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B.    H.    F.    VARI.L 

•TTOBNUr  *T  LAW 

L«B  »HOKLM.  O." 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


gCi  li-* 


]^ 


H.    H.    F.    VARfEC 

i.C^  A,  ',ri.e5    CAL.J7 


A  TREATISE   OX  THE  LAW 


OF 


NEGOTIABLE  INSTRUMENTS, 


INCLUDING 

BILLS  OF  EXCHANGE  ;    PROMISSORY  NOTES  ;   NEGOTIABLE  BONDS 

AND   COUPONS;    CHECKS;    BANK    NOTES;    CERTIFICATES   OF 

DEPOSIT;  CERTIFICATES  OF  STOCK;  BILLS  OF  CREDIT; 

BILLS   OF   LADING;    GUARANTIES;    LETTERS   OF 

CREDIT;    AND   CIRCULAR   NOTES. 


By    JOHN    W.    DANIEL, 

OF  THE   LYNCHBURG    (VA.)    BAR. 


"  Out  of  the  old  fieldes, 
Cometh  al  this  new  come." — Chaucer. 

"  Non  erit  alia  lex  Romae,  alia  Athenis,  alia  nunc,  alia  posthac,  sed  et  apud  omnes  gentes, 
et  omni  tempore,  una  eademque  lex  obtinebit." — Cicero. 


IN  TWO  VOLUMES. 

VOL.   11. 
THIRD  EDITION. 


NEW  YOEK: 
BAKER,    VOORHIS    &    CO.,    PUBLISHERS. 

66   NASSAU   STREET. 
1886. 


Entered,  according  to  the  Act  of  Congress,  in  the  year  eighteen  hundred  arid  seventy-six,  by 

JOHN  W.    DANIEL, 

In  the  office  of  the  Librarian  of  Congress,  at  Washington. 

Copyright  by  John  W.  Daniel,  1S79.  Copyright  by  John  W.  Daniel,  1882. 


TABLE  OF  CONTENTS  OF  VOL.  IL 


BOOK   IV. 


PROTEST  AND  NOTICE;  AND  EXCUSES  FOR 
WANT  OF  PRESENTMENT,  PROTEST,  AND 
NOTICE. 


CHAPTER  XXVIIL 

The  Protest  of  Bills  and  Notes,  

Section  I.     The  nature  and  necessity  of  protest, 

II.     By  whom  and  where  protest  should  be  made, 

III.  Formal   making,   preparation,   and    authentication   of 

protest,       ........ 

IV.  Contents  of  protest,  ...... 

V.     The  protest  as  evidence,     ...... 


PAGE 

X 


lO 

i6 
19 


Section  I. 

II. 

III. 

IV. 

V. 


VI. 


CHAPTER  XXIX. 

Notice  of  Dishonor  of  Negotiable  Instruments, 
Nature  and  necessity  of  notice, 
Formal  and  essential  elements  of  notice. 
Who  may  give  notice  of  dishonor, 
To  whom  notice  of  dishonor  should  be  given, 
Mode  and  formalities  of  giving  notice  when  the  party 
giving  and  the  party  to  receive  it  reside  in  the 
same  place,         ..... 
Mode  of  serving  notice  when  the  party  giving  and  the 
party  to  receive  it  reside  in  different  places, 
VII.     Time  within  which  notice  may  and  must  be  given, 
VIII.     The  allegation  and  proof  of  notice,       .         .         .         . 

(iii) 


30 
30 
33 
46 

52 


60 

75 
87 
97 


6677C4 


iv  TABLE    OF    CONTENTS. 

CHAPTER  XXX. 

PAGB 

Circumstances  of  a  General  Nature  which  Excuse  Want  of 

Presentment,  Protest,  and  Notice,  .         .         .         .107 

Section  I.     War,  interdiction   of  intercourse,   and   occupation   of 

country  by  public  enemy,  .         .         .         .108 

II.     Political  disturbance,  epidemic  disease,  and  overwhelm- 
ing calamity  or  accident,      .         .         .         .         .112 

CHAPTER  XXXI. 

Special  Circumstances  of  Excuse  which  show  an  Original 
Absence  of  Right  to  Require  Presentment,  Protest,  or 
Notice, n? 

Section  I.     Drawing  a  bill  without  a  right  to  do  so,        .         .         .117 

II.  When  the  party  is  under  an  obligation  to  provide  for 

payment,  .         .         .         .         .         •         .128 

CHAPTER  XXXIL 

Special  Circumstances  of  Excuse  for  Want  of  Presentment, 

Protest,  and  Notice,  arising  from  Special  Acts  of  Waiver,     1 34 
Section  I.     Special  written  and  verbal  waivers  of  presentment,  pro- 
test, and    notice.     General  principles  respecting 
waivers,       ........      134 

II.     Special  waivers  after  the  execution  of  the  bill  or  note,       143 
TIL     By  whom  and  to  whom  waiver  of  demand,  protest,  and 

notice  must  be  made,      .         .         .         .         •  .148 

CHAPTER  XXXIII. 

Special  Circumstances  of  Excuse  which  show  an  Inability 
on  the  Part  of  the  Holder  to  make  due  Demand,  Pre- 
sentment, OR  Protest,  or  give  due  Notice,      .         .         .151 
Section  I.     When  there  is  no  person  in  existence  upon  whom  de- 
mand can  be  made,  or  who  is  legally  bound,         .     151 
II.     The  impracticability  of  finding  the  party  to  whom  pre- 
sentment should   be   made   or  notice  given ;    or 
ascertaining  his  residence  or  place  of  business,     .     154 

III.  Receiving  the  bill  or  note  too  late  as  excuse  for  want 

of  presentment  and  notice,  ....     163 

*  IV.     Sickness  of,  or  accident  to,  the  holder,  .         .         .164 


TABLE    OF    CONTENTS. 


CHAPTER  XXXIV. 


Special  Circumstances  of  Excuse  for  Want  of  Presentment, 
Protest,  and  Notice,  arising  from  the  Conduct  of  the 

Party,  167 

Section  I.     When  party  has  received  means  to  take  up  the  bill  or 

note, 167 

II.     When  party  has  received  securities  out  of  which  to  pro- 
vide for  payment,         .         .  .         .         .168 

III.  When  maker  or  acceptor  has  absconded,     .         .  .181 

IV.  When  maker  or  acceptor  has  removed  his  domicile  to 

another  State  or  a  foreign  country,       .  .         .183 

CHAPTER  XXXV. 

Special  Waivers  of  Presentment,  Protest,  and  Notice,  and 
of  the  Evidence  thereof,  by  Promises  to  Pay  and  Part 

Payments  after  Maturity, 186 

Section  I.     Waiver  by  promise  of  the  drawer  or  indorser  to  pay, 
made  after  maturity,  with  knowledge  of  holder's 

default, 186 

II.     Promise  to  pay  as  presumptive  evidence  of  knowledge 

of  laches, .         .192 

III.  Promise  to  pay  as  evidence  of  diligence,  or  waiver  of 

proof  of  negligence,     .         .         .         .         .         .195 

IV.  What  amounts  to  acknowledgment  or  promise  to  pay,     200 
V.     Waiver  by  part  payment  after  maturity,        .         .         ,     203 

CHAPTER  XXXVI. 

Circumstances  which  will  not  Excuse  Failure  to  make  Pre- 
sentment OR  Protest,  or  give  Notice,       ....     206 
Section  I.     The  want  of  injury  to  the  party,  ....     206 

II.     The  bankruptcy  or  insolvency  of  the  acceptor  or  maker,     208 

III.  The  loss  or  mislaying  of  the  bill  or  note,      .  .         .210 

IV.  The  appointment  of  the  drawer  or  indorser  as  executor 

or  administrator  of  maker  or  acceptor,         .  .212 

V.     The  transfer  of  the  bill  or  note  as  collateral  security,  .     213 

VI.     The  death  of  the  maker  or  acceptor,  .         .  .214 

VII.     The  misdating  of  a  bill  or  note  by  a  foreign  resident,  .     216 


Vi  TABLE    OF    CONTENTS. 

BOOK  V. 

ACTION  ON  NEGOTIABLE  INSTRUMENTS;  AND 
DEFENCES,  DISCHARGES,  AND  DAMAGES. 


CHAPTER  XXXVII. 

PAGE 

Action  or  Suit  upon  Bills  and  Notes,  .         .         .        .218 

Section  I.     General  principles  as  to  who  may  sue,         .         .         .218 

II.     Who  may  sue  when  instrument  is  payable  to  an  agent,     223 

III.  Who  may  sue  upon  instruments  payable  to  one  party 

and  discounted  by  another,  .         .         .         .226 

IV.  Who  may  sue  upon  instruments  payable  to  bearer,  or 

indorsed  in  blank, 228 

V.     What  constitutes  the  right  to  sue,  and  the  evidence 
thereof,       ...... 

VI.     Who  may  be  sued, 

VII.     When  right  of  action  accrues, 
VIII.     When  right  of  action  expires, 

IX.     Evidence  in  actions  upon  bills  and  notes, 


234 
236 

239 

244 
246 


CHAPTER  XXXVIII. 

The  Discharge  of  Bills  and  Notes  by  Payment,  .        .250 

Section  I.     The  nature  of  payment, 250 

II.     Who  may  make  payment,  252 

III.  To  whom  payment  may  be  made,        ....     258 

IV.  When  payment  may  be  made, 260 

V.     The  effect  of  payment,  and  who  may  reissue  a  bill  or 

note, 263 

VI.     In  what  medium  payment  may  be  made.     The  legal 

tender  cases,       .         .  .         .         .         •         .270 

VII.     Appropriation  of  payment, 275 

VIII.     Tayment  supra  J>roUsi,  or  for  honor,    .         .         .         .279 

CHAPTER  XXXIX. 

Conditional  and  Absolute  Payment.     Taking  Bill  or  Note 

FOR  OR  ON  Account  of  a  Debt,  .....     283 

Section  I.     When  the  presumption  of  payment  arises  from  taking  a 

bill  or  note,         .....••     283 
II.     Suspension  of  right  of  action  by  taking  bill  or  note  for 

or  on  account  of  a  debt,       .....     295 


TABLE    OF    CONTENTS.  Vll 

PAOB 

Section  III.     Rights  and  duties  of  holder  of  bill  or  note  taken  in 

conditional  payment,            .....  297 

IV.     The  effect  of  taking  a  bill  or  note  upon  a  lien,           .  301 

CHAPTER  XL. 

Discharges  of  Bills  and  Notes  otherwise  than  by  Payaient,  306 

Section  I.     Discharges  of  bills  and  notes  by  operation  of  law,         .  306 

II.     Discharges  by  agreement  of  the  parties,        .         .         .  308 

III.  Discharge  of  a  joint  party,  .         .         .         .         .312 

IV.  Discharge  of  partnership  debt  by  bill  or  note  of  one 

partner,       .         . 315 

CHAPTER  XLI. 

What   Discharges   a   Surety.     The    Law   of   Principal    and 

Surety  in  its  Application  to  Bills  and  Notes,        .         .320 
Section  I.     Who  are  principals,  and  who  sureties  ;  and  general  prin- 
ciples of  sureties'  liabilities,          ....  320 

II.     What  acts  of  creditor  discharge  a  surety  for  the  debt,   .  324 

HI.     What  acts  of  creditor  will  not  discharge  a  surety,           .  337 
IV.     Latent  sureties.     Accommodation  and  joint  parties  as 

sureties,      ........  341 

V.     Surety's  remedies,        .         .         .         .         .         .         .351 

CHAPTER  XLIL 

The  Forgery  of  Negotiable  Instruments,        ....  356 
Section  I.     The  definition  and  nature  of  forgery,             .         .         .356 
II.     Liability  of  party  who  adopts  a  forged  signature  as  his 

own,            ........  360 

III.  When  one  party  is  estopped  from  denying  genuineness 

of  another's  signature,          .....  365 

IV.  Recovery  of  money  paid  upon  forged  instruments,        .  377 

CHAPTER  XLin. 

The  Alteration  of  Negotiable  Instruments,          .        .        .  383 

Section  I.     Definition  and  nature  of  alteration,      ....  383 

II.     Alterations  of  date,  time,  place,  amount,  and  medium 

of  payment,         .......  386 

III.     Alterations  in  respect  to  the  parties  to  the  instrument,  399 


Viii  TABLE    OF    CONTENTS. 

PAGB 

Section  IV.  Alterations  in  respect  to  the  operation  of  the  instrument,     404 

V.  Immaterial  and  authorized  changes  of  the  instrument,     409 

VI.  ^<7«d! /^^  holder  of  altered  bill  ornote,      .         .         .415 

VII.     The  effect  of  alteration, 422 

VIII.  The  burden  of  proof  of  alteration,       .          .         .         .429 

CHAPTER  XLIV. 

The  Law  of  Set-off  in  its  Application   to   Negotiable   In- 
struments,    . 435 

Section  I.     The  general  doctrines  of  set-off,  ....     435 

II.     How  far  the  law  of  set-off  is  applicable  to  negotiable 

instruments,         .......     442 

CHAPTER  XLV. 
Exchange  and  Re-exchange  ;  and  Damages  upon  Dishonored 

Negotiable  Paper,         . 445 

Section  I.     Nature  of  damages  and  of  exchange,  .         .         .     445 

II.      Nature  of  re-exchange,  and  drawer's  liability,        .         .451 

III.  Indorser's  and  acceptor's  liability  for  re-exchange  and 

damages.     Accumulations  of  re-exchange  against 
drawer  and  indorser,  .....     454 

IV.  Re-exchange   and    damages   upon   promissory   notes. 

Other  charges,  .         .         .         .         .         .461 

CHAPTER  XLVI. 

Lost  and  Destroyed  Bills  and  Notes, 467 

Section  I.     Rights  and  duties  of  the  loser,  finder,  and  holder  of  a 

lost  negotiable  instrument,  .         .         .         .467 

II.     Suit  against  parties  to  a  lost  negotiable  instrument,       .     476 

BOOK   VI. 

VARIETIES  OF  NEGOTIABLE  INSTRUMENTS 
OTHER  THAN  BILLS  AND  NOTES. 


CHAPTER  XLVn. 

Coupon  Bonds, 486 

Section  I.     The  definition  and  nature  of  coupon  bonds,          ,         .  486 

II.     The  formal  parts  of  negotiable  bonds  and  coupons,       .  493 

III.  The  negotiability  of  coupon  bonds,  and  the  rights  and 

duties  of  the  holder  or  purchaser,         .         .         .  505 

IV.  Action  on  negotiable  bonds  and  coupons,    .         ,         .518 


TABLE    OF    CONTENTS.  IX 

CHAPTER  XLVIII. 

PAGB 

The  Validity  of  Municipal  Bonds, 527 

Section  I.     Nature  of  iminicipal  corporations,  and  what  powers  may 

be  conferred  upon  them,     .         .  ,         .         -52? 

II.     Express  and  implied  powers  of  municipal  corporations. 

When  they  may  issue  negotiable  bonds,        .  -537 

III.  Power  of  a  municipal  officer  or  agent  to  bind  the  mu- 

nicipality.    Views  of  the  United  States  Supreme 
Court .     547 

IV.  How  invalidity  of  the  bond  is  cured  by  acquiescence  or 

ratification  of  the  municipality,     ....     558 
V.     Correct  principles  as  to  the  liability  of  municipal  corpo- 
rations upon  negotiable  bonds,     ....     563 
VI.     Legislative  control  over  municipal  obligations,      .         .572 

CHAPTER  XLIX. 

The  Law  of  Checks, 583 

Section  I.     What  is  a  check,         .......     5S3 

II.     Formal  parts  and  varieties  of  checks.     Business  and 

memorandum  checks,  .  .  .         ,         -593 

III.  Presentment  and  notice  of  dishonor ;    and  protest  of 

checks, 599 

IV.  Certification  of  checks,         .         .  .         .         .  .613 

V.     Whose  checks  should  be  paid  by  the  bank,  .         .     624 

VI.  What  checks  should  be  paid  by  the  bank,     .         .         .627 

VII.  Payment  by  checks,  .         .         .         .         .         .637 

VIII.  Over-checks, 643 

IX.  Cancelled,  dishonored,  and  stale  checks,       .  .  .     645 

X.  Right  of  holder  of  uncertified  checks  to  sue  the  bank,     648 

XL  How  far  a  check  is  an  assignment  of  the  fund  drawn 

upon, 657 

XII.  Checks  as  evidence,  659 

XIII.  Negotiability  and  transfer  of  checks,  .         .         .     663 

XIV.  Forgeries  of  checks,  ......     665 

XV.  Alterations  of  checks  after  issue,  .         .         .         .671 


CHAPTER  L. 

Bank  Notes, 

Section  I.     The  definition,  nature,  and  formal   elements  of  bank 
notes,  ....... 

II.     How  far  bank  notes  are  similar  to  money,    . 
III.     Liability  of  transferrer  of  bank  notes, 


676 

676 
679 
682 


X  TABLE    OF    CONTENTS. 

PAGB 

Section  IV.     Rights,  duties,  and  remedies  of  the  holder  or  owner  of 

bank  notes,  .......  688 

V.     Payment  in  bank  notes,  and  set-off,    ....  695 

VI.     Lost  or  destroyed  bank  notes, 698 

CHAPTER  LI. 

Certificates  of  Deposit, 703 

Section  I.     Definition,  origin,  and  nature  of  certificates  of  deposit,     703 
II.     Transfer  and  negotiability  of  certificates  of  deposit,       .     706 

CHAPTER  LII. 

Certificates    of    Stock  ;    and    other    quasi   Negotiable   In- 
struments,   713 

Section  I.     Certificates  of  stock, 7^3 

II.     Other  quasi  negotiable  instruments,     .         .         .         .  724 

CHAPTER  LIIL 

Bills  of  Credit, 728 

Section  I.     What  are  bills  of  credit, 729 

II.     What  are  not  bills  of  credit, 735 

CHAPTER  LIV. 

Bills  of  Lading, 73^ 

Section  I.     Definition  and  nature  of  bills  of  lading,         .         .         .  738 
II.     Bills  of  lading  accompanying  bills  of  exchange  drawn 

on  shipments,      .......  749 

III.  The  elements  of  a  bill  of  lading,            ....  75^ 

IV.  Transfer  of  bills  of  lading, 761 

CHAPTER  LV. 

Guaranties,   and  the   Law   of   Guaranty  as    applicable    to 

Negotiable  Instruments,     .......     768 

Section  I.     Definition,  nature,  and  construction  of  guaranties,        ..   768 
II.     The  consideration  of  guaranties,  and  the  operation  of 

the  statute  o'f  frauds, 773 

III.     Forms  and  varieties  of  guaranties.     Absolute  and  con- 
ditional guaranties, 7^0 


TABLE    OF    CONTENTS.  XI 

PAGB 

Section  IV.     Limited  and  unlimited,  and  temporary  and  continuing 

guaranties,           .......  7^2 

V.     The  negotiability  of  guaranties,           ....  785 

VI.     Requisites  to  the  establishment  and  preservation  of 

guarantor's  liability, 793 

CHAPTER  LVI. 

Letters  of  Credit  and  Circular  Notes,          ....  800 

Section  I.     Definition  and  nature  of  letters  of  credit,      .         .         .  800 
II.     To  whom  a  letter  of  credit  is  available,  and  how  far  it 

is  negotiable,      .......  805 

INDEX, 813 


NEGOTIABLE   INSTRUMENTS, 


BOOK  IV. 


PROTEST  AND  NOTICE  ;   AND  EXCUSES  FOR  WANT 
OF    PRESENTMENT,  PROTEST,  AND  NOTICE. 


CHAPTER    XXVIII. 

THE    PROTEST    OF    BILLS    AND    NOTES. 


SECTION  I. 

THE   NATURE   AND   NECESSITY   OF   PROTEST. 

§  926.  First,  as  to  what  instruments  must  or  may  be 
protested. — ^When  a  foreign  bill  of  exchange  is  presented 
for  acceptance  or  payment,  and  acceptance  or  payment  is 
refused,  the  holder  must  take  what  is  called  a  protest,  in 
order  to  charge  the  drawer  or  any  indorser.  According  to 
the  law  of  most  foreign  nations,  a  protest  is  essential  in  the 
case  of  the  dishonor  of  any  bill;^  but  by  the  custom  of 
merchants  in  England,^  and  wherever  the  law  merchant 
prevails  in  the  United  States,  the  protest  is  only  necessary 
in  the  case  of  foreign  bills  ;'  though  by  statute  in  most  of 

'  Thomson  on  Bills  (Wilson's  ed.),  307. 

^  Orr  V.  Maginnis,  7  East.,  359  ;  Gale  v.  Walsh,  5  T.  R.,  239  ;  Leftly  v.  Mills, 
4  T.  R.,  170  ;  Boroug-h  v.  Perkins,  i  Salk.,  131  ;  Chitty  on  Bills  (13  Am.  ed.) 
[*332].  372  ;  Byles  (Sharswood's  ed.)  [*249],  394. 

'  Burke  v.  McKay,  2  How.,  66  ;  Young  v.  Bryan,  6  Wheat.,  146  ;  Union  Bank 
V.  Hyde,  6  Wheat.,  372  ;  Bailey  v.  Dozier,  6  How.,  23 ;  Bank  U.  S.  v.  Leathers, 
10  B.  Mon.,  64;  Hubbard  V.  Troy,  2  Ired.,  134;  McMarchey  v.  Robinson,  10 
Ohio  St.,  496;  Smith  v.  Curlee,  59  III.,  221  ;  Green  v.  Louthain,  49  Ind.,  139; 
Ocean  N.  B.  v.  Williams,  102  Mass.,  141 ;  Phoenix  Bank  v.  Hussey,  13  Pick.,  483. 

Vol.  II.— I 


2  PROTEST    OF    BILLS    AND    NOTES.  §  927. 

the  States  inland  bills  and  promissory  notes  may  be  pro- 
tested in  like  manner.^  So  indispensable  is  the  protest  of 
a  foreign  bill  in  case  of  its  dishonor,  that  no  other  evidence 
will  supply  the  place  of  it,  and  no  part  of  the  facts  requi- 
site to  the  protest  can  be  proved  by  extraneous  testi- 
mony,^ and  it  has  been  said,  that  it  is  a  part  of  the  consti- 
tution of  a  foreign  bill.'  But,  while  the  practice  is  usually 
followed  to  protest  inland  bills  and  notes,  under  the  per- 
missive statutes,  it  is  not  a  practice  which  makes  it  incum- 
bent to  protest  them  ;  and  the  holder  may  waive  the  priv- 
ilege if  he  choose  to  do  so,  and  produce  other  evidence  of 
dishonor.^ 

§  927.  The  requisition  of  a  protest  in  the  case  of  foreign 
bills  was  in  order  to  afford  authentic  and  satisfactory  evi- 
dence of  due  dishonor  to  the  drawer,  who,  from  his  residence 
abroad,  would  experience  a  difficulty  in  making  proper  in- 
quiries on  the  subject,  and  be  compelled  to  rely  on  the  repre- 
sentations of  the  holder.  "  It  also,"  observes  a  distinguished 
author,  "  furnishes  an  indorsee  with  the  best  evidence  to 
charge  an  antecedent  party  abroad  ;  for  foreign  courts  give 
credit  to  the  acts  of  a  public  functionary  in  the  same  manner 
as  a  protest  under  the  seal  of  a  foreign  notary  is  evidence  in 
our  courts  of  the  dishonor  of  a  bill  payable  abroad."  ^  Such 

'  See  Virginia  Code  of  1873,  chap.  141,  p.  987,  §§7,  8,  wherein  it  is  provided: 
"  §  7.  Every  promissory  note,  or  check  for  money  payable  in  this  State,  at  a  par- 
ticular bank,  or  at  a  particular  office  thereof,  for  discount  or  deposit,  or  at  the 
place  of  business  of  a  savings  institution  or  savings  bank,  or  at  the  place  of 
business  of  a  licensed  broker,  and  every  inland  bill  of  exchange,  payable  in  this 
State,  shall  be  deemed  negotiable,  and  may,  upon  being  dishonored  for  non- 
acceptance  or  non-payment,  be  protested,  and  the  protest  be  in  such  case  evi- 
dence of  dishonor,  in  like  manner  as  in  the  case  of  a  foreign  bill  of  exchange. 

"  §  8.  The  protest,  both  in  the  case  of  a  foreign  bill  and  in  the  other  cases  men- 
tioned in  the  preceding  section,  shall  be  prima  facte  evidence  of -what  is  stated 
therein,  or  at  the  foot,  or  on  the  back  thereof,  in  relation  to  presentment,  dis- 
honor, and  notice  thereof." 

"^  Union  Bank  v.  Hyde,  6  Wheat.,  572 ;  Carter  v.  Union  Bank,  7  Humph.,  548. 

'  Borough  V.  Perkins,  i  Salk.,  121  ;  2  Ld.  Raym.,  992;  Chitty  on  Bills  (13 
Am.  ed.)  [*333],  373  ;  Edwards  on  Bills,  581. 

*  Bailey  v.  Dozier,  6  How.,  23 ;  Wanger  v.  Tupper,  8  How.,  234 ;  2  Rob, 
Prac.  (new  ed.),   121. 

"  Byles  on  Bills  (Sharswood's  ed.)  [^249],  395. 


5  9-8.  NATURE  AND  NECESSITY  OF  PROTEST.  3 

was  the  convenience  of  evidence  in  this  form,  obviating  the 
necessity  of  the  attendance  of  witnesses,  and  preserving  their 
testimony  where  otherwise  it  might  be  lost  by  death  or  re- 
moval, that  it  became  common  to  protest  inland  bills,  and 
promissory  notes  as  well ;  and  the  holder  was  often  disap- 
pointed in  finding  that  siich  protest  was  not  evidence  of 
dishonor.^  This  led  to  a  very  general  enactment  of  statutes 
authorizing  protests  in  such  cases ;  and  giving  them  the 
like  effect  as  in  cases  of  foreign  bills. 

The  law  merchant  requires  a  protest  and  notice  only  in 
cases  of  bills  negotiable  by  the  custom  of  merchants.  Bills 
payable  "  in  currency,"  or  any  other  medium  than  legal 
money,  are  not  of  this  character,  and  therefore  no  protest  is 
necessary,  nor  is  it,  unless  by  statute,  evidence  of  any  fact 
therein  stated.'^ 

§  928.  Foreign  promissory  notes. — In  the  case  of  prom- 
issory notes  executed  in  one  State  or  country,  and  payable 
in  another,  no  notice,  of  course,  is  necessary  to  charge  the 
maker  ;  and  if  there  be  no  indorser  there  can  be  no  analogy 
between  the  note  and  a  bill.  But  as  soon  as  a  promis- 
sory note  is  indorsed  it  becomes  closely  assimilated  to  a 
bill,  the  maker  being  primarily  liable,  like  the  acceptor, 
and  the  indorser  secondarily,  like  the  drawer.  It  is  often 
said  that  every  indorser  is  a  new  drawer,  and,  in  fact,  the 
endorser's  obligation  is  precisely  like  that  of  the  drawer  on 
an  accepted  bill.  Therefore,  when  an  indorsed  note  is  pay- 
able in  a  State  or  country  different  from  the  one  where  it 
is  drawn — perhaps  more  especially  when  the  indorser  is  not 
of  the  State  or  country  where  it  is  payable,  though  no  dis- 
tinguishing difference,  it  seems  to  us,  exists — almost  every 
consideration  of  convenience  which  would  make  a  protest 
necessary  and  competent  evidence  of  presentment  and 
notice,  in  case  of  a  foreign  bill,  would  recognize  it  as  equally 

'2  Rob.  Prac.  (new  ed.),  181. 

'  Bank  of  Mobile  v.  Brown,  42  Ala.,  108  ;  Ford  v.  Mitchell,  15  Wis ,  304. 


4  PROTEST    OF    BILLS    AND    NOTES.  §  929. 

competent  in  respect  to  the  indorser  of  the  note.  It  has 
been  well  said  that  "  the  similarity  between  the  indorsement 
of  notes,  and  the  drawing  and  indorsement  of  bills  of  ex- 
change is  so  great,  that  there  can  be  no  sound  reason  given 
for  establishing  or  preserving  a  distinction  between  them, 
and  requiring  a  different  character  of  evidence  to  prove  the 
same  facts  with  regard  to  two  instruments,  which,  though 
different  in  some  respects  as  to  their  phraseology,  are  so 
essentially  similar  in  their  nature  and  operations."^  And 
there  are  well-considered  cases  sustaining  it.^  This  view 
has  been  taken  in  Kentucky,  respecting  an  indorsed  certifi- 
cate of  deposit.^ 

There  are  cases  in  which  the  converse  view  has  been 
taken,  it  being  considered  that  the  certificate  of  protest  of 
a  promissory  note  is  a  document  unknown  to  the  law ;  and 
although  the  note  be  payable  in  a  foreign  place,  is  inadmis- 
sible ;  *  and  although  the  argument  ad  inconveniente  is 
strong  against  this  rejection  of  such  testimony,  in  strict 
law,  it  seems  to  us,  it  must  be  excluded.  A  general  usage 
would  probably  be  controlling.^ 

§  929.  As  to  the  meaning  of  Protest,  the  term  includes, 
in  a  popular  sense,  all  the  steps  taken  to  fix  the  liability  of 
a  drawer  or  indorser,  upon  the  dishonor  of  commercial 
paper  to  which  he  is  a  party.^  More  accurately  speaking, 
it  is  the  solemn  declaration  on  the  part  of  the  holder 
against  any  loss  to  be  sustained  by  him  by  reason  of  the 
non-acceptance,  or  even  non-payment,  as  the  case  may  be, 
of  the  bill  in  question  ;  and  a  calling  of  the  notary  to  wit- 
ness that  due  steps  have  been  taken  to  prevent  it.'^     The 

'  Parker,  C.  J.,  in  Williams  v.  Putnam,  14  N.  H.,  540  ;  Carter  v.  Burley,  9  N.  H., 
558 ;  Smith  v.  Little,  10  N.  H.,  526  ;  Edwards  on  Bills,  584. 

-  Ticonic  Bank  v.  Stackpole,  41  Me.,  302,  held  admissible  at  common  law. 

'Piner  v.  Clary,  17  B.  Men.,  645.  *  Kirtland  v.  Wanzer,  2  Duer,  278. 

'■'  See  Burke  v.  McKay,  2  How  ,  66. 

"  Townsend  v.  Lorain  Bank,  2  Ohio  St.,  345  ;  Coddington  v.  Davis,  i  Comst., 
186. 

'Walker  V.  Turner,  2  Grat.,  536;  Chitty  (13  Am.  ed.)  [*458].  5i6;  Swayne 
T.  Britton,  17  Kansas,  629. 


§§•930' 931-       NATURE  AND  NECESSITY  OF  PROTEST.  5 

word  "  protest  "  signifies  to  testify  before ;  and  the  testi- 
mony before  the  notary  that  proper  steps  were  taken  to  fix 
the  drawer's  Hability  is  the  substance,  and  the  certificate  of 
the  notary  the  formal  evidence,  to  which  the  term  protest 
is  legally  applicable. 

§  930.  Protest  for  iwn-acceptance. — According  to  the 
English  law,  the  protest  must  be  made  in  the  case  of  dis- 
honor by  non-acceptance  ^  as  well  as  dishonor  by  non-pay- 
ment. And  the  same  rule  prevails  in  the  United  States,' 
although  it  was  decided  by  the  Supreme  Court  of  the 
United  States,  in  an  action  on  a  protest  for  non-payment 
of  a  foreign  bill,  that  a  protest  for,  or  notice  of,  non-accept- 
ance, need  not  be  shown,  inasmuch  as  they  were  not  required 
by  the  custom  of  merchants  in  this  country.^  But  the 
English  rule  has  been  deemed  the  most  consistent  with 
commercial  policy  by  the  highest  authorities,  and  Story  and 
Kent  adopt  it  as  the  true  one  ;  the  former  observing  that 
the  decisions  of  the  Supreme  Court,  if  they  would  now  be 
held  law  by  that  court,  would  be  so  held  only  upon  the 
ground  of  the  local  law  of  Pennsylvania  (to  which  State 
the  decisions  appertained),  as  to  bills  drawn  or  payable 
there.'* 

§  931.  As  to  what  constitutes  a  refusal  to  honor  a  bill, 
which  will  authorize  or  require  a  protest,  a  distinction  exists 
between  the  dishonor  for  non-acceptance  and  dishonor  for 
non-payment.  If  the  drawee  accepts  the  bill,  he  is  bound 
to  provide  for  its  payment  at  maturity  ;  and  if  the  holder 


'Gale  V.  Walsh,  5  T.  R.,  239  ;  Benjamin's  Chalmers'  Digest,  176;  2  Ames  B. 

&N.,  114. 

*  Thompson  v.  Cummmg,  2  Leigh,  321  ;  Mason  v.  Franklin,  3  Johns.  202; 
Watson  V.  Loring,  3  Mass..  557  ;  Phillips  v.  McCurdy.  i  Har.  &  J.,  187  ;  Sterry 
V.  Robinson,  i  Day,  11  ;  Winthrop  v.  Pepoon,  i  Bay,  468  ;  Allen  v.  Merchants 
Bank,  22  Wend.,  215  ;  Story  on  Bills,  §  273  ;  Edwards  on  Bills,  444:  2  Ames 
B.  &  N.,  114. 

'  Brown  v.  Barry,  3  Dallas.  365  ;  Clarke  v.  Russell.  3  Dallas,  295,  followed  in 
Pennsylvania,  in  Read  v.  Adams,  6  Sergt.  &  R.,  358. 

*  Kent  Com..  95  ;  Storv  on  Bills,  §  273.  note  ;  Edwards  on  Bills.  448  ;  Chitty 
on  Bills  (13  Am.  ed.),  [*332].  372. 


6  PROTEST  OF  BILLS  AND  NOTES.  §§932,933. 

present  it  at  his  home  or  place  of  business  at  maturity,  and 
finds  that  he  has  absented  himself,  and  left  no  one  with 
funds  to  meet  it,  such  conduct  is  in  itself  a  refusal  to  pay, 
and  the  bill  may  be  at  once  protested  (and,  if  foreign,  must 
be),  and  notice  given.  But  absence  from  home  or  place  of 
business,  without  leaving  any  one  to  accept  a  bill,  is  not  a 
refusal  to  accept,  for  the  drawee  may  not  be  aware  that  the 
bill  is  drawn,  and  is  not  bound  (in  the  absence  of  a  promise 
to  accept)  to  be  prepared  for  its  presentment.^ 

§  932.  There  is  no  difference  in  respect  to  the  necessity 
for  protest  whether  the  bill  be  payable  at  a  certain  time 
after  date  or  after  sight,  for,  although  it  is  not  necessary  to 
present  a  bill  payable  at  a  certain  time  after  date  until  its 
maturity,  yet,  if  such  a  bill  be  presented  for  acceptance  and 
dishonored,  it  is  necessary  to  make  protest  and  give  notice, 
in  order  to  charge  drawer  or  indorsers.^  If  a  bill  has  been 
protested  for  non-acceptance,  and  its  dishonor  duly  notified, 
it  is  not  necessary  to  present  it  again  for  payment,  and  pro- 
test it  separately  for  non-payment,  or  to  give  separate  notice 
of  non-payment.^  But  there  may  be  a  subsequent  protest 
for  non-payment  at  maturity.* 

§  933.  Notarial  charges. — It  is  considered  by  high  au-* 
thority  that  notarial  charges  are  not  a  legal  charge  except 
where  the  protest  is  required  by  the  law  merchant,  although 
it  is  certainly  usual  to  pay  them  where  they  are  reasonable, 
and  made  in  good  faith,  and  in  conformity  with  usage.^  It 
being  an  entirely  unnecessary  act  to  protest  an  inland  bill 
or  a  note  in  order  to  charge  the  drawer  or  an  indorser,  and 
purely  voluntary  and  for  his  own  convenience  on  the  part 

'  Bank  of  Washington  v,  Triplett,  i  Pet.,  35.     See  ante,  §  589,  vol.  i. 

^  Bank  of  Washington  v.  Triplett,  i  Pet.,  25  ;  U.  S.  v.  Barker,  4  Wash.  C.  C, 
+64  ;  O'Keefe  v.  Dunn,  6  Taunt.,  305  ;  S.  C.  5  Maule  &  Sel.,  282 ;  Story  on 
Bills,  §  273. 

^  De  la  Torre  v.  Barclay,  i  Stark.,  part  2,  7  ;  Thomson  on  Bills  (Wilson's  ed.), 
308. 

^  Campbell  v.  French,  6  T.  R.,  200 ;  Chitty,  Jr.,  on  Bills,  541. 

^  I  Parsons  N.  &  B.,  646  ;  Johnson  v.  Bank  of  Fulton,  29  Ga.,  260. 


§§  934j  934^-         ^^  WHOM  and  where  made.  7 

of  the  holder,  there  is  obvious  force  in  this  suggestion. 
But  it  is,  doubtless,  in  almost  every  case  the  cheapest, 
easiest,  and  safest  way  of  proving  notice.  The  defendant 
would  be  chargeable  with  costs  of  other  testimony  more 
cumbrous  and  more  expensive,  where  liable,  and  custom 
has  so  extensively  sanctioned  the  practice,  that  we  antici- 
pate the  courts  will  be  slow  to  hold  that  it  is  not  a  legiti- 
mate charo-e,  in  cases  where  there  is  a  drawer  or  indorser  to 
charge  by  notice.^  But  where  there  is  no  drawer  or  m- 
dorser  to  charge,  the  protest  would  be  useless,  and  notarial 
fees  could  not  be  recovered,^  unless,  indeed,  the  protest  were 
authorized  by  statute,  in  which  case  a  different  rule  might 
perhaps  be  applicable. 


SECTION    11. 

BY  WHOM   AND   WHERE   PROTEST   SHOULD   BE   MADE. 

§  934.  By  whom  the  protest  should  be  made. — As  to  the 
person  by  whom  the  protest  should  be  made,  it  is  necessary, 
as  a  general  rule,  that  it  should  be  made  by  a  notary  pub- 
lic in  person,^  and  by  the  same  notary  who  presented  and 
noted  the  bill.^  The  notary  is  a  public  officer,  commis- 
sioned by  the  State,  and  possessing  an  official  seal,  and  full 
faith  and  credit  are  given  to  his  official  acts,  in  foreign 
countries  as  well  as  in  his  own.^ 

§  934«.  But  when  ?io  notary  can  be  convetiiently  found, 
the  protest  may  be  made  by  any  respectable  private  person 
of  the  place  where  the  bill  is  dishonored.^ 

'  Merritt  v.  Benton,  lo  Wend.,  117. 

«  German  v.  Ritchie,  9  Kan.,  no ;  Noyes  v.  White,  9  Kan.,  640  ;  Cramer  v. 
Eagle  Man.  Co.,  23  Kan.,  400. 

=  Cribbs  V.  Adams,  13  Gray,  597;  Ocean  N.  B.  v.  Williams,  102  Mass.,  141  , 
ante,  §§  579,  5S7  ;  Sacriber  v.  Brown,  3  McLean,  481. 

*  Commercial  Bank  v.  Varnum,  49  N.  Y.,  269;  Commercial  Bank  v.  Barks- 
dale,  36  Mo.,  563 ;  2  Ames  B.  &  N.,  450.  863. 

'  See  chapter  XX,  on  Presentment  for  Payment,  sec.  i,  vol.  i,  §§  579-  1^1- 

•  Burke  v.  McKay,  2  How.,  66  ;  Read  v.  Bank  of  Kentucky,  i  T.  B.  Mon.,  91. 


8  PROTEST    OF    BILLS    AND    NOTES.  §  935- 

In  England,  it  is  required  by  statute  that,  in  case  of  in- 
land bills,  the  protest  by  a  private  person  shall  be  made  in 
the  presence  of  two  or  more  credible  witnesses.^  And  it 
has  been  said  that  when  a  private  person  protests  a  bill,  it 
should  be  done  in  the  presence  of  two  witnesses.^  Cer- 
tainly it  is  sufficient  if  it  be  so  made,^  but  it  does  not  appear 
to  be  necessary  to  require  witnesses  to  the  protest  of  a 
foreign  bill  by  a  private  person.*  The  notary  to  whom  the 
bill  or  note  is  given  for  protest  is  bound  to  follow  the  in- 
structions given  him,  and  it  is  not  his  duty  to  determine 
whether  or  not  it  should  be  protested  on  a  certain  day.  If 
he  follows  instructions  he  is  not  liable  to  any  person  for 
any  irregularity  in  his  course.^ 

§  935-  Where  the  protest  should  be  made. — -As  to  the 
place  of  protest  it  is  usually  made  at  the  place  where  the 
dishonor  occurs.^  When  the  protest  is  for  non-acceptance, 
the  place  of  protest  should  be  the  place  where  the  bill  is 
presented  for  acceptance."^  But  when  the  bill  is  drawn  upon 
the  drawees  in  one  place,  and  is  payable  in  another,  the 
question  has  arisen,  whether  the  protest  should  be  at  the 
place  of  acceptance  or  place  of  payment.  Mr.  Chitty  says, 
in  respect  to  protest  for  non-payment,  that  "  if  a  bill  be 
drawn  abroad,  directed  to  the  drawee  at  Southampton  or 
any  other  place,  requesting  him  to  pay  the  bill  in  London, 

'  9  &  lo  William  IIL,  ch.  17. 

'  Bay  ley  on  Bills  (5th  ed.),  258.  No  authority  is  referred  to  ;  and  "  Qucsre,  if 
not  confined  to  inland  bills,"  say  the  editors  of  Chitty.  Chitty  on  Bills  [*333], 
374,  note  u.  In  Todd  v.  Neal's  adm'r,  49  Ala.,  273,  it  is  said  by  Peters,  J. :  "  If 
there  be  no  legal  notary  there,  on  demand  and  refusal  of  payment,  it  is  sufficient 
if  the  protest  be  made  out  and  drawn  up  by  a  respectable  inhabitant  of  the 
place  where  the  bill  is  payable,  in  the  presence  of  two  witnesses." 

=  Story  on  Bills,  §276;  i  Pars.  N.  &  B.,633  ;  Byles  (Sharswood's  ed.),  [*249], 

395. 

*  Brooks'  Notary,  103;  Chitty  on  Bills  (13  Am,  ed.),  [*333].  374,  note  u. 

"  Commercial  Bank  v.  Varnum,  14  N.  Y.  S.  C.  (7  Hun),  236;  S.  C.  49  N.  Y., 
269. 

"Chitty  on  Bills  (13  Am.  ed.)  [*i7o],  [*456] ;  Benjamin's  Chalmers'  Dig., 
175  ;  2  Ames  B.  &  N.,  450 ;  Edwards  on  Bills,  580;  Bigelow  on  Bills,  275  ;  Byles 
(Sharswood's  ed.)  [^250],  396.     Seeposf,  §  936. 

'  Story  on  Bills,  §  282.  ' 


§  93; 


BY    WHOM    AND    WHERE    MADE. 


the  protest  for  non-acceptance  may  be  made  either  at  South- 
ampton or  in  London."  ^  But  as  the  presentment  for  ac- 
ceptance must  be  at  the  former  place,  it  would  be  better  to 
make  the  protest  for  non-acceptance  there  also.^  It  has 
been  held  that  it  is  sufficient  if  the  protest  for  non-payment, 
where  there  has  been  a  refusal  to  accept,  be  made  at  the  place 
of  the  drawee's  residence  ;  ^  and  in  England,  it  being  conceiv- 
ed that  the  decision  cast  a  doubt  upon  the  legality  of  making 
protest  at  the  place  specified  for  payment,  the  statute  2  and 
3  William  IV.,  c.  98,  was  enacted,  declaring  that  a  protest 
at  the  place  of  payment  in  case  of  a  refusal  to  accept, 
without  further  presentment  to  the  drawee,  should  be  suffi- 
cient. It  is  conceived  that  this  statute  was  merely  declara- 
tory of  the  common  law.  Where  there  has  been  an  ac- 
ceptance by  the  drawee  in  one  place,  to  pay  in  another,  the 


'  Chitty  on  Bills  (13  Am.  ed.)  [*334],  374. 

"  Thomson  on  Bills,  308;  Man,  107,  108. 

'  Mitchell  V.  Baring,  4  Car.  &  P.,  35  ;  10  Bam.  &  C,  8  (19  E.  C.  L.  R..  261). 
The  Code  of  Virginia,  ch.  144,  §  2,  provides  as  follows  :  "  If  a  bill  of  exchange, 
wherein  the  drawer  shall  have  expressed  that  it  is  to  be  payable  in  any  place 
other  than  that  by  him  mentioned  therein  to  be  the  residence  of  the  drawee, 
shall  not,  on  the  presentment  thereof  for  acceptance,  be  accepted,  such  bill  may, 
without  further  presentment  to  the  drawee,  be  protested  for  non-payment  in  the 
place  in  which  it  shall  have  been  by  the  drawer  expressed  to  be  payable,  unless 
the  amount  thereof  be  paid  to  the  holder  on  the  day  on  which  the  bill  would 
have  become  payable  had  it  been  duly  accepted."  This  section  was  first  incor- 
porated in  the  code  of  1849,  upon  recommendation  of  the  revisers,  who  said  in 
their  report  to  the  General  Assembly :  "  It  is  a  general  rule  of  law  that  the  pro- 
test for  non-payment  is  to  be  at  the  place  where  the  drawee  resides.  In 
Mitchell,  etc.,  v.  Baring,  etc.,  4  Car.  &  P.,  35  ;  19  Eng.  Com.  Law.  Rep.,  261  ; 
10  Barn.  &  Cress.,  4 ;  21  Eng.  Law.  Com.  Rep.,  12,  the  drawer  of  a  bill  made 
in  America  had  expressed  that  it  was  to  be  payable  in  London,  yet  Liverpool 
was  mentioned  therein  as  the  residence  of  the  drawee  ;  on  the  presentment 
thereof  for  acceptance,  it  was  not  accepted,  and  the  protest  for  non-payment 
was  at  Liverpool.  Under  particular  circumstances  appearing  in  the  case,  this 
protest  was  held  sufficient ;  the  general  question  whether,  if  the  acceptance  had 
been  in  the  usual  form,  a  protest  in  London  would  have  been  sufficient,  was 
left  undecided.  It  appeared  from  the  evidence  of  several  witnesses,  some  of 
them  notaries  and  others  merchants,  that,  where  a  foreign  bill,  drawn  upon  a 
merchant  residing  at  Liverpool,  payable  in  London,  was  refused  acceptance  by 
the  drawee,  the  usage  was  to  protest  it  for  non-pavment  in  London.  Yet, 
though  this  was  the  usage,  the  doubt  arose  after  the  decision  in  Mitchell,  etc., 
V.  Baring,  etc.,  whether  such  usage  would  be  sustained  by  the  courts,  and  the 
statute  of  2  and  3  Will.  IV.,  ch.,  98,  was  passed  to  remove  the  doubt.  We  pro- 
pose, it  will  be  perceived,  to  adopt  the  same  statute  in  Virginia."  Repoit  of 
Revisers,  p.  719.     See  anU,  §651,  vol.  i. 


lO  PROTEST    OF    BILLS    AND    NOTES.         §§  936-938. 

latter  would  seem  to  be  clearly  the  place  at  which  the  pro- 
test should  be  made/ 

§  936.  As  to  the  law  controlling  the  protest :  it  should  be 
made  according  to  the  law  of  the  place  of  presentment  for 
acceptance,  if  it  be  for  non-acceptance,  or  of  the  law  of  the 
place  where  the  bill  is  payable,  if  it  be  for  non-payment ; 
in  other  words,  according  to  the  law  of  the  place  where  the 
dishonor  occurs.^ 


SECTION   III. 

FORMAL  MAKING,   PREPARATION,   AND   AUTHENTICATION   OF 

PROTEST. 

§  937.  As  to  the  formality  of  making  protest,  and  pre- 
paring the  certificate  thereof,  it  generally  comprises  three 
distinct  steps:  (i).  Making  the  presentment,  and  demand 
of  payment ;  (2),  Noting  the  dishonor ;  and,  (3),  Extend- 
ing the  protest. 

I  938.  (i)  The  presentment  and  demand  of  paymejit. — 
The  first  step  taken  is  the  presentment  of  the  instrument 
to  the  drawee,  or  acceptor,  or  maker,  by  the  notary,  and 
a  demand  of  payment.  By  the  law  merchant  it  is  abso- 
lutely necessary  that  the  notary  himself  should  make  this 
formal  presentment  and  demand.  And,  although  the 
holder  may  have  already  presented  the  bill  and  demanded 
acceptance  or  payment,  and  been  refused,  it  is  still  neces- 
sary that  the  presentment  and  demand,  which  are  to  be 
made  the  basis  of  the  notary's  certificate,  should  be  made 
by  him  in  person.  For  otherwise  his  testimony  contained 
in  the  protest  would  be  hearsay  and  secondary,  and  would 


'  Story  on  Bills,  §  284  ;  Thomson  (Wilson's  ed.),  309. 

''Shanklin  v.  Cooper,  8  Blackf.,  41  ;  Turner  v,  Rogers,  8   Ind.,  139;  Carter 
V.  Union  Bank,  7  Humph.,  548 ;  Onondaga  County  Bank  v.  Bates.  3  Hill,  53 
Rothschild  v.  Currie,  i  O.  B.,  43  ;  ante,  §  935.     See  chapter  xxvil,  vol.  i,  sec- 
tion ix  ;  Bigelow  on  Bills,  275  ;  Wharton  on  Evidence,  §  123. 


§  939-  FORMAL    PROTEST. 


II 


lack  the  very  element  of  certainty  which  the  protest  is  es- 
pecially designed  to  assure.  Not  even  his  clerk,  nor,  unless 
authorized  by  law,  his  deputy,  can  perform  these  functions 
for  the  notary,  as  it  is  to  his  official  character  that  the 
law  imputes  the  solemnity  and  sanction  which  are  accorded 
his  certificate.  The  authorities  on  this  subject  are  collated 
in  the  chapter  on  "  Presentment  for  Payment,"  in  the  first 
volume  of  this  work.^ 

§  939.  (2)  Noting  the  disho7ior. — As  soon  as  the  pre- 
sentment and  demand  have  been  made,  or  at  some  sea- 
sonable hour  during  the  same  day,  the  notary  makes  a 
minute  on  the  bill,  on  a  ticket  attached  thereto,  or  in  his 
book  of  registry,  consisting  of  his  initials  ;  the  month  ; 
the  day ;  the  year ;  the  refusal  of  acceptance  or  payment  ; 
the  reason,  if  any,  assigned  for  such  refusal  ;  and  his  charges 
of  protest.  This  is  the  preliminary  step  toward  the  pro- 
test, which  may  be  afterward  written  out  in  full — extended, 
as  the  elaboration  of  these  minutes  is  termed — and  it  is 
called  noting.^  "  Noting,"  it  was  said  in  an  early  case,  "  is 
unknown  to  the  law,  as  distinguished  from  the  protest ;  it 
is  merely  a  preliminary  step  to  the  protest,  and  has  grown 
into  practice  within  these  few  years."  ^  But  it  is  now  quite 
well  established  in  England,  Scotland,  and  the  United 
States,  that  the  noting  is  a  kind  of  "  initial  protest,"  as 
Thomson  aptly  terms  it,  not  self-sufficient  as  a  protest,  but 
sufficient  in  the  meantime,  if  the  certificate  of  protest  is 
regularly  extended  afterward.'*  It  must  be  made  on  the 
very  day  of  dishonor  by  non-acceptance  or  non-payment, 
otherwise  it  can  not  be  made  the  basis  of  the  extended  pro- 


'  Chapter  XX,  section  i,  §§  579,  587. 

=  Benjamin's  Chalmers'  Digest,  173  ;  Chitty  on  Bills  (13  Am.  ed.)  [*333],  373  ; 
Byles  on  Bills  (Sharswood's  ed.),  *25i  ;  i  Parsons  N.  &  B.,  644;  Bigelow  on 
Bills,  275  ;  Edwards  on  Bills,  461. 

"  Leftly  V.  Mills,  4  T.  R.,  170,  Buller,  J. 

*Chaters  v.  Bell,  4  Esp.,  48  ;  Geralopulo  v.  Wieler,  10  C.  B.,  690;  3  Eng.  L, 
&  Eq.,  515;  Edwards  on  Bills,  581;  Thomson  on  Bills  (Wilson's  ed.),  311  , 
Story  on  Bills  (Bennett's  ed.),  §  278. 


12  PROTEST    OF    BILLS    AND    NOTES.  §  94O. 

test.^  For  the  notary  will  not  be  permitted  to  trust  to  his 
memory  for  the  requisite  particulars.  It  is  to  his  contem- 
poraneous written  statement  that  the  law  gives  credit.^ 
Where,  in  Scotland,  the  original  protest  could  not  be  used, 
because  not  properly  stamped,  it  was  allowed  to  be  used  as 
a  note  for  extending  a  valid  protest,^  and  it  seems  unim- 
portant in  what  particular  form  the  noting  is  done. 

§  940.  (3)  Extending  the  pi'-otest — The  extension  of  the 
protest  is  the  completion  of  the  instrument  of  protest,  from 
minutes  or  "initial  protest,"  as  they  are  called,  noted  down 
on  the  day  of  dishonor.  This  extension  may  be  made  at 
any  time.  As  said  by  Lord  Kenyon :  "If  the  bill  was 
regularly  presented,  and  noted  at  the  time,  the  protest 
might  be  made  at  any  future  period,"  *  and  it  is  well  settled 
to  this  effect  in  the  United  States.^  The  extension  may  be 
made  even  at  any  time  before  suit  is  brought,^  or  after  trial 
has  commenced,  and  when  ma^e,  it  is  antedated,  as  of  the 
day  when  the  initial  protest  was  made.' 

'  Dennistoun  v.  Stewart,  17  Howard,  606;  Buller,  N.  P.,  373;  Thomson  on 
Bills  (Wilson's  ed.),  315  ;  Leftly  v.  Mills,  4  T.  R..  170,  Buller,  J. 

''Thomson  on  Bills,  312;  Benjamin's  Chalmers'  Digest,  174;  Story  on  Bills, 
§§  278,  283  ;  Bavley  on  Bills,  ch.  7,  §  2,  pp.  266,  267;  Bigelow  on  Bills,  275  ; 
Chittv,  Jr.,  on  Bills,  62  ;  Chitty  on  Bills  (13  Am.  ed.)  [*336],  377  ;  Byles  on  Bills, 
(Sharswood's  ed.),  *25o.  In  Buttler  v.  Play,  i  Mod.,  27  (1669),  Chitty,  Jr.,  on 
Bills,  p.  161,  it  is  said  that  protest  "must  regularly  be  the  day  of  the  bill  due, 
especially  if  the  party  be  not  present  on  the  place."  In  a  note  to  Benjamin's 
Chalmers'  Digest,  p.  174,  it  is  said  (citing  Brooks'  Notary,  p.  80),  that  in  prac- 
tice, foreign  bills  are  frequently  not  noted  till  the  day  after  their  dishonor,  and 
that  "  it  is  conceived  that  if  the  bill  has  been  duly  presented  this  is  sufficient." 
But  this  is  against  the  current  of  authority,  and  is  not  the  accepted  view. 

*  Thomson  on  Bills,  312. 

*  Chaters  v.  Bell,  4  Esp.,  48  (1801).  To  same  effect  Geralopulo  v.  Wieler,  10 
C,  B.,  690  ;  3  Eng.  L.  &  Eq.,  515  ;  Robins  v.  Gibson,  i  Maule  &  S.,  288 ;  Chitty 
on  Bills  (13  Am.  ed.)  [*336],  377  ;  Bigelow  on  Bills,  275  ;  Benjamin's  Chalmers' 
Dig.,  174;  Stor)^  on  Bills,  278;  i  Parsons  N,  &  B.,  644,  note  ;  Byles  on  Bills, 
(Sharswood's  ed.)  *2  5o ;  Chitty,  Jr.,  on  Bills,  62  ;  Goostrey  v.  Mead  Buller  N.  P., 
271,  cited  in  Orr  v.  Maginnis,  7  East.,  358  (semble);  Commercial  Bank  v.  Barks- 
dale,  36  Mo.,  563. 

^  Bailey  v.  Dozier,  6  How.,  23  ;  Bank  of  Decatur  v.  Hodges,  9  Ala.,  631  ;  Cay- 
uga Co.  Bank  v.  Hunt,  2  Hill,  635. 

*  Dennistoun  v.  Stewart,  19  How.,  606  ;  Brooks*  Notarj^  97  ;  Orr  v.  Maginnis, 
7  East.,  358  (semble). 

'In  Byles  on  Bills  [^250],  396,  it  is  said:  "The  protest  of  a  foreign  bill 
should  be  begun,  at  least  (and  such  an  incipient  protest  is  called  noting),  on  the  day 


§§94^94--  FORMAL    PROTEST.  13 

In  Scotland,  the  extension  of  a  protest  was  permitted 
fifteen  years  after  noting.^ 

§  941.  In  cases  of  payment  supra  protest. — It  has  been 
contended  that  in  the  case  of  payment  for  honor,  which 
must  be  made  stipra  protest,  the  formal  extension  of  the 
protest  must  be  made  before  the  payment,  on  the  ground 
that  unless  this  were  done,  the  allegation  that  the  bill  was 
continued  and  paid  under  protest  would  not  be  proved,  in- 
asmuch as  the  protest  should  be  understood  to  mean  such 
pr(5test  as  would  give  a  right  of  action  to  the  person  paying 
for  honor.  But  this  distinction  is  not  recognized.  It  is 
true  that  the  declaration  that  the  payment  was  made  for 
honor  must  precede  the  protest,  and  that  the  noting  of  such 
declaration  and  of  the  dishonor  must  be  then  made,  and 
that  unless  the  declaration  were  then  made,  no  after  act 
could  give  to  the  payment  the  character  of  payment  supra 
protest}  But  the  protest  in  this,  as  in  other  cases,  may  be 
extended  at  any  time,  provided  it  was  duly  noted.^ 

§  942.  When  there  is  a  protest  for  non-acceptance,  and 
subsequently  a  protest  for  non-payment,  it  is  not  sufficient 
to  simply  note  the  bill  for  non-acceptance,  and  extend  only 
the  protest  for  non-payment ;  but  wherever  proof  of  protest 
is  requisite,  the  extended  protest  alone  will  suffice.* 


on  which  acceptance  or  payment  is  refused  ;  but  it  may  be  drawTi  up  and  com- 
pleted at  any  time  before  the  commencement  of  the  suit,  or  even  dunng  the 
trial,  and  antedated  accordingly."  To  same  effect  see  Thomson  on  Bills  (\Vil- 
son's  ed.),  312.  That  it  may  be  at  any  time  before  trial,  see  Story  on  Bills 
(Bennett's  ed.),  §  278,  citing  Geralopulo  v.  Wieler,  3  Eng.  L.  &  Eq.,  515;  10 
Com.  B.,  690.  That  it  may  be  at  any  time,  Benjamin's  Chalmers'  Dig.,  174. 
"  It  is  not  too  late  to  make  it  after  the  bringing  of  suit,  and  in  the  course  of 
trial,"  Bigelow  on  Bills,  275.  Chitty  says :  "  It  is  said  it  should  be  made  before 
the  commencement  of  suit."  Chitty  on  Bills  (13  Am.  ed.)  [*477].  540.  Prof. 
Ames  says  in  vol.  2  B.  «&  N.,  863 :  "  The  dictum  in  Dennistoun  v.  Stewart, 
that  the  protest  may  be  drawn  up  at  any  time  before  trial,  can  not  be  defended 
upon  principle."  But  the  text  is  supported  by  the  general  tenor  of  authority, 
and  we  can  perceive  no  sound  doctrine  that  it  trenches  upon. 

'  Alexander  v.  Scott,  Thomson  on  Bills,  312. 

» Vanderwall  v.  Tyrrell,  I  Mood.  &  Malk.,  87. 

'Geralopulo  v.  Wieler,  10  C.  B.,  690;  3  Eng.  L.  &  Eq.,  515. 

*  Rogers  v.  Stephens,  2  T.  R.,  713;  Orr  v  Maginnis,  7  East.,  359. 


14  PROTEST    OF    BILLS    AND    NOTES.  §§  943  -946. 

§  943.  Copy  of  protest,  and  of  instrument  protested. — If 
the  drawer  reside  abroad,  it  has  been  said  that  a  copy,  or 
some  memorial  of  the  protest,  should  accompany  the  notice 
of  dishonor.^  But  it  is  now  well  settled,  that  it  is  only 
necessary  for  the  drawer  or  indorser  to  receive  a  notice  of 
the  protest,  without  any  copy  or  memorial  of  the  instru- 
ment itself,  in  order  to  fix  his  liability,  the  protest  not  being 
necessary  until  the  trial.^ 

§  944.  It  is  usual,  and  highly  important,  to  prefix  a  copy 
of  the  bill  or  note,  with  all  indorsements  thereon,  verbaiim 
et  literatim,  to  the  instrument  of  protest,  for  the  purpose 
of  identifying  the  bill  or  note  with  certainty,  and  indicat- 
ing to  the  drawer  or  indorsers  what  party  is  entitled  to  pay- 
ment.^ 

§  945.  How  the  protest  is  authenticated  or  proved. — The 
official  seal  of  a  notary  attached  to  the  certificate  of  protest 
is  everywhere  received  as  a  sufficient  prima  facie  proof  of 
its  authenticity.  The  courts  take  judicial  notice  of  the 
seal,  and  it  proves  itself  by  its  appearance  upon  the  certifi- 
cate.* But  it  may  be  controverted  as  false,  fictitious,  or 
improperly  annexed.^ 

§  946.  It  is  not  always  essential  to  the  admissibility  in 
evidence  of  the  certificate  of  protest  that  it  should  be  under 
the  notary's  seal  ;  nor  is  it  essential  in  all  cases,  as  already 
seen,  that  it  should  be  made  by  the  notary  in  person  ;  but 


*  Byles  (Sharswood's  ed.)  P252],  399. 

^  Goodman  v.  Harvey,  4  Ad.  &  El.,  870  (31  E.  C.  L.  R.)  ;  Robins  v.  Gibson, 
I  Maule  &  S.,  288;  Cromwell  v.  Hynson,  2  Esp.,  511  ;  Ex  /^r/^  Lowenthal,  L. 
R.  9  ch.,  591  ;  Dennistoun  v.  Stewart,  17  How.,  606;  Lenox  v.  Leverett,  10 
Mass.,  I  ;  Wells  v.  Whitehead,  15  Wend.,  527  ;  Wallace  v.  Agry,  4  Mason,  336  ; 
Chitty  on  Bills  (13  Am.  ed.)  P344],  375  ;  Bigelow  on  Bills,  275  ;  2  Ames  B.  & 
N.,  115;  post,  §  986. 

'Story  on  Bills,  §  276;  Chitty  (13  Am.  ed.)  [*458],  517. 

*  Nichols  V.  Webb,  8  Wheat.,  326  ;  Townsley  v.  Sumrall,  2  Pet.,  170  ;  Dickens 
V.  Beal,  10  Pet.,  582  ;  Mullen  v.  Morris,  2  Barr.,  86 ;  Nelson  v.  Fotterall,  7  Leigh, 
180;  Carter  v.  Burley.  9  N.  H.,  558  ;  Bryden  v.  Taylor,  2  Har.  &  J.,  399 ;  Bank 
of  Ky.  V.  Pursley,  37  B.  Monroe,  240 ;  Bradley  v.  Northern  Bank,  60  Ala.,  258. 

"  Ibid. 


§§  947-949-  FORMAL    PROTEST.  15 

in  either  of  these  cases  it  does  not  prove  itself,  and 
there  must  be  extraneous  evidence  to  show  that  it  was 
duly  made  by  the  person  officiating,  and  is  sufficient  with- 
out a  seal,  according  to  the  laws  of  the  country  where  it 
was  made.^  In  some  cases  it  has  been  held  that  a  notary's 
certificate  of  protest  is  sufficient  without  a  seal,  the  law  giv- 
ing full  evidence  to  his  protestations  and  attestations;' 
while  other  authorities  hold  that  by  the  law  merchant  the 
notary's  seal  is  an  essential  part  of  the  certificate  protest, 
and  that  without  such  seal  the  certificate  is  insufficient  as 
proof  of  protest.' 

§  947.  An  impression  of  the  notarial  seal  on  the  paper 
of  the  protest  is  prima  facie  sufficient,  and  it  will  be  pre- 
sumed to  have  been  affixed  according  to  the  laws  of  the 
country  where  the  dishonor  occurred  until  there  is  some- 
thing to  impeach  it.^  But  it  seems  that  a  mere  scrawl 
would  not  be.^ 

§  948.  It  is  well  settled  that  where  the  laws  of  the  State 
in  which  the  protest  is  made  require  that  it  shall  be  made 
under  the  notary's  seal,  it  will  not  be  received  in  evidence 
in  another  State  without  such  seal,  and  no  other  mode  of 
authentication  is  available.^ 

§  949.  The  protest  should  be  signed  by  the  notary  ;  but 
if  his  act,  in  fact,  it  may  be  signed  by  his  clerk  in  his  name, 
c  r  may  be  in  printing,  it  being  requisite  only  that  it  should 
be  by  his  authority.'^ 

'Carter  v.  Burley,  9  N.  H.,  558  ;  Chanoine  v.  Fowler,  3  Wend.,  173. 

'Bank  of  Ky.  v.  Pursley,  3  T.  B.  Monroe,  240  (1826)  ;  Huffuker  v.  National 
Bank,  12  Bush.  (Ky.),  293  (1876),  Lindsay,  C.  J.,  saying  ;  "The  notary  being  an 
officer  of  this  State,  his  official  signature  is  all  that  is  required  to  the  protest." 
Lambeth  v.  Caldwell,  i  Rob.  La.,  61. 

'-'Donegan  v.  Wood,  49  Ala.,  251-2.  See  2  Pars.  N.  &  B.,  634;  Stoiy  on 
Bills,  §  277  ;  Kirksey  v.  Bates,  7  Porter  (Ala.),  529. 

*  Carter  v.  Burley,  9  N.  H.,  558;  Conolly  v.  Goodwin,  5  Cal.,  220;  Bank  of 
Manchester  v.  Slason,  13  Vt.,  334 ;  Bradley  v.  Northern  Bank,  60  Ala.,  258. 

'  Carter  v.  Burley,  9  N.  H.,  558.     See  Donegan  v.  Wood,  49  Ala.,  251. 

•Ticknor  v.  Roberts,  11  La.,  14;  Bank  of  Rochester  v.  Gray,  2  Hill  (N.  Y.), 
227  ;  Wharton's  Conflict  of  Laws,  §  699a. 

^Fulton  V.  McCracken,  18  Md.,  528. 


l6  PROTEST    OF    BILLS    AND    NOTES.  §§  95O-952. 


SECTION    IV. 

CONTENTS    OF     PROTEST. 

§  950.  The  protest,  or,  more  strictly  speaking,  the 
notarial  certificate  thereof,  should  set  forth  :  (i)  The  time 
of  presentment;  (2)  the  place  of  presentment;  (3)  the 
fact  and  manner  of  presentment ;  (4)  the  demand  of  pay- 
ment ;  (5)  the  fact  of  dishonor  ;  (6)  the  name  of  the  party 
by  whom  presentment  was  made  ;  and  (7)  the  name  of  the 
person  to  whom  presentment  was  made.  And  in  respect 
to  notice,  it  should  state  :  (i)  The  person  notified  ;  (2)  the 
manner  of  notification  ;  and  (3)  when  not  served  on  the 
party  in  person,  it  should  specify  distinctly  whether  it  was 
delivered  at  his  house  or  place  of  business  ;  or,  if  sent  by 
mail,  that  it  was  addressed  to  the  post-office  nearest  to  him, 
or  at  which  he  usually  received  his  business  letters.  These, 
at  least,  are  the  elements  of  a  regular  and  perfect  protest. 
The  admissibility  of  the  protest  as  evidence  of  notice,  and 
its  statements  in  reference  to  notice,  are  considered  under  a 
separate  head. 

§  951.  As  to  the  time. — It  is  essential  that  the  time  of 
presentment  and  demand  should  be  stated,  for  otherwise  it 
can  not  appear  from  the  certificate  that  the  bill  was  duly 
dishonored.  And  if  it  state  that  the  bill  was  "  this  day  pro- 
tested," and  is  dated  on  a  day  previous  to,  or  after,  the  day 
of  maturity,  it  is  invalid  upon  its  face.^ 

It  is  better  to  state  that  the  presentment  and  demand 
were  made  during  the  usual  hours  of  business,  but  where 
the  hour  of  the  day  is  not  stated,  it  will  be  presumed  that 
they  were  made  at  the  proper  time  of  day.^ 

§  952.  As  to  the  place. — If  the  bill  is  not  payable  at  a 
particular  place,  it  is  not  absolutely  necessary  to  state  at 

'  Walmsley  v.  Acton,  44  Barb.,  312  ;  see  post,  %  984. 

"  Burbank  v.  Beach,  15  Barb.,  326  ;  DeWolf  v.  Murray,  2  Sand.,  166  ;  Cayuga 
County  Bank  v.  Hunt,  2  Hill,  227  ;  Skelton  v.  Dunston,  92  111,  49. 


§§  953'  954-  CONTENTS    OF    PROTEST.  1 7 

what  place  the  presentment  and  demand  were  made  ;  but  if 
it  were  payable  at  a  bank,  or  other  specified  place,  the  cer- 
tificate is  insufficient  unless  it  state  presentment  and  demand 
at  such  place. ^ 

§  953.  As  to  the  manner  and  fact  of  presentment  and 
demand. — The  presentment  of  the  bill  and  the  demand  of 
payment  should  be  separately  stated.  The  usual  expression 
of  the  certificate  is,  that  the  notary  "  did  exhibit  said  bill," 
and  it  is  certain  that  there  must  be  some  expression  im- 
porting ex  vi  termini  that  the  bill  was  presented  to  the 
drawee  or  acceptor.^  The  mere  statement  that  payment 
was  "  demanded  "  has  been  held  by  the  United  States  Su- 
preme Court  to  be  insufficient  in  itself,  because  not  neces- 
sarily implying  a  "  presentment  also."^  But  there  can  be 
no  legal  demand  without  presentment,  and  the  term  "  de- 
manded "  has  been  considered  sufficient  in  Louisiana.**  The 
mere  statement  of  "  presentment "  is  not  in  itself  sufficient 
without  also  a  statement  of  demand.^ 

§  954.  As  to  the  fact  of  dishonor. — The  dishonor  of  the 
bill  must  be  stated,  and  it  is  usually  expressed  in  the  phrase 
that  the  person  to  whom  it  was  presented  "  answered  that 
it  would  not  be  accepted,  or  paid,"  or  that  such  person 
"  refused  to  accept  or  pay  it,"  or  some  such  language.  If 
it  does  not,  in  some  terms,  inform  the  party  of  the  dishonor, 
it  is  fatally  defective.^  But  it  is  not  material  what  words 
are  used.  If  it  states  that  the  reason  of  protest  was  its 
non-payment,  it  is  sufficient.'^ 


'  People's  Bank  v.  Brooke,  31  Md.,  7. 

'  Union  Bank  v.  Fowlkes,  2  Sneed,  555  ;  Bank  of  Vergennes  v.  Cameron,  7 
Barb.,  143. 

'  Musson  V.  Lake,  4  How.,  262,  Woodbury  and  McLean,  JJ.,  dissenting  on 
this  point. 

*  Nott  V.  Beard,  16  La.,  308. 

•  Nave  V.  Richardson,  36  Mo.,  130 ;  Farmers'  Bank  v.  Allen,  18  Md.,  475. 

'  Taylor  v.  Bank  of  Illinois,  7  T.  B.  Mon.,  576 ;  Arnold  v.  Kinloch,  50  Barb. 
(N.  Y.),  44  ;  Littledale  v.  Maberry,  43  Me.,  264. 
'  Young  V.  Bennett,  7  Bush.  (Ky,),  477. 

Vol.  II.— 2 


1 8  PROTEST    OF    BILLS    AND    NOTES.         §§955-958. 

§  955.  As  to  the  name  of  the  person  upon  whom  demand 
was  made,  it  should  be  stated,  especially  when  it  was  not 
made  at  the  place  of  business  of  the  drawer  or  acceptor. 
In  the  latter  case,  it  is  sufficient  to  describe  the  person  as  a 
clerk,  or  person  in  charge.^  If  a  firm  were  the  drawer  or 
acceptor,  it  would  be  fatally  defective  in  not  stating  the 
name  of  the  person  on  whom  demand  was  made,  as  well  as 
that  he  was  a  member  of  the  firm.^ 

If  the  bill  is  payable  at  a  bank,  nothing  more  need  be 
stated  than  that  the  notary  presented  it  and  demanded  pay- 
ment at  the  bank,  and  that  it  was  refused,  without  stating 
the  name  of  the  person  or  officer  of  the  bank  to  whom  it 
was  presented.^ 

§  956.  The  certificate  frequently  states  the  name  of  the 
party  who  requests  the  protest  to  be  made,  and  who  looks 
to  the  drawer  or  indorser  for  payment ;  but  this  is  not 
necessary.^ 

§  957.  It  is  said  to  be  important  that  the  reasons  given 
by  the  drawee  for  non-acceptance  or  non-payment  should 
be  stated  in  the  certificate  of  protest ;  ^  and  it  may  be  usual 
to  do  so.  But  the  reasons  for  a  refusal  to  accept  or  pay, 
while  they  may  sometimes  be  of  such  a  character  as  to 
excuse  protest  or  notice,  as  against  the  drawer,  are  not  an 
essential  part  of  the  protest,  and  it  makes  no  difference  if 
they  are  not  stated. 

§  958.  No  mere  verbal  inaccuracy  or  mistake  in  the  cer- 
tificate of  protest  will  vitiate  it,  if  in  fact  the  protest  was 
properly  made  and  the  notice  given.  Thus,  a  misdescrip- 
tion of  the  acceptor  as  "  Chas."  instead  of  "  And.  E. 
Byrne,"  was  held  not  fatal  to  the  protest ;  ^  and  so  a  mis- 
statement of  the  date.'' 

'  Nelson  v.  Fotterall,  7  Leigh,  179 ;  Stainback  v.  Bank  of  Va.,  11  Grat.,  260, 

"^  Otsego  County  Bank  v.  Warren,  18  Bark.,  290. 

'  Hildeburn  v.  Turner,  6  How.,  69.     ■•  Duckert  v.  Van  Lilienthal,  1 1  Wis.,  56 

=■  Chitty  on  Bills  (13  Am.  ed.)  P458],  516,  517  ;  Story  on  Bills,  §  276. 

'  Dennistoun  v.  Stewart,  17  How.,  606. 

'Bank  at  Decatur  v.  Hodges,  9  Ala.,  631. 


^  959.  THE    PROTEST    AS    EVIDENCE.  I9 

SECTION  V. 

THE   PROTEST  AS   EVIDENCE. 

§  959.  The  original  instrument  of  protest,  or  a  duly  au 
thenticated  copy,  is  respected  by  the  courts  of  a  foreign 
country,  and  whenever  admissible  in  testimony  is  regarded 
2iS  prz?na  facie  tviditncQ  oi  all  the  facts  therein  stated,  so 
far  as  they  come  within  the  scope  of  the  notary's  duty  in 
making  the  presentment  and  demand  and  protest.^  But  it 
IS  prima  facie  tw\&QncQ  only,  and  any  statement  made  in 
the  protest  may  be  rebutted  by  any  competent  testimony 
to  the  contrary.^ 

Although  the  notary,  when  examined,  has  no  recollec- 
tion of  the  facts  stated  in  the  certificate  of  protest,  it  is 
st\\]  prima  facie  evidence  until  contradicted.® 

But  as,  by  the  law  merchant,  the  protest  is  only  neces- 
sary, or  receivable  as  evidence  of  dishonor,  in  the  case  of 
foreign  bills  or  of  indorsed  notes,  which  are  of  the  nature 
of  foreign  bills  and  come  within  the  reason  of  the  law  re- 
specting them,  the  protest  of  an  inland  bill  or  of  an  inland 
promissory  note  is  not  evidence  of  dishonor  in  a  foreign 
State,  although  it  may  be  in  the  State  where  the  dishonor 
occurred  by  statute*  And  where  a  State  statute  makes 
the  protest,  when  executed  by  a  notary  of  that  State,  evi- 
dence as  to  demand  and  notice,  it  does  not  authorize  the 
notary  to  act  beyond  its  territorial  limits,  or  accord  the 
same  effect  to  his  act  when  beyond  them.^ 

'  Townsley  v.  Sumrall,  2  Pet,,  170  ;  Chase  v.  Taylor,  4  Har.  &  J.,  54. 

'^  Dickens  v.  Beal,  10  Pet.,  582 ;  Ricketts  v.  Pendleton,  14  Md.,  320  ;  Howard 
Bank  v.  Carson,  50  Md.,  27;  Wharton  on  Evidence,  §123;  Union  Bank  v. 
Fowlkes,  2  Sneed,  555;  Nelson  v.  Fotterall,  7  Leigh,  180;  Spence  v.  Crockett, 
5  Baxter,  576. 

'  Sherer  v.  Easton  Bank,  33  Penn.  St.,  134. 

*  Dutchess  Co.  Bank  v.  Ibbottson,  5  Den.,  no;  see  Kirtland  v.  Wanzer,  2 
Duer,  278,  on  this  point.  But  see  supra  as  to  other  points  in  which  it  is  not 
approved. 

'Dutchess  Co.  Bank  v.  Ibbottson,  5  Den.,  no. 


20  PROTEST    OF    BILLS    AND    NOTES.        §§960,961. 

§  960.  By  the  law  fnerchant  protest  not  evidence  as  to 
notice. — When  the  notary  who  has  in  charge  the  bill  for 
presentment  has  presented  it  for  acceptance  or  payment,  as 
the  case  may  be,  and  has  protested  it  in  the  event  of  its 
dishonor  by  a  refusal,  his  official  duty  is  fulfilled ;  and  it  is 
not  incumbent  on  him  to  go  farther  and  give  notice.-  Al- 
though, if  the  holder  desires  him  to  do  so,  he  may,  as  well 
as  a  private  person,  act  as  his  agent  in  giving  notice.^  It 
being  no  part  of  the  notary's  official  duty  to  give  notice, 
which  is  entirely  distinct  from  the  protest,  the  certificate 
of  protest  made  out  by  the  notary  is  not  by  the  law  mer- 
chant evidence  of  any  fact  stated  therein  respecting  the 
service  or  transmission  of  notice,  but  only  of  such  things, 
as  pertain  to  his  official  duty  in  respect  to  the  protest,^  By 
statutes,  in  the  States  of  the  Union,  it  is  very  generally 
provided  that  the  certificate  of  protest  shall  be  evidence  of 
the  facts  stated  therein  respecting  notice,  it  being  found  by 
experience  to  be  a  more  convenient  method,  and  as  reliable 
as  any  other,  of  making  the  proof.  Prof.  Parsons  ex- 
presses the  opinion  that  without  the  aid  of  a  statute,  the 
certificate  is  evidence  "  not  only  of  presentment,  demand, 
and  dishonor,  but  of  such  notice  as  it  asserts  to  have  been 
given."  *  When  a  statute  makes  the  certificate  of  protest 
evidence  of  the  facts  stated  therein,  and  it  states  the  due 
mailing  of  notice  to  the  proper  post-office,  properly  di- 
rected, the  mere  fact  that  notice  does  not  reach  the  in- 
dorser  will  not  rebut  the  statements  of  the  certificate.^ 

§  961.  How  notice  proved. — The  notice  must  be  proved 

'  Dickens  v.  Beal,  10  Pet.,  582  ;  Morgan  v.  Van  Ingen,  2  Johns,  204;  Miller 
V.  Hacl<ley,  5  Johns,  384;  Bank  of  Rochester  v.  Gray,  2  Hill,  231. 

'  See  chapter  XX,  on  Presentment  for  Payment,  sec.  i,  vol.  i,  §  572. 

'  Dickens  v.  Beal,  10  Pet.,  582  ;  Walker  v.  Turner,  2  Grat.,  536  ;  Williams  v. 
Putnam,  14  N.  H.,  540  ;  Rives  v.  Parmley,  18  Ala.,  256  ;  Couch  v.  Sherrill,  \^ 
Kansas,  624;  Swayze  v.  Britten,  17  Kansas,  625.     ^&&  post,  %  991. 

*  2  Parsons  N.  &  B.,  498  ;  Bank  of  Rochester  v.  Gray,  2  Hill,  231  ;  disap- 
proving Cape  Fear  Bank  v.  Steinmetz,  i  Hill,  45. 

'Wilson  V.  Richards,  Minnesota  S.  C,  Oct.,  1881  ;  Albany  L.  J.,  Jan'y  7. 
1882,  p.  18,  Clark,  T. 


^  962.  THE    PROTEST    AS    EVIDENCE.  21 

by  the  notary  himself  when  he  gives  it,  or  by  other  wit- 
nesses in  depositions  duly  taken  as  in  any  other  case,  or  by 
examination  ore  tenus,  at  the  trial.^  The  certificate  of  pro- 
test is  in  no  sense,  unless  by  statutory  enactment,  a  certifi- 
cate of  notice,  nor  is  a  certificate  of  the  notary  subjoined 
to  the  protest,  nor  a  separate  affidavit  of  the  notary,  ad- 
missible to  prove  the  fact,  it  not  being  a  legal  form  of  tes- 
timony.* When  the  notary  undertakes  to  act  as  agent  of 
the  holder,  the  engagement  does  not  inure  to  the  benefit  of 
any  one  but  his  principal,  and,  therefore,  where  the  notary 
had  engaged  to  give  notice  to  the  first  and  second  indors- 
ers,  but  only  gave  it  to  the  second,  of  whom  the  holder 
received  the  amount  of  the  bill,  the  second  indorser  who 
paid  it  could  not  sue  him  for  not  giving  notice  to  the  first' 

§  962.  Protest  only  evidence  of  facts  stated. — It  can  not 
be  inferred  from  the  mere  fact  of  protest  when  it  is  admissi- 
ble as  evidence  of  the  manner  and  service  of  notice,  or  of 
the  facts  stated  respecting  the  giving  of  notice,  that  any 
step  was  regularly  taken,  or  any  fact  existed,  which  is  not 
certified  to.  In  other  words,  the  admission  of  the  cer- 
tificate of  protest  as  evidence,  only  makes  it  evidence  of 
such  things  as  it  distinctly  states,  and  purports  to  give  evi- 
dence of. 

Therefore,  where  the  certificate  of  protest  is  by  statute 
admissible  evidence  of  the  facts  stated  as  to  notice,  and  it 
simply  states  that  notice  was  addressed  to  the  indorser  at  a 
certain  place,  without  adding  that  such  place  was  the  post- 
office  or  residence  of  the  indorser,  there  can  be  no  inference 
that  such  was  the  fact,  and  the  certificate  is  consequently 
insufficient  in  itself  to  prove  due  notice.*     Such,  at  least,  is 

'  D'ckf'ns  V.  B^al,  10  Pet.,  582 ;  Miller  v.  Hackley,  5  Johns,  384 ;  Lloyd  v. 
McGair,  ■>  Barr  ,  a82.    See/^i/,  §  967. 

"  Waiker  «.  Turner,  2  Grat.,  536;  Bank  of  Vergennes  v.  Cameron,  7  Barb., 
144. 

'  Morgar.  v.  v/'an  Ingen,  2  Johns,  204. 

*  Braashaw  V.  Hedge,  10  Iowa,  402  (i860);  Sprague  v.  Tyson,  44  Ala.,  34a 
(1870;.     inlurne;  v.  xicgers,  8  Ind.,  140  (1856),  the  certificate  stated  that,  "  I 


22  PROTEST    OF    BILLS    AND    NOTES.  §  962. 

the  view  which  has  been  taken  in  the  cases  cited  in  the 
subjoined  note,  and  which  seems  to  us  consistent  with  rea- 
son  and  with  the  strict  principles  of  the  law  merchant, 
which  throws  the  burden  of  proving  due  notice  on  the 
plaintiff.  But  the  Supreme  Court  of  the  United  States, 
it  seems,  takes  a  different  view,  though  this  precise  ques^ 
tion  was  not  before  it.  The  question  in  the  case  before 
it  arose  upon  a  demurrer  to  evidence,  the  notary  who 
made  the  certificate  being  examined  as  a  witness,  and 
testifying  that  he  sent  notice  by  mail  addressed  to  the 
indorser  at  Alexandria,  without  any  evidence  that  that 
was  his  place  of  residence  ;  and  the  court  held  that  the 
jury  would  have  been  warranted  to  infer  that  the  indors- 
er's  residence  was  in  Alexandria.^     In  Virginia  this  case 

notified  Henry  Turner  and  John  H.  WoodfiU  by  letter  to  each  at  New  Albany, 
Indiana,  permail  the  same  day."  The  parties  named  were  indorsers.  The  court 
said,  there  was  "  no  evidence  that  the  defendant  resided  at  New  Albany  or  any- 
where else.  The  notary's  statement  in  the  protest  that  he  notified  the  indorsers 
is  qualified  by  specifying  the  manner  in  which  it  was  done — that  is,  by  address- 
ing notices  to  them  at  New  Albany.  The  bill  was  drawn,  indorsed,  and  payable 
in  Ohio.  There  is  no  preeumption  that  they  resided  in  New  Albany."  To  same 
effect  see  also  Sullivan  v.  Deadman,  19  Ark.,  486.  In  Stiles  v.  Inman,  55  Miss., 
472  (1877),  notarial  certificate  stated  that  notice  was  mailed  to  Stiles,  the  in- 
dorser, at  Vicksburg.  The  court  said  :  "  There  was  no  evidence  that  Stiles,  the 
indorser,  resided  at  Vicksburg,  or  that  Vicksburg  was  his  place  of  residence,  or 
his  nearest  post-office,  or  the  one  at  which  he  received  his  mail  matter.  For  all 
that  appears,  the  notice  might  as  well  have  been  sent  by  mail  to  Boston  or  New- 
Orleans,"  and  held  that  the  proof  of  notice  was  insufficient,  citing  Walker  v. 
Tunstall,  3  How.  (Miss.),  259;  Ellis  v.  Commercial  Bank,  7  How.  (Miss.),  294. 
The  case  of  Raine  v.  Rice,  2  Patton.  &  H.,  530  (1857),  is  often  quoted  for  the 
saitie  doctrine.  The  syllabus  of  the  reporter  is  misleading,  and  no  such  ques- 
tion was  decided,  as  is  shown  in  Linkous  v.  Hale,  27  Grat.,  674  (1876). 

'  Bank  of  U.  S.  v.  Smith,  11  Wheat.,  171  (1826).  In  this  case  it  appeared  that 
the  notary  who  protested  the  note  in  Washington  swore  on  the  trial,  being  ex- 
amined as  a  witness,  that  on  the  day  of  dishonor  he  put  in  the  post-office  notice 
of  non-payment,  addressed  to  the  defendant  at  Alexandria.  This  was  the  only 
evidence  of  due  notice,  and  the  defendant  demurred  to  the  evidence  on  the 
ground  that  it  did  not  appear  that  Alexandria  was  the  post-office  to  which  no- 
tice should  have  been  sent.  Thompson,  J.,  said,  rendering  the  unanimous 
opinion  of  the  court :  "  If  the  defendant's  place  of  residence  was  Alexandria,  it 
is  not  denied  that  but  due  and  regular  notice  was  given  him.  The  notary  was  a 
sworn  officer,  officially  employed  to  demand  payment  of  this  note,  and  it  is  no 
more  than  reasonable  to  presume  that  he  was  instructed  to  take  all  necessary 
steps  to  charge  the  indorsers.  This  must  have  been  the  object  in  viev/  in  de- 
manding payment  of  the  maker.  And,  it  is  fair,  also,  to  presume  that  he  made 
inquiry  for  the  residence  of  the  defendant  before  he  addressed  a  letter  to  him  ; 
for  it  is  absurd  to  suppose  he  would  direct  to  him  at  that  place,  without  some 
knowledge  or  information  that  he  lived  there,  this  being  the  usual  and  ordinary 
course  of  such  transactions  and  with  which  the  notary  was,  no  doubt,  acquainted. 


§  962.  THE    PROTEST    AS    EVIDENCE.  23 

was  recently  cited  with  approval  by  the  Supreme  Court  of 
Appeals,  and  applied  where  there  was  no  evidence  but  the 
notary's  certificate  that  he  mailed  notice  to  the  indorsers  at 
Blacksburg,  Virginia ;  but  while  the  court  considered  that 
on  the  demurrer  to  evidence,  in  which  form  the  question 
arose,  it  should  be  inferred  that  their  residence  was  at 
Blacksburg,  it  held  that  no  such  inference  would  be  justi- 
fied in  the  case  of  a  special  verdict,  it  being  an  inflexible 
rule  that  the  court,  upon  a  special  verdict,  can  not  infer 
other  facts  from  those  found  by  the  jury.^  In  a  late  case 
in  Iowa  it  was  said  by  the  court  that  "the  bare  certificate 
of  the  notary  that  he  notified  the  makers  and  indorsers  is 
itself /r2V;2^/«^2>  evidence  that  they  were  notified.  If  he 
specifies  the  mode  in  which  he  did  it,  such  specification 
does  not  destroy  the  prima  facie  case,  nor  render  it  neces- 
sary to  prove  that  such  mode  would  effectuate  such  result, 
unless  indeed  it  should  appear  affirmatively  that  the  mode 
adopted  could  not  have  done  so.  But  if  the  notary  only 
certify  the  mode  he  adopted  to  give  the  notice,  and  not  to 
the  fact  that  he  did  give  it,  then,  unless  it  further  appeared 
that  such  mode  would  effectuate  notice,  the  certificate  does 
not  make  2i  prima  facie  case."  *     This  distinction  is  very  re- 

The  jury  would,  undoubtedly,  have  been  warranted  to  infer  from  this  evidence 
that  the  defendant's  residence  was  in  Alexandria.  If  that  was  not  the  fact,  this 
case  is  a  striking  example  of  the  abuse  which  may  grow  out  of  demurrers  to  evi- 
dence. For  a  single  question  to  the  witness  would  have  put  at  rest  that  point 
one  way  or  the  other,  if  the  least  intimation  had  been  given  of  the  objection.  It 
was  manifestly  taken  for  granted  by  all  parties  that  the  defendant  lived  at  Alex- 
andria. And  if  a  party  will  upon  the  trial  remain  silent,  and  not  suggest  an  in- 
quiry which  was  obviously  a  mere  omission  on  the  part  of  the  plaintiff,  a  jury 
would  be  authorized  to  draw  all  inferences  from  the  testimony  given  that  wouW 
not  be  agamst  reason  and  probability,  and  the  court,  upon  a  demurrer  to  the  evi- 
dence, will  draw  the  same  conclusions  that  the  jury  might  have  drawn."  It 
will  be  perceived  that  this  case  does  not  determine  the  sufficiency  of  the  evi- 
dence if  it  were  merely  contained  in  a  statement  of  the  protest.  In  such  case 
the  defendant  could  have  no  opportunity  to  cross-examine  and  to  elicit  the  facts 
respecting  reasonable  inquiry  by  the  notary,  and  although  the  decision  just 
quoted  militates  strongly  against  the  doctrine  of  the  text,  it  is  therefore  not 
necessarily  inconsistent  with  it. 

'Linkous  V.  Hale,  27  Grat.,  668-674  (1876),  Moncure,  P.  See  Slaughter  v. 
Farland,  31  Grat.,  134. 

■••Walmsley  v.  Rivers,  34  Iowa,  466  (1871).  In  which  case  the  notary  certi- 
fied that  he  notified  the  indorsers,  and  that  he  dehvered  the  notice  at  the  post- 


24  PROTEST    OF    BILLS    AND    NOTES.  §  963. 

fining,  and  without  just  ground.  In  Indiana  it  was  not 
taken  in  a  similar  case.^  A  certificate  of  notice  to  a  drawer 
sent  to  a  place  where  the  bill  bears  date  would  stand  on  a 
different  footing,  that  being  presumably  the  drawer's  place 
of  residence.^  So  where  the  protest  states  that  notice  of 
protest  "  was  left  at  the  boarding-house  of  A.  B.,  or  the 
office  of  C.  D.,  it  is  not  sufficient  evidence  that  it  was  left 
in  the  proper  manner.^  And  where  it  states  presentment  of 
a  note  payable  at  bank  to  the  cashier,  it  has  been  held  that 
it  is  not  to  be  inferred  that  the  note  was  in  the  bank,  or  un- 
less it  was  in  the  bank,  that  the  cashier  was  at  the  bank, 
but  that  might  be  proved  by  other  testimony.^ 

§  963.  As  to  the  mere  fact  that  due  notice  was  given, 
however,  when  there  is  no  question  raised  as  to  the  person 
upon  whom,  or  the  place  where,  it  was  served,  the  certificate 
that  "  due  notice  was  given  or  mailed,  or  that  the  person 
was  duly  notified,"  is  sufficient  evidence  that  the  notice  in 
itself  corresponded  to  the  protest,  and  was  in  proper  legal 
form. 

A  legal  notice  is  a  definite  legal  instrument,  and  where 
a  statute  makes  the  certificate  of  the  notary  evidence  as  to 
the  service,  or  as  to  facts  stated  respecting  notice,  it  would 
seem,  that  his  certificate  that  notice  was  given,  would  be  as 
definite  as  if  it  detailed  the  minutias  of  the  instrument  thus 

office  addressed  to  them,  "  Des  Moines."  And  the  case  was  distinguished  from 
Bradshaw  v.  Hedge,  10  Iowa,  402  {supra),  in  which  the  notary  merelj'  stated 
that  he  put  notice  in  the  post-office  addressed  to  a  certain  place  named. 

^  Turner  v.  Rogers,  8  Ind.,  140. 

"^  See  chapter  XX,  on  Presentment  for  Payment,  vol.  i,  §  639,  and  chapter 
XXIX,  on  Notice,  vol.  2,  §§  1030,  1031. 

'Rives  V.  Parmley,  18  Ala.,  262,  Dargan,  C.  J.,  said:  "Notice  might  have 
been  left  at  the  boarding-house  of  the  detendant  in  a  manner  wholly  insufficient 
to  charge  him.  Indeed,  the  notice  might  have  been  left  at  the  house  on  the  day 
stated,  and  yet  the  notary  might  have  been  guilty  of  gross  neglect,  as  if  he 
had  merely  stopped  at  the  house  and  left  the  notice  without  inquiry  for  the  de- 
fendant, or  saying  a  word  about  the  object  of  his  visit,  or  delivering  the  notice 
to  any  one  to  be  handed  to  the  defendant,  when  he  could  have  delivered  it  to 
the  party  himself  by  inquiring  for  him." 

*  Magoun  v.  Walker,  49  Me.,  420 ;  Seneca  County  Bank  v.  Neass,  5  Den., 
329 ;  ante,  §  644.  But  see  Barbaroux  v.  Waters,  3  Mete.  (Ky.),  304,  and  a»/tf, 
§659. 


§  964.  THE    PROTEST    AS    EVIDENCE.  2$ 

described.^  But  it  has  been  held,  that  the  protest,  unless  it 
states  the  contents  of  the  notice,  is  only  evidence  that 
what  purported  to  be  notice  was  sent,  and  not  of  its  suffi- 
ciency in  law.*  It  seems  to  us  that  the  separate  facts  as  to 
service  and  place,  and  person  should  be  stated,  but  that  the 
contents  of  the  notice  are  to  be  presumed  to  be  conforma- 
ble to  law. 

§  964.  Presimiptioiis  in  favor  of  protest. — But  legal 
presumptions  are  made  in  favor  of  the  protest  under  proper 
circumstances.  Thus,  when  the  certificate  of  protest  states 
that  demand  was  made  of  the  clerk  of  the  drawee,  found 
at  his  office  or  place  of  business,  the  drawee  himself  being 
absent,  it  is  evidence  not  only  of  the  fact  of  demand,  but 
also  that  the  person  named  was  the  drawee's  clerk,  duly 
authorized  to  refuse  acceptance  or  payment.^  And  it  would 
be  presumed,  if  not  stated,  that  the  drawee  was  absent.'' 
So  (where  it  is  evidence  as  to  notice),  if  it  state  that  notice 
was  left  "at  the  indorser's  desk  in  the  custom  house,  he 
being  absent,  with  a  person  in  charge,"  it  is  prima  facie 
evidence  that  such  was  his  place  of  business,  and  that  it 
was  properly  left  there,  it  not  appearing  that  better  service 
could  have  been  made.^  So,  if  it  states  demand  at  his 
office  or  place  of  business,  of  his  bookkeeper,®  or  agent,'' 
or  clerk,®  it  is  evidence  that  such  person  was  the  drawee's 
agent.      But  unless  the  demand  was  at  the  drawee's  place 


*  Tate  V.  Sullivan,  30  Md.,  464  ;  Pattce  v.  McCrillis,  53  iMe.,  410  ;  Orono  Bank 
V.Wood,  49  Me.,  26  ;  Lewistown  Bank  v.  Leonard,  43  Me.,  144;  Ticonic  Bank  v. 
Stackpole,  41  Me.,  321  ;  Simpson  v.  White,  40  N.  H.,  540;  Bushworth  v.  Moore, 
36  N.  H.,  144  ;  Galladay  v.  Bank  of  Union,  2  Head.,  57  ;  Union  Bank  v.  Middle- 
brook,  33  Conn.,  95  ;  McFarland  v.  Pico,  8  Cal.,  626  ;  Kern  v.  Van  Phal,  7 
Minn.,  426. 

"  Ducket  V.  Van  Lilienthal,  11  Wis.,  56  ;  Smith  v.  Hill,  6  Wis.,  154;  Kimball 
V.  Bowen,  2  Wis.,  224.     See  post,  %  105 1  and  notes. 

'  Nelson  v.  Fotterall,  7  Leigh,  179;  Stainback  v.  Bank  of  Virginia,  11  Grat., 
260;  W^halcy  v.  Houston,  I2  La.  Ann.,  585. 

*  Gardner  v.  Bank  of  Tenn.,  i  Swan,  420. 

*  Bank  of  Commonwealth  v.  Mudgett,  44  N.  Y.,  514. 

*  Phillips  V.  Poindexter,  18  Ala.,  579.  '  Dickerson  v.  Turner,  12  Ind.,  223.' 

*  Bradley  v.  Northern  Bank,  60  Ala.,  259. 


26  PROTEST    OF    BILLS    AND    NOTES.         §§  965,  966. 

of  business,  it  would  be  different  ;  and  where  the  protest 
was  legal  evidence  of  the  manner  of  service  of  notice,  it 
was  held,  nevertheless,  that  the  certificate  that  "  a  notice  to 
D.  B.  P.,  the  indorser,  was  left  at  the  residence  of  J.  P.  S., 
his  attorney  in  fact,  with  a  female  white  servant,  the  said 
J.  P.  S.  not  being  in,"  was  not  evidence  that  S.  was  P.'s 
attorney  in  fact  to  receive  notice,  but  only  of  such  matters 
as  it  was  the  notary's  duty  to  certify.^ 

§  965.  And  so  a  recital  in  a  foreign  notarial  certificate, 
that  the  notary  had  served  the  protest  on  the  acceptor,  in 
his  own  name,  and  as  agent  of  the  drawer,  is  no  evidence 
of  the  agency  in  a  suit  against  the  drawer,^  There  is  ob- 
vious reason  in  this  distinction.  When  the  notary  finds  a 
clerk  or  other  person  acting  as  the  drawee's  representative, 
in  his  office  or  place  of  business,  he  has  a  right  to  presume 
that  he  is  duly  authorized  to  represent  him.  Being  held 
out  as  his  clerk  or  agent,  parties  may  so  regard  him.  But 
when  it  is  alleged  that  a  mere  outside  person  is  an  agent, 
it  is  an  allegation  to  be  sustained  by  distinct  evidence,  like 
any  other  separate  fact. 

If  the  certificate  state  that  a  bill  drawn  on  a  firm  was 
presented  to  A.,  one  of  the  members  thereof,  it  is  evidence 
of  his  membership,  upon  the  same  principle  that  it  is  evi- 
dence as  to  the  identity  of  an  individual  to  whom  present- 
ment is  made.^ 

When  the  protest  states  that  notice  was  sent  by  mail,  it 
will  be  presumed  that  the  postage  was  prepaid.* 

§  966.  Not  evidence  of  collateral  facts. — But  the  certifi- 
cate of  protest  is  not  evidence  of  any  collateral  facts  which 
may  have  been  stated  in  it.-  Thus,  if  it  state  that  the 
reason  given  by  the  drawee  for  non-acceptance  was,  that 
he  had  no  effects  or  funds  of  the  drawer,  it  is  no  evidence  of 


'  Drumm  v.  Bradfute,  18  La.  Ann.,  681. 

"  Coleman  v.  Smith,  26  Penn.  St.,  255. 

*  Elliott  V.  White,  6  Jones  (N.  C),  98.  *  Brooks  v.  Day,  11  Iowa,  46. 


^  967.  THE    PROTEST    AS    EVIDENCE.  2*] 

the  want  of  effects  or  funds.^  Nor  is  it  evidence  that  the 
drawee  expressed  his  willingness  to  pay  in  certain  bank 
bills.'^ 

Nor  is  it  evidence  of  a  course  of  conduct  not  specified 
in  particular  acts.  Thus,  where  the  notary  stated  in  the 
protest  that  he  "  made  diligent  search  and  inquiry  "  for  tlie 
makers,  it  was  considered  not  proof  of  that  fact,  what 
search  and  inquiry  not  being  stated.^  This  seems  to  us 
correct,  for  what  constitutes  due  diligence  is  a  matter  of 
law,  to  be  adjudicated  upon  the  facts,  and  is  not  a  matter 
of  notarial  judgment  and  determination.^ 

§  967.  Protest  as  secondary  evideiice  of  notice. — Even 
where  there  is  no  statute  authorizing  it,  there  may  arise 
circumstances  which,  upon  general  principles  of  the  law  of 
evidence,  render  the  protest  of  a  promissory  note  compe- 
tent to  show  due  demand  and  notice.  Thus,  where  the 
notary  who  had  made  the  protest  had  died  before  the  trial, 
and  his  testimony  could  not  be  procured,  the  protest  of  a 
note,  coupled  with  the  deposition  of  the  notary's  daughter, 
as  to  the  uniform  habit  of  her  father  in  his  notarial  acts, 
was  considered  admissible  secondary  evidence  for  the  pur- 
pose of  conducing  to  prove  demand  and  notice.^  So, 
where  the  messenger  of  a  bank  was  dead,  his  book,  in  which 
he  entered  his  acts  respecting  service  of  notices,  was  held 
admissible  to  prove  that  he  notified  an  indorser.^     And  in 


'  Dakin  v.  Graves,  48  N.  H.,  45  ;  Dumont  v.  Pope,  7  Blackf.,  367  ;  i  Parsons 
N.  &  B.,  639;  Wharton  on  Evidence,  §  123. 

*  Maccoun  v.  Atchafalaya  Bank,  13  La.,  342. 

*  Bennett  v.  Young-,  18  Penn.,  261.  In  Cockrill  v.  Loewenstine,  9  Heisk.,  206 
(1872),  the  notarial  certificate  stated  that  the  notary  "  made  diligent  search  and 
careful  inquiry  "  to  find  the  maker.  The  court  held  that  this  statement  was  not 
prima  facie  evidence  that  he  did  these  things.  Sneed,  J.,  said  :  "The  question 
of  diligence  is  a  question  of  law  and  fact,  to  be  determined  by  the  court  and 

jury,  and  not  to  be  certified  by  the  notary The  notarial  protest  by  the 

law  and  usage  of  merchants  is  credited  everywhere,  and  is  generally  prima 
facie  evidence  of  the  facts  it  recites ;  but  it  must  state  facts,  and  not  legal  con- 
clusions." 

*  Cockrill  V.  Loewenstine,  supra.  "  Nicholls  v.  Webb,  8  Wheat.,  450 
"  Welsh  v.  Barrett,  15  Mass.,  380. 


28  PROTEST    OF    BILLS    AND    NOTES.         §§  968,  969. 

respect  to  the  form  of  notice,  the  notary  being  dead,  his 
clerk's  evidence  as  to  the  forms  he  was  accustomed  to  use, 
is  admissible.^ 

§  968.  When  suit  is  brought  in  State  or  country  where 
protest  is  made,  is  it  evidence  ? — As  has  been  already  said, 
the  instrument  of  protest  is  only  admissible  evidence  of  the 
facts  it  asserts  in  cases  of  foreign  bills,  except  where  stat- 
utory enactment  has  extended  their  admissibility  in  cases 
of  inland  bills  and  promissory  notes.^  And  it  has  been 
held  that  it  can  only  be  used  to  prove  the  dishonor  when 
made  in  a  foreign  country ;  and  that  if  the  bill  were  drawn 
in  a  foreign  country,  and  payable  in  England,  and  suit  were 
brought  in  England,  the  protest  should  be  proved  in  the 
same  manner  as  if  it  were  an  inland  bill.^  For  this  ruling 
there  is  the  high  authority  of  Lord  Ellenborough,  who  ex- 
pressed himself  as  "quite  clear"  in  the  opinion,  but  no  prec- 
edent was  quoted,  and  it  has  been  criticised  by  Story,  who 
considers  that  if  the  bill  be  foreign,  the  protest  should  be 
admitted.^  The  United  States  Supreme  Court  has  inti- 
mated its  approval  of  the  English  precedent  quoted  ;  but 
Story's  views  seem  to  us  more  judicious.  Doubtless,  the 
original  reason  of  convenience,  which  recognized  the  pro- 
test of  a  bill  made  in  foreign  parts  as  evidence  of  dishonor, 
does  not  apply  to  a  case  in  which  the  witnesses  are  within 
the  country.  But  protest  of  all  foreign  bills  is  essential, 
irrespective  of  the  place  of  payment ;  and  if  the  holder  is 
required  to  make  the  protest,  it  would  seem  singular  and 
unequal  to  deny  him  the  benefit  of  its  production.^ 

§  969.  Evidence  to  supply  omissions  of  protest. — When 
the  protest  has  been  made  at  the  proper  time  and  place, 

'  Wetherall  v.  Claggett,  28  Md.,  465. 

^  Union  Bank  v.  Hyde,  6  Wheat.,  572  ;  Young-  v.  Bryan,  6  Wheat.,  146  ;  Sul- 
livan V.  Deadman,  19  Ark.,  484;  Bond  v,  Bragg,  17  111.,  69  ;  Sumner  v.  Bowen 
2  Wis.,  524. 

°  Chesmer  v.  Noyes,  4  Camp.,  129  ;  Byles  on  Bills  (Sharswood's  ed.)  [*254] 
401  ;  Edwards  on  Bills,  468. 

*  Story  on  Bills,  §  277,  note  2.  '  Nicholls  v.  Webb,  8  Wheat.,  326. 


J  969.  THE    PROTEST    AS    EVIDENCE.  29 

and  in  the  proper  manner,  but  does  not  upon  its  face  make 
all  the  statements  necessary  to  prove  due  demand  and  no- 
tice, parol  evidence  is  admissible  to  supply  the  omission, 
provided  it  be  in  furtherance  of,  and  not  inconsistent  with 
or  contrary  to,  the  statements  that  are  made  in  the  protest. 
Thus,  where  the  protest  stated  a  demand  of  the  cashier,  but 
omitted  to  state  that  the  note  was  in,  or  the  cashier  at  the 
bank,  it  was  held  admissible  to  prove  these  facts  by  parol 
testimony.^  So  where  it  did  not  state  where  the  present- 
ment and  demand  were  made,  or  that  the  note  was  in  the 
bank  w^here  it  was  made  payable,^  or  where  it  fails  to  in- 
form the  indorser  of  a  demand  on  the  maker  and  a  refusal,* 
or  to  state  the  fact  of  non-payment,^  any  legitimate  extrin- 
sic evidence  is  admissible  to  show  that  any  of  these  facts 
existed,  or  steps  were  taken.  And  if  there  be  any  question 
as  to  the  agency  of  the  person  to  whom  presentment  was 
made,  evidence  is  admissible  to  show  it.^ 

In  like  manner,  any  defect  in  the  statements  respecting 
notice  may  be  supplied — and,  indeed,  as  we  have  seen,  no- 
tice may  be  proved  without  any  aid  from  the  protest,  which 
is  only  admissible,  and  not  necessary  evidence  of  it.^ 

'  Magoun  v.  Walker,  49  Me.,  420  ;  Seneca  Co.  Bank  v.  Neass,  5  Denio,  329. 

•  W^etherall  v.  Claggett,  28  Md.,  465  ;  Hunter  v.  Van  Bomhorst,  i  Md.,  504. 
»  Wetherall  v.  Claggett,  28  Md.,  465  ;  Nailor  v.  Bowie,  3  Md.,  252. 

*  Sasscer  v.  Farmers'  Bank,  4  Md.,  429. 

*  Stainback  v.  Bank  of  Va.,  1 1  Grat.,  269. 

•  Graham  v.  Sangston,  i  Md.,  59.     See  Reynolds  v.  Appleman,  41  Md.,  615. 


CHAPTER  XXIX. 

NOTICE    OF    DISHONOR    OF    NEGOTIABLE    INSTRUMENTS. 


SECTION   I. 
NATURE   AND   NECESSITY   OF  NOTICE. 

§  970.  When  a  negotiable  bill  or  note  is  dishonored  by 
non-acceptance  on  presentment  for  acceptance,  or  by  non- 
payment at  its  maturity,  it  is  the  duty  of  the  holder  to  give 
immediate  notice  of  such  dishonor  to  the  drawer,  if  it  be  a 
bill,  and  to  the  indorser,  whether  it  be  a  bill  or  note.  The 
party  primarily  liable  is  not  entitled  to  notice,  for  it  was  his 
duty  to  have  provided  for  payment  of  the  paper ;  and  the 
fact  that  he  is  maker  or  acceptor  for  accommodation  does 
not  change  the  rule.^ 

Notice  is  not  due  to  any  party  to  a  bill  or  note  not 
negotiable,  the  rules  of  the  law  merchant  concerning  notice 
and  protest  applying  to  none  but  strictly  commercial  in- 
struments.^ 

It  is  regarded  as  entering  as  a  condition  in  the  contract 

*  Hays  V.  N.  W.  Bank,  9  Grat.,  127  ;  see  §  995. 

"  Pitman  v.  Breckenridge,  3  Grat.,  129.  In  Early  v.  Preston,  2  Pat.  &  Heath, 
229,  the  following  notice  was  accepted  as  good  in  form,  and  seems  in  every 
respect  unobjectionable  : 

Richmond  August  20,  1842. 

Sir  :— Please  take  notice  that  a  draft  drawn  by  S.  H.  Davis  on  Samuel  S. 
Saunders,  dated  Lynchburg  the  i8th  of  February,  1842,  for  two  thousand  dol- 
lars, at  six  months'  date,  and  indorsed  by  Joel  Early  and  Pleasant  Preston  and 
A.  Tompkins,  Cashier,  has  been  protested  for  non-payment  by  the  President 
and  Directors  of  the  Farmers'  Bank  of  Virginia,  payment  having  been  refused  at 
the  counting-room  of  S.  S.  Saunders  on  the  2otli  instant,  and  you  are  held  liable 
as  indorser  lor  all  loss,  damages,  principal,  interest,  cost,  and  charges  sustained 
or  to  be  sustained  by  reason  of  the  non-payment  aforesaid. 

Yours,  Archibald  Blair,  Notary  Public. 

{30) 


§  970^-  NATURE    AND    NECESSITY    OF    NOTICE.  3 1 

of  the  drawer  and  indorser  of  a  bill,  and  of  the  indorser  of 
a  note,  that  he  shall  only  be  bound  in  the  event  that  accept- 
ance or  payment  is  only  demanded  ;  and  he  notified  if  it  is 
not  made.  And  in  default  of  notice  of  non-acceptance  or 
non-payment,  the  party  entitled  to  notice  is  at  once  dis- 
charged, unless  some  excuse  exist  which  exonerates  the 
holder.^ 

This,  then,  is  one  of  the  most  important  branches  of  the 
law  of  negotiable  paper. 

§  970^.  Power  of  government  to  regulate  notice. — In 
England,  in  France,  and  in  other  countries  where  there  is 
no  restraint  by  constitutional  law  upon  the  legislative  de- 
partment, interdicting  its  interference  with  contracts,  it  is 
within  the  power  of  that  branch  of  the  government  to  ex- 
tend the  time  of  payment  of  negotiable  and  other  securities, 
and  consequently  to  preserve  the  liability  of  a  drawer  or 
indorser  without  the  preliminary  steps  respecting  protest 
and  notice  being  taken  at  the  stipulated  time  of  payment,  ac- 
cording to  the  terms  of  the  instrument.^  But  in  the  United 
States,  where  the  States  are  prohibited  by  the  Federal  Con- 
stitution from  passing  any  law  "  impairing  the  obligation  of 
contracts,"  it  is  not  within  the  power  of  any  State  legisla- 
tive body,  whether  a  convention,  or  an  ordinary  representa- 
tive assembly,  by  ordinance,  resolution,  or  enactment,  to 
alter  contracts  entered  into ;  and  as  the  condition  of  due 
notice  is  regarded  as  incorporated  in  the  contract  of  the 
drawers  and  indorsers  of  negotiable  paper,  it  would  not  be 
within  their  power  to  dispense  with  it,  or  change  the  time 
within  which  it  must  be  given,  so  as  to  affect  existing  instru- 
ments. This  view  of  the  law  in  the  United  States  was  re- 
cently taken,  and  elaborately  set  forth  by  the  Supreme 
Court  of  Appeals  of  Virginia,  which  held  void  an  ordinance 
of  the  State  convention,  the  effect  of  which  was  to  dispense 

'Rothschild  v.  Currie,  41  E.  C.  L.  R.,  43;  Musson  v.  Lake,  4  How.,  262. 
*Rouquette  v.  Overman,  L.  R.  10  Q.  B.,  525  (1875). 


32  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  97I. 

with  demand,  protest,  and  notice  upon  all  checks,  bills,  and 
notes  payable  at  a  bank  located  in  any  city  or  town,  if  at 
the  time  of  the  maturity  of  such  instruments,  the  town  was 
occupied,  invested,  or  access  thereto  interrupted  by  the 
public  enemy ;  and  also  an  Act  of  the  General  Assembly 
which  extended  the  time  forgiving  notice  to  ten  days  after 
the  removal  of  the  obstruction  created  by  the  presence  of 
the  enemy.* 

§  971.  Failure  to  notify  party  entitled  to  notice  dis- 
charges debt  for  which  bill  was  drawn  or  indorsed. — So 
absolute  is  the  necessity  for  notice  to  an  indorser,  in  order 
to  charge  him,  that  if  a  note  has  been  indorsed  to  the 
holder  in  conditional  payment  of  a  debt,  the  failure  to  give 
notice  to  the  indorser  will  not  only  discharge  the  indorser 
as  a  party  to  the  note,  but  also  a  debtor  upon  the  original 
consideration,  even  though  it  be  secured  by  a  mortgage  or 
deed  of  trust.  The  note,  then,  is  made  an  absolute  dis- 
charge of  his  liability,  and  the  indorsee  must  look  solely  to 
prior  parties.^  And  so  in  respect  to  the  drawer  of  a  bill 
given  in  conditional  payment.^  The  neglect  to  give  notice 
to  the  drawer  of  a  renewed  bill  not  only  discharges  him 
from  liability  to  pay  that  bill,  but  discharges  him  from 
liability  to  pay  the  prior  bill,  to  satisfy  which  it  was  drawn  ;  * 
and  this  although  it  be  expressly  agreed  that  the  taking 
of  such  second  bill  shall  not  exonerate  any  of  the  parties  to 
the  first  bill  until  actual  payment.^ 

'  Duerson's  Adm'r  v.  Alsop,  27  Grat,  230  (1876).  See  also  Farmers'  Bank  v. 
Gunnell,  26  Grat.,  144  (1875);  see  §  871  ;  and  Cook  v.  Googins,  126  Mass.,  410, 

"  Shipman  v.  Cook,  i  Green  (N.  J.),  251  ;  Peacock  v.  Purcell,  14  C.  B.  N.  S., 
728.     See  also  §§  828,  1276,  1277  ;  Benjamin's  Chalmers'  Digest,  180. 

'Darrach  v.  Savage,  i  Show.,  155  (1691)  ;  Bridges  v.  Berry,  3  Taunt.,  130, 
Gale  V.  Walsh,  5  T.  R.,  239 ;  Rogers  v.  Stephens,  2  T.  R.,  713  ;  Allan  v.  Eldred, 
50  Wis.,  136;  Betterton  v.  Roope,  3  Lea  (Tenn.),  220;  Rucker  v.  Hiller,  16 
East.,  43 ;  3  Camp.,  217  ;  Smith  v.  Miller,  43  N.  Y.,  171  (1870)  ;  52  N.  Y.,  546 
(1873)  ;  Edwards  on  Bills,  445.     See  infra,  §§  452,  828,  1276. 

*  Bridges  v.  Berry,  3  Taunt.,  130  ;  3  Maule  &  S.,  362  ;  Chitty  on  Bills  [*433l 
488  [*444],  500,     See  §  1276. 

"  Reid  V.  Coats,  Bro.  P.  C. ;  Chitty  on  Bills  [*434].  488. 


^972.       FORMAL  AND  ESSENTIAL  ELEMENTS  OF  NOTICE.  33 

SECTION     II. 
FORMAL  AND   ESSENTIAL  ELEMENTS   OF  NOTICE. 

§  972.  Notice  7nay  be  verbal  or  written. — The  notice  need 
not  be  in  writing ;  it  is  sufficient  if  it  be  given  verbally  ;  ^  but 
for  precision  and  safety  written  notice  is  preferable.  Verbal 
notice  must  be  necessarily  confined  to  those  cases  in  which 
notice  is  directly  given  to  the  party  in  person,  or  is  sent  by 
a  messenger  to  his  place  of  business  or  residence.  It  seems 
that  a  verbal  notice  is  less  strictly  construed  than  a  written 
one,  especially  when  its  sufficiency  is  impliedly  admitted  by 
the  party's  response.^  Thus,  where  the  holder's  clerk  told 
the  drawer  that  the  bill  had  been  duly  presented,  and  that 
the  acceptor  could  not  pay  it,  and  the  drawer  replied  that 
he  would  see  the  holder  about  it,  this  was  held  to  be  suffi- 
cient evidence  to  warrant  the  jury  in  finding  that  the  fact 
of  the  dishonor  of  the  note  w^as  sufficiently  communicated 
to  the  drawer.^ 

Mere  knowledge  of  dishonor  does  not  constitute  notice.* 
Notice  signifies  more;  but  when  the  fact  of  dishonor  is 
communicated  by  one  entitled  to  call  for  payment,  it  be- 
comes notice,  as  it  is  then  to  be  inferred  that  the  intention 
is  to  hold  the  party  notified  responsible. ** 


"  Boyd's  Adm'r  v.  City  Savings  Bank,  15  Grat.,  501  ;  Glascow  v.  Pratte,  8  Mo., 
366  ;  First  National  Bank  v.  Ryerson,  23  Iowa,  508  ;  Cuyler  v.  Stevens,  4  Wend., 
506;  Thompson  v.  Williams,  14  Cal.,  160;  Pierce  v.  Schader,  55  Cal.,  406  ; 
Merritt  v.  Woodbury,  14  Iowa,  299  ;  Bank  v.  Brooking,  2  Litt.,  41  ;  Gilbert  v. 
Dennis,  3  Mete,  495  ;  Byles  on  Bills  (Sharswood's  ed.).  411  ;  Story  on  Notes, 
§  341  ;  I  Parsons  N.  &  B.,477  ;  Thomson  on  Bills,  336;  2  Ames  B.  &  N.,  432  ; 
Tindal  v.  Brown,  i  T.  R.,  167  ;  Housego  v.  Cowne,  6  L.  J.  Exch.,  1 10 ;  Crosse  v 
Smith,  I  Maule  &  S.,  545. 

'Byles  on  Bills  [*264],  211,  212  :  Phillips  v.  Gould,  8  C.  &  P.,  355  (34  E.  C. 
L.  R.) 

'  Metcalfe  v.  Richardson,  11  Com.  B.,  ion  (73  E.  C.  L.  R.) 

*  Juniata  Bank  v.  Hale,  16  Serg.  &  R.,  157  ;  Bank  of  Old  Dominion  v.  McVeigh, 

29  Grat.,  559;  26  Grat.,  852;  Brown  v.  Ferguson,  4  Leigh,  37  ;  Story  on  Bills. 

§  375- 

'Caunt  V.   Thompson,  7  Com.  B.,  400;  Miers  v.  Brown,  11   M  &  W..  ^72; 

Tindal  v.  Brown,  i  T.  R.,  167. 

Vol.  II.— 3 


34  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.      §§  973,  974. 

§  973.  As  to  the  fo7'm  of  the  notice,  no  particular  phrase 
or  form  is  necessary.  The  object  of  it  is  to  inform  the  party 
to  whom  it  is  sent :  i,  that  the  bill  or  note  has  been  pre- 
sented ;  2,  that  it  has  been  dishonored  by  non-acceptance, 
or  non-payment ;  and,  3,  that  the  holder  considers  him 
liable,  and  looks  to  him  for  payment.  And  in  framing  the 
notice,  all  that  is  necessary  to  apprise  the  party  of  the  dis- 
honor of  the  instrument  is,  to  intimate  that  he  is  expected 
to  pay  it. 

In  order  that  a  notice  should  answer  these  conditions, 
and  duly  intimate  dishonor  to  the  drawer  or  indorser,  it 
should  therefore,  either  expressly  or  by  just  and  natural 
implication,  comprise  the  following  elements :  (i)  A  suffi- 
cient description  of  the  bill  or  note  to  ascertain  its  identity. 
(2)  That  it  has  been  duly  presented  for  acceptance  or  pay- 
ment to  the  drawee,  acceptor,  or  maker.  (3)  That  it  has 
been  dishonored  by  non-acceptance  or  non-payment.  (4) 
That  the  holder  looks  to  the  party  notified  for  payment* 

§  974.  Description  of  the  bill  or  note  dishonored. — The 
notice  should  describe  the  bill  or  note  in  unmistakable 
terms ;  should  state  where  the  note  is,  that  the  party  noti- 
fied may  find  it ;  should  state  who  the  holder  is,  and  who 
gives  the  notice,  or  at  whose  request  it  is  given.  Such,  at 
least  in  theory,  are  the  requisites  of  a  proper  notice  ;  and  a 
good  business  man  should  never  neglect  to  comply  with 
them.  But  the  courts  are  not  strict  in  requiring  this  thor- 
ough description  of  the  dishonored  instrument ;  and  the 
requirements  of  the  law  are  considered  as  satisfied  by  any 
description  which,  under  all  the  circumstances  of  the  case, 
so  designates  the  bill  or  note  as  to  leave  no  doubt  in  the 
mmd  of  the  party,  as  a  reasonable  man,  what  bill  or  note 
was  intended.^ 

'  Bank  of  Old  Dominion  v.  McVeigh,  29  Grat.,  558 ;  Thompson  v.  Williams, 
14  Cal.,  162  ;  Story  on  Notes,  §  348, 

'^  Gilbert  v.  Dennis,  3  Mete,  495  ;  Shelton  v.  Braithwaite,  7  M.  &  W.,  436 ;  I 
Parsons  N.  &  B.,  472,  474. 


§  975-        FORMAL  AND  ESSENTIAL  ELEMENTS  OF  NOTICE.  35 

§  975.  The  object  of  the  law  in  requiring  a  correct  de 
scription  of  the  bill  or  note  to  be  given  in  the  notice  to  the 
drawer  or  indorser  is,  that  he  may  be  put  upon  notice  of  the 
extent  of  his  liability,  and  placed  in  possession  of  the  material 
facts  necessary  to  enable  him  to  secure  the  liability  of  others 
over  to  him,  and  his  mvn  reimbursement  upon  payment  of 
the  note.  The  rule  was  not  intended  to  subserve  a  technical 
purpose,  but  to  promote  substantial  justice  ;  and  when  it 
sufficiently  appears  that  the  drawer  or  indorser,  at  the  time 
of  receiving  the  notice,  knew  what  particular  piece  of  paper 
was  referred  to,  and  could  not  have  been  prejudiced  by  the 
failure  to  describe  it,  he  should  not  be  permitted  to  object 
that  his  information  was  not  communicated  in  a  particular 
manner.*  Accordingly,  it  has  been  held  in  California  that 
where  the  holder  verbally  informed  the  indorser  that  "  he 
had  demanded  payment  of  that  note,  and  should  endeavor 
to  make  him  liable,"  the  indorser  was  bound,  although  the 
note  was  neither  produced  nor  described,  as  it  appeared 
that  he  knew  what  note  was  referred  to,  and  was  in  no  re- 
spect misled.^  Describing  a  bill  as  having  been  left  for  col- 
lection by  the  indorser,  when  in  fact  it  was  left  by  the 
holder,  would  make  no  difference.^ 

§  976.  Circumstances  may  be  regarded  in  testing  suf- 
ficiency of  description. — Story  says  that  "the  description 
of  the  note  should  be  sufficiently  definite  to  enable  the  in- 
dorser to  know  to  what  one  in  particular  the  notice  applies  ; 
for  an  indorser  may  have  indorsed  many  notes  of  very  dif- 
ferent dates,  sums,  and  times  of  payment,  and  payable  to 
different  persons,  so  that  he  may  be  ignorant,  unless  the 
description  in  the  note  is  special  to  which  it  properly  ap- 
plies or  which  it  designates.'"*  This  is  undoubtedly  the 
correct  statement  of  the  general  rule,  as  to  the  best  mode 

ri>* 

, '  Thompson  v.  Williams,  14  Cal.,  162,  langiiage  of  Cope,  J. 
'  Thompson  v.  Williams,  supra.  ^  Biilson  v.  Hood,  5  Victorian  R.,  125, 

*  Story  on  Promissory  Notes,  §  349 ;  Cook  v.  Litchfield,  5  Seld.,  289. 


$6  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  977. 

of  preparing  notice  ;  but  if  it  were  intended  to  confine  the 
parties  to  the  mere  face  of  the  notice  to  ascertain  its  suf- 
ficiency, it  would  be  clearly  erroneous.  For  there  is  no 
doubt  that  the  circumstances  of  each  particular  case,  and 
the  indorser's  or  drawer's  knowledge  of  them,  may  be 
looked  to,  to  ascertain  whether  or  not  the  notice  is  sufficient. 
And  if  the  drawer  or  indorser  could  not  reasonably  con- 
found the  bill  or  note  mentioned  in  the  notice  with  another, 
the  notice  would  be  sufficient,  although  meagre  in  its  de- 
scription. And  if  full  and  ample  in  setting  forth  the  terms 
of  the  note,  it  would  make  no  difference  that  the  notice 
left  the  indorser  in  doubt  as  to  what  instrument  it  referred 
to,  it  being  his  misfortune,  if  from  his  having  indorsed  sev- 
eral notes,  a  complete  description  of  one  of  them,  in  every 
essential  feature,  does  not  enable  him  to  identify  it.^ 

§  977.  In  New  York,  where  defendant  was  payee  and 
indorser  of  four  several  notes  made  by  J.  L.  Caren,  and 
dated  each  "  Detroit,  April  2d,  1849,"  it  appeared  that  each 
note  was  for  the  sum  of  $740,  and  were  precisely  the  same 
terms,  except  that  one  was  payable  in  nine,  one  ten,  one 
eleven,  and  the  other  twelve  months  from  date.  Each 
note  was  presented  and  protested  on  the  day  of  maturity, 
and  notices  addressed  to  the  indorser,  each  stating  that  the 
note  to  which  it  referred  "  was  duly  protested  for  non-pay- 
ment on  the  day  that  the  same  became  due."  In  a  suit 
upon  the  notes,  it  was  held  by  the  Superior  Court  that  the 
notices  were  sufficient,  inasmuch  as  they  informed  the  in- 
dorser that  each  note  was  protested  on  the  day  it  became 
due,  and  although  they  did  not  describe  the  respective 
notes  by  their  dates,  they  sufficiently  identified  them  as  the 
notes  falhng  due  on  the  very  days  they  were  respectively 
protested.^     This  decision  was  subsequently  reversed  by  the 

'  Hodges  V.  Shuler,  22  N.  Y.,  115  (i860).  The  defendant  executed  a  number 
of  notes  in  all  respects  alike,  and  distinguishable  only  by  the  numbers  marked 
on  the  margin.  It  was  held  that  the  omission  to  state  the  number  in  a  notice  oi 
non-payment  of  one  of  them,  did  not  vitiate  it. 

*  Cook  V.  Litchfield,  5  Sandf.,  340  (1851),  Durer,  J. 


5  97^-       FORMAL  AND  ESSENTIAL  ELEMENTS  OF  NOTICE.  2>7 

Court  of  Appeals,  on  the  ground  that  the  description  of 
the  notes  was  insufficient,  in  not  distinguishing  the  one 
from  the  other,  and  a  new  trial  ordered.^  And  finally 
judgment  was  rendered  for  the  plaintiff,  the  jury  having 
found  as  a  fact  that  the  defendant  knew  to  what  particular 
notes  the  notices  respectively  related.^  The  Superior  Court 
reluctantly  bowed  to  the  authority  of  the  Court  of  Ap- 
peals, in  respect  to  the  doctrine  enunciated ;  and  the  views 
of  the  Superior  Court  seem  to  us  altogether  unanswerable.^ 

§  978.  The  entire  omission  of  the  maker's  name  in  the  no- 
tice of  dishonor  of  a  note  would  be  fatal ;  ■*  but  notice  to  the 
acceptor  describing  the  bill  as  "  drawn  by  you,"  though  not 
naming  the  drawer,  has  been  held  sufficient,  there  being  no 
proof  that  he  had  drawn  or  indorsed  any  other  paper  with 
which  it  could  be  confounded,  and  it  being  otherwise  cor- 
rectly described.^  And  likewise,  notices  describing  a  note 
as  a  bill,^  a  bill  as  a  note,'''  or  the  drawer  as  acceptor,®  or  the 
indorser  as  maker,^  have  been  held  not  vitiated  thereby. 

Where  a  note  is  made  payable  to  two  persons  jointly, 
and  indorsed  by  each,  it  is  not  indispensable  that  notices 
of  protest  should  be  addressed  to  them  jointly,  or  refer  to 
their  joint  indorsement,  and  notices  addressed  to  them  sev- 
erally, each  describing  the  note  as  indorsed  by  the  person 
to  whom  it  is  addressed,  without  mentioning  the  other  in- 
dorser, are  sufficient  to  charge  them,  being  in  other  respects 
unobjectionable.^^ 

'  Cook  V.  Litchfield,  5  Selcl.,  286  (1853),  Ruggles,  C.  J. 
'  Cookv.  Litchfield,  2  Bosw.,  147  (1857),  Bosworth,  J, 
'  See  Hodges  v.  Shuler,  22  N.  Y.,  115,  and  ante,  §  976, 

•  Home  Insurance  Company  v.  Green,   5  Smith  (19  N.  Y.),  518;  see  also. 
Stockman  v.  Parr,  li  Mees.  &  W.,  809 ;  s.  c.  i  Car.  &  K.,  41. 

"  Gill  V.  Palmer,  29  Conn.,  54. 

•  Messenger  Southey,  i  Man.  &  G.,  76  (39  E.  C.  L.  R.) 
'  Stockman  v.  Parr,  11  M.  &  W.,  809. 

•  Mellersh  v.  Rippen,  7  Exch,,  578,  overruling,  in  effect,  Beauchamp  v.  Cash, 
1  Dow.  &  R.,  3,  where  it  was  held  that  a  notice  calling  the  "  drawer  "  an  "  in 
dorser  "  was  bad. 

'  Haines  v.  Dubois,  i  Vroom  (N.  J.),  259. 
'°  Cayuga  Co  Bank  v.  Warden,  2  Seld.,  19. 


38  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  979 

§  979.  What  notice  need  not  state. — The  notice  need  not 
state  who  is  the  holder  of  the  bill  or  note,^  nor  at  whose 
request  it  is  given.^  For  although  the  protest  and  notice 
are  nullities,  unless  proceeding  from  the  request  of  a  party- 
entitled  to  direct  them,  the  objection  that  the  party  is  a 
stranger  must  appear  from  proof,  and  is  not  presumable 
from  the  mere  omission  of  the  notice  to  state  the  interest 
or  relation  of  the  party  sending  it  ;^  nor  where  the  demand 
was  made  ;  *  nor  at  what  hour  the  paper  was  presented  ;  ^ 
nor  where  it  is  lying,  nor  on  whose  behalf  payment  is  de- 
manded ;  ^  nor  that  the  party  presenting  had  the  paper 
with  him  at  the  time  ;''  nor  at  what  time  it  fell  due  ;^  nor 
the  absence  of  the  maker  when  it  was  presented.* 

But  it  should  be  signed  or  indicated  from  whom  it  pro- 
ceeds— otherwise  it  will  be  insufficient.^"  It  is  not  netessary 
that  the  party  should  know  the  fact  of  dishonor,  if  the 
notice  unequivocally  states  it." 

The  decisions  in  the  United  States  go  to  the  extent  of 


'  Mills  V.  Bank  United  States,  li  Wheat.,  431  ;  Bradley  v.  Davis^  26  Me,,  45  ; 
Howe  V.  Bradley,  19  Me.,  35. 
'  Shed  V.  Brett,  i  Pick.,  401. 
'  Gillespie  v.  Nevill,  14  Cal.,  408 ;  Woodthorpe  v.  Lawes,  2  M.  &  W.,  109. 

*  Mills  V.  Bank  United  States,  11  Wheat.,  431.  In  this  case  the  Supreme 
Court  said  :  "  The  last  objection  to  the  notice  is,  that  it  does  not  state  that  pay- 
ment was  demanded  at  the  bank  when  the  note  became  due.  It  is  certainly  not 
necessary  that  the  notice  should  contain  such  a  formal  allegation.  It  is  sufficient 
that  it  states  the  fact  of  non-payment  of  the  note,  and  that  the  holder  looks  to 
the  indorser  for  indemnity.  Whether  the  demand  was  duly  and  regularly  made 
is  a  matter  of  evidence,  to  be  established  at  the  trial.  If  it  be  not  legally  made 
no  averment,  however  accurate,  will  help  the  case ;  and  a  statement  of  non- 
payment and  notice  is,  by  necessary  implication,  an  assertion  of  right  by  the 
holder,  founded  upon  his  having  complied  with  the  requisitions  of  law  against 
the  indorser.  In  point  of  fact,  in  commercial  cities,  the  general,  if  not  universal, 
practice  is  not  to  state  in  the  notice  the  mode  or  place  of  demand,  but  the  mere 
naked  fact  of  non-payment."  See  remarks  on  this  case  in  Gilbert  v,  Dennis,  3 
Mete,  409,  quoted  post,  §  983,  p.  39,  note  3. 

"  Fleming  v.  Fulton,  6  How.  (Mo.),  473. 

'  Woodthorpe  V.  Lawes,  2  M,  &  W„  109;  Harrison  v,  Ruscoe,  15  M,  &  W„ 
«3i. 

'  Mainerv.  Spurlock,  9  Rob.  (La.),  161. 

*  Denegre  v.  Hiriart,  6  La.  Ann.,  100.  '  Sanger  v.  Stimpson,  8  Mo.,  260. 
"•  Klockenbaum  v.  Pierson,  16  Cal.,  375 ;  Walker  v.  State  Bank,  8  Miss.,  704, 
"  Jennings  v,  Roberts,  4  E.  &  B„  615  (82  E,  C,  L,  R.) 


§  979^-       FORMAL  AND  ESSENTIAL  ELEMENTS  OF  NOTICE.         39 

holding  that  a  notice  to  the  indorscr  of  a  note,  simply 
statinjr  the  name  of  the  maker,  the  amount,  and  the  fact 
that  it  was  indorsed  by  the  party  to  whom  notice  was  sent, 
is  sufficient.^  But  if  there  are  any  circumstances  which 
caused  this  meagre  description  to  mislead  the  party  receiv- 
ino-  the  notice — as,  for  instance,  if  he  were  the  indorser  of 

o 

two  or  more  notes  to  which  the  terms  of  the  notice  might 
equally  apply — then  the  notice  might  be  void  for  uncer- 
tainty of  description.^ 

A  notice  without  date,  stating  that  the  instrument  had 
been  "  this  day  presented  for  payment,"  would  be  defective, 
in  not  fixing  the  date  of  dishonor,  though  extraneous  evi- 
dence mieht  doubtless  be  introduced  to  show  that  the  de- 
feet  did  not  mislead  the  indorser,  and  that  the  dishonor 
was,  in  fact,  at  the  proper  time.^ 

§  979^.  No  misdescription  of  the  date  of  the  iiistrument 
will  vitiate  the  instrument,  unless  it  misleads} — Nor  will 


'  Housatonic  Bank  v.  Laflin,  5  Cush.,  546;  Youngs  v.  Lee,  18  Barb.,  187  . 
Beals  V.  Peck,  12  Barb.,  245. 

'  I  Parsons  N.  &  B.,  473  ;  Story  on  Bills,  §  301 ;  Cook  v.  Litchfield,  5  Seld., 
279;  Cayuga  Bank  v.  Warden,  i  Corns.,  415. 

^  Wynn  v.  Alden,  4  Den.,  163;  Thompson  v.  Williams,  14  Cal.,  164;  Reynolds 
V.  Appleman,  41  Md.,  615.     But  this  is  doubtful,     i  Parsons  N.  &  B.,  474. 

*  Mills  V.  Bank  United  States,  il  Wheat.,  431.  In  the  case  cited,  the  note  ot 
Wood  &  Ebert,  for  $3,600,  was  dated  "  20th  July,  1819,"  and  was  payable  "  sixty 
days  after  date,  at  the  office  of  discount  and  deposit  of  the  Bank  of  the  United 
States,  at  Chilicothe,"  and  the  notice  was  as  follows: 

"Chilicothe,  22d  September,  1819. 
"  Sir  :  You  will  hereby  take  notice  that  a  note,  drawn  by  Wood  &  Ebert. 
dated  20th  day  of  September,  1819,  for  §3,600,  payable  to  you  or  order  in  sixty 
days  at  the  office  of  discount  and  deposit  of  the  Bank  of  the  United  States,  at 
Chilicothe,  and  on  which  you  are  indorser,  has  been  protested  for  non-payment, 
and  the  holders  thereof  look  to  you. 

"  Yours,  respectfully, 

"  Levi  Belt,  Mayor  of  Chilicothe. 
"Peter  Mills,  Esq." 

The  notice  was  sustained,  the  court  saying  that  the  error  of  substituting  Sep- 
tember for  July  was  apparent  on  the  face  of  the  notice,  and  immaterial,  as  the 
mistake  could  not  mislead.  Dennistoun  v.  Stewart,  17  How.,  606;  Tobey  v. 
Lennig,  14  Penn.  St.,  483  ;  Kilgore  v.  Buckley,  14  Conn.,  362  ;  Ross  v.  Planters' 
Bank,  5  Humph.,  335  ;  Cayuga  County  Bank  v.  Warden,  i  Corns.,  413  ;  Byles  on 
Bills  (Sharswood's  ed.)  [*269],  417  ;  Thompson  v.  Williams,  14  Cal.,  162. 


40  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.      §§  980,  98 1. 

such  a  misdescription  of  the  amount;*  nor  of  the  names 
of  the  parties  ;^  nor  of  the  time  the  paper  fell  due.^ 

§  980.  As  instances. — Notices  in  which  the  indorser  was 
termed  "  Samuel  A.  Bradbury,"  while  his  real  name  was 
"  Samuel  A.  Bradley";*  describing  "J.  Cushman  "  as  "J. 
Gushing";^  one  "Byron"  as  "Pyron,"^  have  been  held 
sufficient.  So  notices  describing  the  bill  as  dated  "  28th 
October,"  whereas  it  bore  date  the  "23d";''  describing  a 
note  as  for  "$200,"  which  was  only  for  "  $175",^  describ- 
ing the  amount  as  "  $999.52,"  instead  of  "  $599.52  'V  and 
the  amount  as  "$300,"  instead  of  "$600,"^°  have  been  held 
sufficient,  the  party  not  being  misled. 

§  981.  Where  there  was  a  misstatement  in  the  notice  of 
the  party  on  whose  behalf  it  was  given,  it  was  held  that  the 

'  Bank  of  Alexandria  v.  Swann,  9  Pet.,  33,  in  which  case  the  court  said  :  "  The 
misdescription  complained  of  in  this  case  is  in  the  amount  of  the  note.  The 
note  is  for  $1,400,  and  the  notice  describes  it  as  for  the  sum  of  $1,457.  In  all 
other  respects  the  description  is  correct ;  and  in  the  margin  of  the  note  is  set 
down  in  figures,  1,457  ;  and  the  question  is,  whether  this  was  such  a  variance  or 
misdescription  as  might  reasonably  mislead  the  indorser  as  to  the  note  for  pay- 
ment of  which  he  was  held  responsible.  If  the  defendant  had  been  an  indorser 
of  a  number  of  notes  for  Humphrey  Peake,  there  might  be  some  plausible 
grounds  for  contending  that  this  variance  was  calculated  to  mislead  him.  But 
the  special  verdict  finds  that  from  the  5th  of  February,  1828  (the  date  of  a  note 
for  which  the  one  now  in  question  was  a  renewal),  down  to  the  day  of  the  trial 
of  this  cause,  there  was  no  other  note  of  the  said  Humphrey  Peake  indorsed  by 
the  defendant,  discounted  by  the  bank,  or  placed  in  the  bank  for  collection,  or 
otherwise.  There  was,  therefore,  no  room  for  any  mistake  by  the  indorser  as  to 
the  identity  of  the  note."  Bank  of  Rochester  v.  Gould,  9  Wend.,  279 ;  Reedy 
v.  Seixas,  2  Johns  Cas.,  337  ;  Rowan  v.  Odenheimer,  5  Sm.  &  M.,  44;  Snow  v. 
Perkins,  2  Mich.,  238 ;  Wood  v.  Watson,  53  Me.,  300.  In  Cayuga  County  Bank 
V.  Warden,  i  Corns.,  413;  2  Seld.,  19,  the  note  was  for  $600,  and  the  notice  to 
the  indorsers  described  it  as  for  $300.  It  being  the  only  note  of  the  maker, 
Warden,  indorsed  by  the  defendants,  and  "$600"  being  indorsed  on  the  margin 
of  the  notice,  it  was  held  sufficient.  Jewett,  Ch.  J. :  "  Who  can  doubt  but  that 
this  notice  conveyed  to  the  minds  of  the  defendants  the  information  that  this 
identical  note  had  been  dishonored,  although  it  misdescribed  the  note  as  it 
respects  the  sum  for  which  it  was  made  in  the  body  of  it  ?  "  See,  also,  Downer 
V.  Remer,  23  Wend.,  670. 

^  Dennistoun  v.  Stewart,  17  How.,  606  ;  Carter  v.  Bradley,  19  Me.,  62  ;  Smith 
V.  Whiting,  12  Mass.,  6. 

^  Smith  v.  Whiting,  12  Mass.,  6;  see  §984. 

*  Carter  v.  Bradley,  19  Me.,  62.  "  Smith  v.  Whiting,  12  Mass.,  6. 

"  Moorman  v.  Bank  of  Alabama,  12  Ala.,  353. 

"•  McCune  v.  Belt,  38  Mo.,  291.  *  Snow  v.  Perkins,  2  Mich.,  238. 

'  Downer  v.  Remer,  23  Wend.,  670 ;  25  Id.,  277. 

"  Cayuga  Co.  Bank  v.  Warden,  i  Corns.,  413  ;  2  Seld.,  19. 


§  9^2.       FORMAL  AND  ESSENTIAL  ELEMENTS  OF  NOTICE.  \.\ 

notice  was  not  thereby  wholly  avoided  ;  but  the  party  giv- 
ing it  was  placed  in  the  same  situation,  as  to  the  party  to 
whom  it  was  given,  as  if  the  representation  had  been  true. 
And,  therefore,  that  defendant  would  be  entitled  to  every 
defence  against  the  plaintiff  that  he  would  have  had  if  the 
notice  had  been  given  by  the  party  named.^ 

§  982.  /7i  the  second  and  third  places,  as  to  the  statement 
of  presentment  and  dishonor. — It  was  held  at  one  time  that 
the  presentment  and  dishonor  of  the  bill  or  note  must  ap- 
pear on  the  face  of  the  notice  "in  express  terms  or  by  nec- 
essary implication";^  but  the  later  and  better  ruling  is  that 
it  is  sufficient  if  this  appear  by  "reasonable  intendment."' 
Though  properly  understood,  the  sense  of  the  two  phrases 
is  pretty  much  the  same,  for  "  necessary  implication  means 
not  natural  necessity,  but  so  strong  a  probability  that  an 
intention  contrary  to  that  which  is  imputed  can  not  be  sup- 
posed."* But  it  is  quite  clear  that  it  will  not  be  sufficient 
merely  to  state  in  the  notice  the  fact  of  non-payment  of  the 
bill  or  note,  without  stating  that  payment  was  demanded 
of  the  maker,  drawee,  or  acceptor,  as  the  case  may  be,  or 
stating  some  legal  excuse  for  not  making  such  demand. 
It  should  state  whether  or  not  the  paper  has  been  presented 
for  payment ;  and  if  not,  why  not,  for  the  reason  that  the 
indorser  has  a  right  to  be  informed  of  the  facts  on  which 
the  liability  depends,  to  the  end  that  he  may  judge  for  him- 
self whether  or  not  it  is  his  duty  to  pay  it.^ 

*  Harrison  v.  Ruscoe,  15  M.  &  W.,  231. 

^  Solarte  v.  Palmer,  7  Bins'.,  53^  (20  E.  C.  L.  R.)  ;  5  Moo.  &  P.,  475  ;  I 
Cromp.  &  J.,  417  ;  i  Tyrw.,  371  ;  Boneton  v.  Welsh,  3  Bing.  N.  C,  688  ;  Byles 
on  Bills  (Sharswood's  ed.)  [*265],  413. 

"  Hedger  v.  Steavenson,  2  M.  &  W.,  799 ;  Lewis  v.  Gompertz,  6  M.  &  W„ 
402  ;  Byles  on  Bills  (Sharswood's  ed.),  413,  n.  9,  and  [*265j,  416  ;  Chitty  [*466], 
525  ;  Edwards  on  Bills,  595. 

*  Wilkinson  v.  Adams,  i  Ves.  &  B.,  466,  Lord  Eldon  ;  Hedger  v.  Steavenson, 
2  M.  &  W.,  799  ;  5  Dowl.,  771,  Parke,  B. 

*  Page  V.  Gilbert,  60  Me.,  488  (1872),  Walton,  J.  :  "A  notice  to  the  indorser 
of  a  note,  which  merely  informs  him  of  the  non-payment  of  the  note,  and  de- 
mands payment  of  him,  without  stating  that  payment  has  been  demanded  of  the 
maker,  or  giving  any  legal  excuse  for  not  demanding  it  of  him,  is  not  sufficient 
to  charge  the  indorser.     The  notice  should  state  whether  or  not  the  note  has 


42  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  983. 

§  983.  What  is  sufficient  intijnation  of  dishonor. — The 
mere  statement  that  the  bill  or  note  is  unpaid  is  not  alone 
sufficient  to  intimate  by  "  reasonable  intendment"  that  the 
bill  or  note  has  been  dishonored,  for  the  holder  may  not 
have  used  due  diligence  in  presenting  it ;  and  therefore 
something  more  must  appear,  according  to  the  weight  and 
number  of  authorities  on  the  question,^  though  there  is  au- 
thority to  the  contrary,  which  deprecates  overnicety,  and 


been  presented  to  the  maker  for  payment ;  and  if  not,  why  not  ?  The  indorser 
has  a  right  to  be  informed  of  those  facts  on  which  his  liability  depends,  to  the 
end  that  he  may  judge  for  himself  whether  or  not  it  is  his  duty  to  pay  the  note. 
A  notice  which  merely  states  that  the  note  has  not  been  paid,  without  stating 
whether  or  not  it  has  been  presented  for  payment,  or  giving  any  excuse  for  not 
presenting  it,  is  not  sufficient ;  for  such  a  notice  may  be  strictly  true  in  every 
particular,  and  yet  the  indorser  not  be  liable.  When  the  official  certificate  of  a 
notary  public  states  that  he  '  duly '  notified  the  indorser,  it  is  sufficient  prima 
facie  to  charge  the  indorser  ;  because  the  notary  could  not  properly  say  he  had 
'  duly '  notified  hmi  unless  he  had  given  hun  notice  of  a  demand  as  well  as  of 
non-payment  of  the  note."  Gilbert  v.  Dennis,  3  Mete,  495  ;  Union  Bank  v. 
Humphreys,  48  Me.,  172  ;  Strange  v.  Price,  2  Perry  &  D.,  278. 

1  Phillips  V.  Gould,  8  C.  &  P.,  355  (34  E.  C.  L.  R.)  ;  Strange  v.  Price,  10  Ad. 
&  EL,  125  (37  E.  C.  L.  R.)  ;  Furze  v.  Sharwood,  2  Q.  B.,  338  (42  E.  C.  L.  R.)  ; 
Messenger  v.  Southey,  i  Man.  &  G.,  76  (39  E.  C.  L.  R.)  ;  Boneton  v.  Welsh,  3 
Bing.  N.  C,  688  (32  E.  C.  L.  R.)  ;  Hartley  v.  Case,  4  Barn.  &  C,  339 ;  Gilbert 
V.  Dennis,  3  Mete,  495  ;  Townsend  v.  Lorain  Bank,  2  Ohio  St.,  355  ;  Armstrong 
v'.  Thruston,  11  Md.,  148  ;  Graham  v.  Sangston,  i  Md.,  60  ;  Arnold  v.  Kinloch, 
50  Barb.,  44  ;  Ething  v.  Schuylkill  Bank,  2  Barr.,  356  ;  Sinclair  V.  Lynch,  I 
Spears,  244;  Clark  v.  Eldridge,  13  Mete,  96;  Pinkham  v.  Macy,  9  Id.,  174; 
Lockwood  v.  Crawford,  18  Conn.,  361.  In  Mills  v.  Bank  United  States,  11 
Wheat.,  431,  cited  in  a  previous  note,  it  is  said  obiterhy  the  Supreme  Court  that 
"  the  mere  naked  fact  of  non-payment  is  sufficient."  This  dictum,  as  explained 
in  Gilbert  v.  Dennis,  3  Mete,  495,  is  reconcilable  with  the  text,  and  we  concur 
fully  in  what  is  said  by  Shaw,  C.  J.,  in  the  latter  case.  Says  he,  speaking  of  the 
case  of  Mills  v.  Bank  United  States  :  "  In  the  case  then  before  the  court,  the 
notice  contained  a  full  and  precise  statement  of  the  presentment,  demand,  and 
non-payment  by  the  maker.  The  objection  with  which  the  court  was  dealing 
was,  that  the  notice  did  not  specify  the  time  and  place  of  demand.  The  answer 
made  was,  that  such  particularity  was  unnecessary,  and  that  it  is  sufficient  that 
it  states  the  fact  of  non-payment.  AppHed  to  the  facts  of  that  case,  it  may  be 
construed  to  mean  non-payment  after  due  presentment.  So  when  the  learned 
judge  speaks  of  the  practice  of  commercial  cities,  he  speaks  of  notice  of  the  mere 
naked  non-payment,  in  contradistinction  to  stating  in  the  notice  the  mode  and 
place  of  demand.  That  such  is  the  meaning  may  be  inferred  from  the  passage 
before  cited,  in  which  he  speaks  of  the  object  of  the  notice,  which  is  to  inform 
the  indorser  that  payment  has  been  refused  by  the  maker.  Refusal  implies  non- 
payment on  demand,  or  under  such  circumstances  as  render  a  presentment  and 
demand  unnecessary.  Indeed,  in  many  cases,  simple  notice  of  non-payment  is 
notice  of  dishonor ;  as  where  the  note  is  in  terms,  or  by  usage  or  special  agree- 
ment, payable  at  a  bank,  a  notice  stating  the  date  and  terms  of  the  note,  showing 
that  it  has  become  due,  and  averring  that  it  is  unpaid,  is  equivalent  to  an  aver- 
ment that  it  is  dishonored." 


§  983.       FORMAL  AND  ESSENTIAL  ELEMENTS  OF  NOTICE.         43 

declares  such  rulings  to  be  severe  technicalities.*  But  such  a 
notice  may  suffice  when  the  paper  is  payable  at  a  bank,  and 
the  notice  emanates  from  the  bank.^  Nor  will  it  be  sufficient 
to  say  simply  that  payment  was  demanded,  unless  it  appear 
also  that  it  was  presented.^  But  the  direct  statement  that  the 
instrument  has  been  "  dishonored,"  is  sufficient,  that  word 
including  the  presentment  and  demand  which  were  neces- 
sary f  and  there  are  other  words  which,  coupled  with  the  state- 
ment of  non-payment,  indicate  sufficiently  a  dishonor.  Thus  : 
"  Your  bill  is  unpaid,  noting  5s.";^  or,  "  is  this  day  returned 
with  charges";^  or,  "  noting  expenses,  etc.";''  or,  "  with  charges 
of  protested  exchange."^  The  expression  "returned  un- 
paid "  was  held  insufficient  to  indicate  dishonor  at  one  time  ;* 
but  subsequently  the  opposite  view  prevailed.*" 

And  Hkewise  "protested,""  is  sufficient  in  the  case  of 
promissory  notes  and  inland  bills,*^  as  well  as  of  foreign 

'  Cromer  V.  Piatt,  37  Mich.,  132.  See  26  Am.  Rep,,  505,  where  it  is  shown 
that  this  decision  is  but  slenderly  supported  by  precedent.  But  in  Paul  v.  Joel, 
4  H.  &  N.,  355  (1859),  where  to  the  statement  that  the  bill  was  dishonored  was 
added,  "  payment  is  requested  before  4  o'clock,"  notice  was  held  sufficient.  2 
Ames  B.  &  N.,  378. 

*  See  previous  note,  and  Gilbert  v.  Dennis,  3  Mete,  495. 
'  Musson  V.  Lake,  4  How.,  262. 

*  Stocken  v.  Collin,  9  C.  P.,  653  (38  E.  C.  L.  R.)  ;  S.  C.  7  M.  &  W.,  515  ; 
Woodthorpe  v.  Lawes,  2  M.  &  W.,  109;  Shekon  v.  Braithwaite,  7  M.  &  W., 
436  ;  Edmunds  v.  Cates,  2  Jur.,  183  ;  Lewis  v.  Gompertz,  6  M.  &:  W.,  400 ;  King 
V.  Bickley,  2  Q.  B.,  419  ;  Rowland  v.  Sprinjett,  14  M.  &  W.,  7  (7  E.  C.  L.  R.)  ; 
Smith  V.  Boulton,  i  Hurl.  &  W.,  3. 

'  Armstrong  v.  Christiana,  5  C.  B.,  687  (57  E.  C.  L.  R.)  ;  Hedger  v.  Steaven- 
son,  2  M.  &  W.,  799 ;  5  Dowl.,  771. 

*  Grudgeon  v.  Smith,  6  Ad.  &  El.,  499  (33  E.  C.  L.  R.)  ;  2  Nev.  &  P.,  303  ; 
Everard  v.  Watson,  i  El.  &  B.,  801. 

'  Everard  v.  Watson,  i  EI.  &  B.,  801  ;  Mellersh  v.  Rippen,  7  Exch.,  578. 

*  De  Wolf  V.  Murray,  2  Sandf,  166. 

'  Boulton  V.  Welsh,  3  Bing.  N.  C,  688. 

"  Robson  V.  Curlewis,  Car.  &  M.,  378  ;  S.  C.  2  Q.  B.,  421, 

"  Wheaton  V.  Wilmarth,  13  Mete,  422  ;  Saltmarsh  v.  Tuthill,  13  Ala.,  390  ; 
McFarland  v.  Pico,  8  Cal.,  636  ;  Eastman  v.  Turman,  24  Cal.,  383 ;  see  also 
Burkham  v.  Trowbridge,  9  Mich.,  209  ;  Edwards  on  Bills,  295. 

'■^  Mills  V.  Bank  United  States,  11  Wheat.,  431  ;  Bank  of  Alexandria  v.  Swann, 
9  Pet.,  33 ;  Brewster  v.  Arnold,  i  Wis.,  264 ;  Kilgore  v.  Buckley,  14  Conn., 
362;  Smith  V.  Little,  10  N.  H..  526;  Howe  v.  Bradley,  19  Me.,  31;  Cook  v. 
Litchfield,  5  Sandf,  330;  5  Seld.,  279;  Youngs  v.  Lee,  2  Kern,  551  ;  Housa- 
tonic  Bank  v.  Laflin,  5  Cush.,  546;  Beals  v.  Peck,  12  Barb.,  445  ;  Denegre  v. 
Hiriart,  6  La.  An.,  100;  Burgess  v.  Vreeland,  4  N.  J.,  71;  amfra,  Piatt  v. 
Drake,  J  Doug.  (Mich.),  296,  overruled  by  Burkham  v.  Trowbridge,  9  Mich.,  209, 


44  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.     §§  984,  985. 

bills.^  Where  the  notice  of  the  maker's  non-payment  of 
an  instahnent  states  that  the  holder  looks  to  the  indorser 
for  payment  of  the  instalment  and  of  the  interest  on  the 
note,  the  surplusage  does  not  vitiate  it.^ 

§  984.  Whether  misstateme7it  of  notice  will  vitiate  it. — 
There  is  conflict  of  authority  on  the  question  whether  or 
not  the  indorser  is  discharged  by  a  misstatement  in  the 
notice  of  the  time  of  presentment  or  protest,  when  in  fact 
there  had  been  no  irregularity.  Some  cases  hold  that,  if 
he  were  not  misled  or  deceived,  the  notice  is  valid  ;  ^  but 
others  decide  it  to  be  invalid,  on  the  ground  that  it,  in 
fact,  communicates  to  the  party  that  he  is  discharged  in 
stating  presentment  or  protest  at  an  improper  time.^  But 
it  is  obvious  that  the  holder  in  such  a  case  claims  that  the 
party  is  not  discharged,  and  he  is  notified  that  he  is  held 
liable,  and  looked  to  for  payment.  He  ought  not  to  be 
misled  by  the  mere  circumstance  of  a  mistaken  date,  which 
on  its  face  would  seem  to  be  a  mistake.  And  if,  in  fact, 
there  was  due  presentment  and  protest  in  the  proper  time, 
it  would  be  adopting  a  technicality  quite  opposed  to  the 
uniform  liberal  spirit  of  the  law  of  notice  to  discharge  the 
mdorser  on  account  of  it. 

§  985.  In  the  fo2irth  place,  as  to  the  statement  that  the 
holder  looks  to  the  party  to  whom  notice  is  sent  for  pay- 

1  Crawford  v.  Branch  Bank,  7  Ala.,  205  ;  Spies  v.  Newbury,  2  Doug.  (Mich.), 

495. 

Titchburg  Mutual  Fire  Ins.  Co.  v.  Davis,  121  Mass.,  121. 

^Ontario  Bank  v.  Petrie,  3  Wend.,  456  ;  Crocker  v.  Getchell,  23  Me.,  392  ; 
Byles  on  Bills  (Sharswood's  ed.)  P269],  417,  note  i  ;  Journey  v.  Pierce,  2 
Houston. 

*Routh  V.  Robertson,  11  S.  &  M.,  362;  Etting  v.  Schuylkill  Bank,  2  Penn. 
St.,  355;  Ransom  v.  Mack,  2  Hill,  587  ;  Townsend  v.  Lorain  Bank,  2  Ohio  St., 
345  ;  I  Parsons  N.  &  B.,  476.  In  Reynolds  v.  Appleman,  41  Md.,  615,  this  view 
seems  to  be  approved,  but  it  was  held  inapplicable  to  the  case  considered.  In 
this  case  the  notarial  certificate  was  dated  December  23d,  and  stated  that  the 
note  "  is  delivered  to  me  for  protest,  the  same  not  being-  paid,  payment  thereof 
having  been  demanded  and  refused."  The  court  said,  through  Bartel,  C.  J. : 
"  This  implies,  in  the  absence  of  any  statement  to  the  contrary,  that  the  demand 
was  duly  made  at  the  maturity  of  the  note,"  the  note  fell  due,  and  was  duly  pre- 
sented on  December  22d,  as  was  proved  by  parol  testimony.  Edwards  on  Bills, 
593. 


§  9^6.       FORMAL  AND  ESSENTIAL  ELEMENTS  OF  NOTICE.  45 

ment,  the  express  statement  in  the  notice  to  this  effect  was, 
as  it  might  seem,  formerly  held  necessary  ;  ^  but  the  pre- 
vailing rule  at  the  present  time  is,  that  the  mere  fact  of 
giving  notice  to  the  party  implies  that  he  is  looked  to  for 
payment.^ 

On  this  subject  it  has  been  said  by  the  United  States 
Supreme  Court  :^  "A  suggestion  has  been,  made  at  the 
bar,  that  a  letter  to  the  indorser,  stating  the  demand  and 
dishonor  of  the  note,  is  not  sufficient,  unless  the  party 
sending  it  also  informs  the  indorser  that  he  is  looked  to  for 
payment.  But  when  such  notice  is  sent  by  the  holder,  or 
by  his  order,  it  necessarily  implies  such  responsibility  over. 
For  what  other  purpose  could  it  be  sent  ?  We  know  of 
no  rule  that  requires  any  formal  declaration  to  be  made 
to  this  effect.  It  is  sufficient,  if  it  may  be  reasonably  in- 
ferred from  the  nature  of  the  notice." 

§  986.  Whether  notice  must  state  fact  of  protest. — When 
a  protest  is  necessary  in  order  to  charge  the  drawer  or  in- 
dorser, the  notice  should  state  that  the  bill  was  protested, 
in  order  to  show  that  his  liability  was  fixed.;  but  if,  in 
point  of  fact,  the  bill  was  noted  for  protest,  no  statement 
as  to  protest  in  the  notice  is  necessary.*  And  in  one  case, 
where  the  notice  stated  expressly  that  the  bill  had  not  been 
protested,  it  was  held  by  the  court,  that  it  might  mean  no 
more  than  that  the  protest  had  not  been  extended,  and  it 
misfht  still  be  understood  that  it  had  been  noted. ^     W^here 

o 

'Tindal  v.  Brown,  i  T.  R.,  169  ;  Solarte  v.  Palmer,  7  Bing.,  530  (20  E.  C.  L. 
R.) 

'Bank  of  Cape  Fear  v.  Seawell,  2  Hawks,  560;  Warren  v.  Gilman,  5  Shep., 
360;  Shrieve  v.  Duckham,  i  Litt.,  194;  Cowles  v.  Harts,  3  Conn.,  517;  Town- 
send  V.  Lorain  Bank,  2  Ohio  St.,  345  ;  Burg-ess  v.  Vreeland,  4  N.  J.,  71  ;  Bar- 
stow  V.  Hiriart,  6  La.  An.,  98;  Story  on  Promissory  Notes,  §  355;  Furze  v. 
Sharwood,  2  Q.  B.,  388  (42  E.  C.  L.  R.)  :  Chard  v.  Fo.x.  14  Q.  B.,  200  (68  E.  C. 
L.  R.)  ;  Metcalf  v.  Richardson,  20  Eng.  L.  &  Eq.,  301  ;  Miers  v.  Brown,  ii 
Mees  &  W.,  372;  Caunt  v.  Thompson,  7  C.  B.,  400  (62  E.  C.  L.  R.)  ;  King  v. 
Buckley,  2  Q.  B.,  419  (42  E.  C   L.  R.)  ;  Edwards  on  Bills,  598,  660. 

'Bank  of  U.  S.  v.  Carneal,  2  Pet.,  543. 

*  Ex  parte  Lowenthal,  L.  R.,  9  ch.,  591  ;  2  Ames  B.  &  N.,  452. 

'  Brown  v.  Dunbar,  Thomson  on  Bills,  332. 


46  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  987. 

the  party  receiving  notice  is  abroad,  it  has  been  said  that 
the  notice  should  mention  the  protest,  since  he  could  not 
readily  ascertain  as  to  the  fact  by  inquiry,^  but  this  doctrine 
does  not  seem  to  have  become  ingrafted  into  the  principles 
of  the  law  merchant. 

It  is  now  settled — though  the  contrary  at  one  time  was 
maintained — that  it  is  not  necessary  that  a  copy  of  the  pro- 
test of  a  foreign  bill  should  accompany  notice  of  its  dis- 
honor.^ But  information  of  the  protest  should  be  sent  if 
the  party  to  whom  notice  is  transmitted  resides  abroad.^ 


SECTION   III. 

WHO   MAY   GIVE    NOTICE   OF  DISHONOR. 

§  987.  The  notice  of  dishonor  should  emanate  from  the 
holder  of  the  instrument  at  the  time  of  its  dishonor,  and 
should  be  communicated  to  all  the  parties  whom  he  means  to 
hold  liable  for  its  payment.  But  it  is  not  absolutely  neces- 
sary that  it  should  come  from  him,  for  the  holder  is  entitled 
to  the  benefit  of  notice  given  in  due  time  by  any  party  to  the 
instrument  who  would  be  liable  to  him  if  he,  the  holder,  had 
himself  given  him  notice  of  dishonor.*  Thus  if  the  holder 
duly  notifies  the  sixth  indorser,  and  he  the  fifth,  and  he  the 

'  Lord  Ellenborough,  in  Rollins  v.  Gilson,  3  Camp.,  334 ;  i  M.  &  S.,  288 ; 
Thomson  on  Bills,  334. 

^Goodman  v.  Harvey,  4  Ad.  &  EL,  870  (31  E.  C.  L.  R.)  ;  Wallace  v.  Agry,  4 
Mason,  336  ;  Story  on  Bills,  §  302  ;  ante,  §  943. 

=  See  Rogers  v.  Stephens,  2  T.  R.,  713  ;  Byles  on  Bills  (Sharswood's  ed.)  [*270], 
418. 

*  Chapman  v.  Keene,  3  Ad.  &  El.,  193  ;  4  Nev.  &  M.,  607  ;  Lysaght  v.  Bryant, 
9  C.  B.,  46;  s.  C.  2  Cam  &  K.,  1016;  Jameson  v.  Svvinton,  2  Camp.,  373; 
Wilson  V.  Swabey,  i  Stark.,  34  ;  Stafford  v.  Yates,  18  Johns,  327  ;  Bachellor  v. 
Prest,  12  Pick.,  406;  Stanton  v.  Blossom,  14  Mass.,  116  ;  Bank  U.  S.  v.  God- 
dard,  5  Mason,  366;  Triplett  v.  Hunt,  3  Dana,  126;  Renshaw  v.  Triplett,  23 
Mo.,  213  ;  Whitman  v.  Farmers'  Bank,  8  Porter  (Ala.),  258;  Wilson  v.  Mitchell, 
4  How.  (Miss.),  272  ;  Marr  v.  Johnson,  9  Yerg.,  i  ;  Abat  v.  Rion,  9  Mart.  (La.), 
465;  Stor}'  on  Prom.  Notes,  §  301;  Story  on  Bills,  §304;  i  Parsons  N.  &  B.,  503, 
504 ;  [Tindal  v.  Brown,  i  T.  R.,  467,  and  ex  parte  Barclay,  7  Ves.,  597,  are 
overruled] ;  Thomson  on  Bills,  357  ;  Edwards,  626,  627  ;  Swayze  v.  Britton,  17 
Kansas,  627. 


§  9^8-  ^^'HO    MAY    GIVE    NOTICE    OF    DISHONOR.  47 

fourth,  and  so  on  to  the  first,  the  latter  will  be  liable  to  all 
the  parties.*  Where  the  holder  has  duly  notified,  or  exer- 
cised due  diligence  to  notify  the  several  and  successive  in- 
dorsers,  and  an  intermediate  indorser  who  did  not  himself 
notify  his  predecessors,  takes  up  the  bill  or  note,  there  is  no 
doubt  that  the  notice  sent  them  by  the  holder  to  whom  he 
makes  payment  inures  to  his  benefit,  provided  it  actually 
reached  them.^  But  it  has  been  observed  that  it  would 
seem  to  be  still  unsettled  whether  the  notice  inured  to  the 
benefit  of  the  intermediate  indorser,  when  the  holder's  dili- 
gence in  sending  notice  did  not  secure  its  actual  reception.^ 
In  the  single  American  case,  deciding  the  question,  which 
we  have  seen,  it  was  held  that  the  plaintiff  could  not  avail 
himself  of  the  diligence  of  the  holder  in  such  a  case,  and 
"  that  there  was  no  authority  for  holding  that  an  excuse 
for  the  omission  to  serve  notice  by  the  holder  should  ex- 
tend to  other  parties  for  whom  there  is  no  such  excuse."^ 
But  high  authority  has  sustained  the  view  that  all  the  in- 
dorsers  being  liable  to  the  holder,  an  intermediate  indorser 
on  paying  him  becomes  substituted  to  his  rights  and  is  en- 
titled to  recover.^  And  Thomson  considers  the  doctrine 
settled  to  this  effect.^ 

§  988.  It  is  certain  that  notice  from  a  mere  stranger'^  is  i7t- 
sufficicnt,  and  it  is  equally  well  established  that  a  party  to 
the  bill  who  has  been  discharged  by  laches,  and  who  could 
not  in  any  event  sue,  can  not  give  notice  for  his  own  or 
another's  benefit,  he  being  then  a  mere  stranger  to  the 
paper.  ^ 

*  Hilton  V.  Shepherd,  6  East.,  14  ;  Swayze  v.  Britton,  17  Kansas,  627. 

'  Stafford  v.  Yates,  18  Johns,  327.  '  i  Parsons  N.  &  B.,  627. 

*  Beale  v.  Parrish,  20  N.  Y.,  407,  overruling  24  Barb.,  243. 

*  I  Parsons  N.  &  B.,  627.  *  Thomson  on  Bills,  327. 

'  Stanton  v.  Blossom,  14  Mass.,  1 16  ;  Chanoine  v.  Fowler,  3  Wend.,  173  ;  Juni- 
ata Bank  v.  Hale,   16  Sergt.  &  R.,  157;  Brailsford  v.  Williams,   15  Md.,   150 
Stewart  v.  Kennett,  2  Camp.,  177  ;  Byles  on  Bills  (Sharswood's  ed.)  [*278J,43o; 
Storjf  on  Notes,  §  301  ;  Thomson  on  Bills,  355  ;  Edwards,  626. 

*  Harrison  v.  Ruscoe,  15  L.  J  Exch.,  no  ;  15  M.  «&:  W.,  231 ;  Turner  v.  Leech, 
4  B.  &  Aid.,  451  ;  Rowe  v.  Tipper,  13  C.  B.,  249 ;  Thomson  on  Bills,  358. 


48  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.      §§  989,  99O. 

The  broad  doctrine  is  laid  down  by  some  of  the  authori- 
ties that  any  party  to  the  instrument  may  give  notice  ;  ^  but 
as  we  have  already  seen,  this  rule  is  certainly  not  without 
exception,  for  if  the  party  be  discharged  he  can  no  longer 
interfere  with  the  rights  of  others.  And  the  proper  limita- 
tion to  the  rule  seems  to  be  that  he  must  be  a  party  whose 
liability  is  fixed  ;  or  one  who,  on  the  paper  being  returned 
to  him  when  he  pays  it,  will  be  entitled  to  reimbursement 
from  some  prior  party.^ 

§  989.  The  liability  of  the  party  must  be  fixed  before  he 
is  himself  competent  to  give  notice,  and  that  it  may  inure 
to  the  holder's  benefit.^  But  it  is  not  necessary  that  he 
should  be  himself  aware  at  the  time  that  his  own  liability 
has  been  duly  fixed  by  dishonor  in  proper  form  ;  for  if  the 
fact  have  been  so,  and  the  notice  to  him  have  been  given, 
the  requisites  to  his  liability  are  there,  and  his  own  state  of 
mind  on  the  question  can  not  alter  the  situation.^ 

§  990.  Whether  acceptor  may  give  notice. — Whether  or 
not  the  acceptor  of  a  bill,  who  refuses  or  fails  to  pay  it, 
may  give  the  notice,  has  been  a  matter  of  difference.  In 
respect  to  the  early  cases,  which  held  that  he  could,^  it  has 
been  said  by  some  of  the  text  writers  that  they  must  have 
been  cases  in  which  the  holder  constituted  the  acceptor  his 
agent  for  that  purpose.®     There  are  also  cases  which  hold 

*  See  I  Parsons  N.  &  B.,  503  ;  Wilson  v.  Svvabey,  i  Stark.,  34.  In  Chitty  on 
Bills,  C.  10,  pp.  524,  527,  it  said  :  "  It  suffices. if  it  be  given  after  the  bill  was  dis- 
honored by  any  person  who  is  a  party  to  the  bill,  or  who  would,  on  the  same 
being-  returned  to  him,  and  after  paying  it,  be  entitled  to  require  reimburse- 
ment." And  Story  on  Bills,  §  304,  adopts  the  principle  in  almost  the  identical 
language  of  Chitty. 

'^  In  Bayley  on  Bills,  it  is  said  (pp.  254,  256) :  "  The  notice  must  come  from  the 
holder,  or  from  some  party  entitled  to  call  for  payment  or  reimbursement." 
See  also  Chanoine  v.  Fowler,  3  Wend.,  173. 

'  Lysaght  v.  Bryant,  9  C.  B.,  46;  Harrison  v.  Ruscoe,  15  M.  &  W.,  231; 
Thomson  on  Bills  (Wilson's  ed.,  1865),  357  ;  Bayley  on  Bills,  254. 

*  Jennings  v.  Roberts,  24  L.  J.  Q.  B.,  102 ;  Thomson  on  Bills,  358. 

^  Shaw  V.  Craft  (1793),  Chitty  on  Bills,  333  ;  Kosher  v.  Kiernan,  4  Camp.,  87. 

^Byles  on  Bills  (Sharswood's  ed.)  [*279],  431,  432;  Bayley  on  Bills  (5th 
ed.),  254  ;  Thomson  on  Bills  (Wilson's  ed.,  1865),  359;  i  Parsons  N.  &  B.,  505, 
Parke,  B.,  in  Harrison  v.  Ruscoe,  15  M.  &  W.,  231. 


^  990.  WHO    MAY    GIVE    NOTICE    OF    DISHONOR.  49 

±at  the  maker  of  a  note  may  give  notice.^     But  the  cases 
which  maintain  the  doctrine  do  not  rest  it  on  the  ground  of 
agency.     It  was,  at  one  period,  held  in  England  that  no 
one  but  the  holder  at  the  time  could  give  a  valid  notice  ;* 
but  the  rule  became  re-established  that  the  acceptor  might 
do  so,  and  now  the  principle  is  settling  down  to  that  effect. 
In  reasserting  the  doctrine,  Lord  Denman,  after  referring 
to  ex  parte  Barclay,  and  Tindal  v.  Brown,  quoted  in  the 
previous  note,  said  :^  "  Notwithstanding  these  high  authori- 
ties, it  is  clear,  from  Jameson  v.  Swinton,  2  Camp.,  i']^)  ; 
•J      Wilson  v.  Swabey,  i   Stark.,  N.  P.  C,  34  ;  and  also  from 
—  J  tjie  learned  treatises  on  bills  of  exchange,  that  the  contrary 
^  "^  doctrine  has  prevailed  in  the  profession,  and  we  must  pre- 
>   "^   glume  a  contrary  practice  in  the  commercial  world.     It  is 
.   if    ^universally  considered  that  the  party  entitled,  as  holder,  to 
^-   fsue  upon  the  bill,  may  avail  himself  of  notice  given  in  due 

o  time  by  any  party  to  it We  are  now  compelled  to 

determine  whether  the  case  of  Tindal  v.  Brown,  as  to  this 
point,  be  good  law.  We  think  that  it  is  not."  This  lan- 
guage of  Lord  Denman  was  approved  in  Maryland  in  a 
well-considered  case,  and  Tuck,  J.,  added:  "We  may  con- 
sider the  doctrine  then  announced  established  law."*  It  had 
been  held,  in  Massachusetts,  that  a  drawee  who  refuses 
acceptance  can  not  give  a  valid  notice.' 

'  First  National  Bank  v.  Ryerson,  23  Iowa,  508 ;  Glasgow  v.  Pratte,  8  Mo., 
336  ;  Wade  on  Notice,  §  713. 

"  Tindal  v.  Brown,  i  Term  R.,  167  ;  ex  parte  Barclay,  7  Ves.,  597  ;  Stewart  v. 
Kennett,  2  Camp.,  177. 

'Chapman  v.  Keene,  3  Ad.  &  EL,  193  (30  E.  C.  L.  R.,  69) ;  Thomson  on 
Bills,  356. 

^Brailsford  v.  Williams,  15  Md.,  157  (1859),  Tuck,  J.,  saying:  "  In  Jameson 
V.  Swinton,  2  Camp.,  373,  where  the  notice  was  not  given  by  the  holder  of  the 
bill,  but  by  his  immediate  indorser,  who  had  received  notice,  the  Court  said  : 
'The  diawer  or  indorser  is  liable  to  all  subsequent  indorsers,  if  he  had  due 
notice  of  the  dishonor  of  the  bill  from  any  person  who  is  a  party  to  it.  Such  a 
notice  must  serve  all  the  purposes  for  which  the  giving  of  notice  is  required. 
The  drawer  or  indorser  is  authoritatively  informed  that  the  bill  is  dishonored  ; 
he  is  enabled  to  take  it  up,  if  he  pleases,  and  may  immediately  proceed  against 
the  acceptor  or  prior  indorser.'  " 

*  Stanton  v.  Blossom,  14  Mass.,  116. 

Vol.  II.— 4 


50  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  <^§  99I 

Professor  Parsons  dissents  from  the  views  of  the  later 
authorities,  and  considers  that  notice  must  emanate  from 
one  who,  if  he  were  owner,  could  recover  of  some  other 
party  to  the  paper.  But,  as  matter  of  authority,  the  doc- 
trine seems  now  to  be  established,  whatever  be  its  merit. 
And  as  any  established  rule  of  mercantile  conduct  is 
better  than  continuous  shifting,  we  suppose  the  courts 
will  not  be  disposed  to  disturb  it,  whether  they  find  it 
necessary  to  adopt  the  idea  of  agency  or  otherwise.  It 
rests  upon  usage,  and  is  a  principle  of  the  law  merchant, 
however  unphilosophical  it  may  seem. 

§  991.  Notice  by  agent. — Notice  given  by  an  agent  is 
the  same  as  if  by  the  holder  himself,  and  it  may  be  either 
in  the  agent's  name,^  or  in  the  name  of  any  party  entitled 
to  give  notice.^  The  notary  to  whom  the  bill  or  note  has 
been  given  for  presentment  may,  as  the  agent  of  the  holder, 
give  notice  ;  ^  but  it  is  no  part  of  his  official  duty  ;  *  and  a 
bank  holding  a  bill  or  note  for  collection,  or  its  officers  or 
agents,  should,  as  a  matter  of  duty,  give  the  notice  neces- 
sary.^ Any  person,  indeed,  in  whose  hands  the  bill  law- 
fully is,  may  give  the  notice  as  holder  or  agent,  as  the  case 
may  be,  and,  if  as  agent,  a  verbal  authority  from  the  holder 
is  sufficient.^ 


•  W^oodthorpe  v.  Lawes,  2  M.  &  W.,  109, 

"  Rogerson  v.  Hare,  i  Jur.,  71  ;  Harrison  v.  Ruscoe,  15  M.  &  W.,  231  ;  Byles 
on  Bills  (Sharswood's  ed.),  432  ;  Benjamin's  Chalmers'  Digest,  182. 

^  Smedes  v.  Utica  Bank,  20  Johns,  372  ;  s.  c.  3  Cow.,  662  :  Bank  of  Utica  v. 
Smith,  18  Johns,  230;  Safford  v.  Wyckoff,  i  Hill  (N.  Y.),  11  ;  Cowperthwaite 
V.  Sheffield,  i  Sandf.,  416;  Crawford  v.  Branch  Bank,  7  Ala.,  205;  Shed  v. 
Brett,  I  Pick.,  401  ;  Fulton  v.  McCracken,  18  Md.,  528  ;  Renick  v.  Robbins,  28 
Mo.,  339  ;  Swayze  v.  Britton,  17  Kan.,  629. 

*  Burke  v.  McKay,  2  How.,  66  ;  Harris  v.  Robinson,  4  How.,  336 ;  Swayze  v. 
Britton,  17  Kan.,  625.  See  a7ite,  chapter  xxviii,  on  Protest,  §  960.  It  is  held 
in  Tennessee  that  a  notary  failing  to  give  notice  is  liable  on  his  official  bond,  he 
having  been  instructed  to  give  it,  and  it  thus  becoming  under  the  Tennessee 
statute  a  part  of  his  official  duty.     Wheeler  v.  State,  9  Heiskell,  393. 

^Ogden  V.  Dobbin,  2  Hall,  112  ;  Freeman's  Bank  v.  Perkins,  7  Shep.,  292  ; 
Bank  of  State  of  Missouri  v.  Vaughan,  36  Mo.,  90. 

^  Story  on  Bills,  §  303  ;  Byles  on  Bills  (Sharswood's  ed.),  432  ;  Cowperthwaito 
V.  Sheffield,  i  Sandf.,  416. 


§  992.  WHO    MAY    GIVE    NOTICE    OF    DISHONOR.  5 1 

§  992.  Banks  and  other  agents  for  collection. — A  bank 
or  banker  with  whom  a  bill  or  note  is  deposited  to  present 
for  acceptance  or  payment,  of  any  agent  to  whom  it  is  in- 
dorsed for  collection,  is  to  be  regarded  as  a  distinct  holder 
for  the  purposes  of  notice,  and  has  the  same  time  to  notify 
the  principal,  and  the  principal  the  prior  parties,  as  if  such 
bank  or  agent  were  the  real  owner^ — but  the  mere  servant 
acting  as  the  principal  would  not  be.^  The  same  rule  ap- 
plies to  the  several  branches  of  the  same  bank." 

Upon  the  same  principle,  where  the  holder  of  a  bill  em- 
ployed an  attorney  to  give  notice  to  an  indorser,  and  the  at- 
torney wrote  to  another  professional  man  requesting  him 
to  ascertain  the  indorser's  residence,  and  received  an  answer 
with  information  on  the  i6th  of  the  month,  which  informa- 
tion he  communicated  to  his  principal  on  the  17th,  and  on 
the  1 8th  forwarded  the  letter  containing  notice  of  dishonor, 
it  was  held  sufficient* 

The  factor,  or  other  agent  or  attorney,  may  not  know 
which  of  the  prior  parties  his  principal  may  desire  to  hold 
bound  to  him  ;  or  he  may  not  know  where  notice  would 
find  them,  as  he  has  no  interest  in  the  bill  or  note,  or 
privity  with  the  parties,  and  the  rule  placing  such  agents  on 
the  footing  of  a  distinct  holder  is  essential  to  the  conven- 
ient collection  and  management  of  negotiable  paper. 

'  Friend  v.  Wilkinson,  9  Grat.,  31  ;  Neal  v.  Wyatt,  3  Humph.,  125  ;  Gindrat 
V.  Mechanics'  Bank,  7  Ala.,  324  ;  Hill  v.  Planters'  Bank,  3  Humph.,  670  ;  Crocker 
V.  Getchell,  23  Me.,  392;  Sussex  Bank  v.  Baldwin,  2  Har. ,  487;  Bank  United 
States  V.  Goddard,  5  Mason,  366  ;  Church  v.  Barlow,  9  Pick.,  547  ;  Colt  v. 
Noble,  5  Mass.,  167;  Ogden  v.  Dobbin,  2  Hall,  112;  Howard  v.  Ives,  i  Hill 
(N.  Y.),  263;  Butler  v.  Duval,  4  Yerg.,  265;  Worden  v.  Nourse,  36  Vt.,  756; 
I3artlett  v.  Isbell,  31  Conn.,  296;  Mead  v.  Engs,  5  Cow.,  303  ;  Sheldon  v.  Ben- 
ham,  4  Hill  (N.  Y.),  129;  Eagle  Bank  v.  Hathaway,  5  Mete,  213;  Lawson  v. 
Farmers'  Bank,  i  Ohio  St.,  206  ;  Langdale  v.  Trimmer,  15  East.,  291 ;  Daly  v. 
Slater,  4  Car.  &  P.,  200  ;  Robson  v.  Bennett,  2  Taunt.,  388  ;  Scott  v.  LitTord,  9 
East.,  347  ;  Byles  on  Bills  (Sharswood's  ed.)  [*276],  428  ;  Story  on  Bills  (Ben- 
nett's ed.),  292  ;  Benjamin's  Chalmers'  Digest,  186.  So  far  overruling  Haynes 
V.  Birks,  2  Bos.  &  P.,  599. 

"^  Bartlett  v.  Isbell,  31  Conn.,  296.  'Ciode  v.  Bayley,  12  M.  &  W.,  51. 

♦  Firth  V.  Thrush,  8  B.  &  C,  387  (15  E.  C.  L.  R.)  ;  2  Man.  &  Ry.,  259.  Lord 
Tenterden  said  :  "  A  banker  who  holds  a  bill  for  a  customer  is  not  bound  to  give 
notice  of  dishonor  on  the  day  on  which  the  bill  is  dishonored.  He  has  another 
day,  and  upon  the  same  principle  I  think  the  attorney  in  this  case  was  entitled 
by  law  to  be  allowed  a  day  to  consult  his  client." 


52  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.       §§  993-995- 

The  name  of  the  party  should  be  upon  the  bill  or  note, 
and  a  drawee  who  has  not  accepted,  and  who  therefore  is 
an  entire  stranger  to  the  bill,  is  incompetent  to  give  notice.* 

§  993.  Sending  the  bill  or  note  to  a  bank  for  collection 
implies  authority  to  it  to  give  notice,  and  in  giving  it,  it 
may  itself  claim  to  be  holder — or  agent  of  the  holder — 
or  give  it  in  the  real  holder's  name.^  Authority  to  collect 
a  bill  is  authority  to  give  notice.^  A  creditor  holding  the 
paper  as  collateral  security  *  is  a  holder  for  the  purposes  of 
notice,  and  so  also  is  he  who  accepts  or  pays  supra  pro- 
test'' 

§  994.  If  the  holder  be  dead,  his  personal  representative 
should  give  notice,  if  there  be  one;  but  if  none  be  ap- 
pointed at  the  time  of  maturity,  the  indorser  will  not  be  dis- 
charged if  notice  be  sent  him  in  a  reasonable  time  after  an 
appointment  is  made.® 


SECTION  IV. 

TO   WHOM   NOTICE   OF   DISHONOR   SHOULD   BE   GIVEN. 

§  995.  Each  indorser  of  a  bill  or  note  is  entitled  to  no- 
tice, and  so  also  is  the  drawer  of  a  bill  payable  to  a  third 
party,  as  bills  generally  are.  The  acceptor  of  a  bill  and  the 
maker  of  a  note  are  not  entitled  to  notice,  they  being  the 
primary  debtors.  Where  there  are  several  successive  in- 
dorsers,  the  holder  may,  and  ordinarily  does,  give  notice  to 
all,  with  a  view  to  preserve  his  recourse  upon  all.     But  he 


'  "^ttpost,  §  995  ;  Chanoine  v.  Fowler,  3  Wend.,  173  ;  Brailsford  v.  Williams, 
15  Md.,  155  ;  Stanton  v.  Blossom,  14  Mass.,  116. 

'  Worden  v.  Nourse,  36  Vt.,  757  ;  Woodthorpe  v.  Lawes,  2  M.  &  W.,  109 ; 
Edwards  on  Bills,  629. 

'  Worden  v.  Nourse,  36  Vt.,  756. 

*  Peacock  v.  Purcell,  14  C.  B.  N.  S.,  728  (108  E.  C.  L.  R.) 

*  Konig  V.  Bayard,  i  Pet.,  262  ;  Martin  v.  Ingersoll,  8  Pick.,  i. 

*  White  V.  Stoddard,  11  Gray,  38  ;  i  Parsons  N.  &  B.,  444,  559- 


W  995^'  995^-  "^Q  WHOM  given.  53 

IS  not  bound  to  give  notice  to  all,  in  order  to  bind  those  to 
whom  he  does  give  it.  He  may,  if  he  please,  give  notice  to 
any  one  or  more  of  the  indorsers,  who  are  then  made  liable 
to  him  ;  and  the  indorser  receiving  notice  must  then  notify 
antecedent  indorsers  in  order  to  assure  himself.^ 

§  995^.  Indorsers  for  collectio7t  entitled  to  notice. — The 
rule  requiring  notice  to  the  indorsers  of  bills  and  notes  ex- 
tends to  all  indorsers,  whether  they  are  indorsers  for  value 
or  mere  agents  for  collection.  A  banking  house,^  or  other 
agent,^  merely  passing  title  to  the  bill  or  note  by  indorse- 
ment for  purposes  of  collection,  stands  on  the  same  footing 
as  any  other  indorser  in  respect  to  notice.  "In  regard  to 
notice,  each  branch  of  a  bank  is  considered  a  separate  es- 
tablishment." * 

It  is  not  sufficient,  in  order  to  charge  a  prior  indorser,  to 
enclose  notice  for  him  to  a  subsequent  one.  Each  suc- 
cessive indorser  is  entitled  to  notice,  in  order  to  charge  him, 
and  overdiligence  in  notifying  one  will  not  supply  the  de- 
fect as  to  diligence  in  respect  to  another.^  The  transferrer 
of  a  negotiable  instrument  by  delivery  without  making  him- 
self a  party  is  not  entitled  to  notice.^ 

§  995<i5.  Accommodation  drawer  or  vidorser  e^ititled  to 
notice ;  but  not  so  if  accommodated. — An  accommodation 
drawer  or  indorser  is  as  much  entitled  to  notice  as  if  the  draw- 
ing or  indorsing  was  done  for  value  ; '  but  if  the  drawer  or 
indorser  be  himself  the  accommodated,  instead  of  the  accom- 
modating party,  he  is  under  obligation  to  take  up  the  bill 

'  Cardwell  v.  Allen,  33  Grat.,  167. 

'  McNeal  V.  Wyatt,  3  Humph.,  125  ;  Scott  v.  Lifford,  9  East.,  347;  Seaton  v. 
Scovill,  18  Kansas,  435. 

'  Butler  V.  Duval,  4  Yerg.,  265. 

*  Clode  V.  Bayley,  12  L.  J.  Exch.,  17  ;  12  M.  &  W.,  51  ;  Thomson  on  Bills, 
351  ;  Edwards  on  Bills,  623. 

^  Stix  V.  Mathews,  63  Mo.,  371  ;  Brown  v.  Ferguson,  4  Leigh,  37  ;  see  post, 
§  I045- 

•  Van  Wort  v.  Wooley,  3  B.  &  C,  439. 

'  Turner  v.  Samson,  2  Q.  B.  Div.,  23  ;  19  Moak's  E.  R.,  195  ;  Thillman  v. 
Gueble,  32  La.  An.,  260;  Braley  v.  i3uchanan,  21  Kansas,  555. 


54  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  996. 

or  note,  has  no  remedy  on  doing  so  against  any  other  party  ; 
and  consequently  is  without  legal  possibility  of  injury,  and 
is  not  entitled  to  notice.^ 

§  996.  Indorsers  of  bills  or  notes  payable  on  demand,  or 
indorsed  overdue,  entitled  to  notice. — Although  a  bill  or 
note  is  payable  on  demand,  or  has  been  indorsed  long  after 
it  was  due,  there  must  still  be  a  demand,  and  notice  of  de- 
fault, in  order  to  charge  the  indorser,  because  a  bill  or  note, 
though  overdue,  continues  to  be  negotiable,  and  is  in  the  nat- 
ure of  a  new  bill  payable  on  demand.^  This  principle  seems 
clearly  correct,  though  it  has  been  said  that  in  such  cases  the 
party  has  a  reasonable  time  within  which  to  give  notice,^  and 
even  that  no  notice  at  all  is  necessary/  In  a  recent  case, 
where  it  was  contended  that  the  holder  of  a  note,  indorsed 
overdue,  had  a  "  reasonable  time"  to  give  notice,  it  was  re- 
sponded and  held,  that  such  "  reasonable  time  "  meant  "im- 
mediate notice,  which  at  farthest  is  the  next  day  after  de- 
fault, where  the  parties  reside  in  the  same  town."  ^  In 
California,  it  has  been  held  that  the  contract  of  one  who  in- 
dorses a  note  after  maturity,  and  as  additional  security  to 


'  Post,  §  1085. 

'^  See  vol.  I,  §611  ;  Thompson  V.Williams,  i4Cal.,  162;  Beebe  v.  Brooks,  i2Cal., 
308  ;  Coltv.  Barnard,  18  Pick.,  260  ;  Bishop  v.  Dexter,  2  Conn.',  419  ;  Berry  v.  Rob- 
inson,9  Johns,  121  ;  Dwight  V.Emerson,  2  N.  H.,  159;  Greeley  v.  Hunt,  21  Me.,455; 
Kirkpatrick  v.  McCullough,  3  Humph.,  171  ;  Leavitt  v.  Putnam,  3  Coms.,  494; 
Adams  v.  Torbert,  6  Ala.,  865  ;  Lockw^ood  v.  Crawford,  18  Conn.,  361  ;  Atvvood 
V.  Hazelton,  3  Bailey  (S.  C),  457  ;  McKinney  v.  Crawford,  8  Serg.  &  R.,  351  ; 
Course  v.  Shackleford,  2  Nott  &  McC,  283  ;  Branch  Bank  v.  Gaflfrey,  9  Ala., 
153  ;  I  Parsons  N.  &  B.,  520;  Hart  v.  Eastman,  7  Minn.,  74  ;  Jones  v.  Middle- 
ton,  29  Iowa,  188;  Bemis  v.  McKenzie,  13  Fla.,  557;  Swartz  v.  Redfield,  13 
Kansas,  550;  Shelby  v.  Judd,  24  Kansas,  161  ;  Sawyer  v.  Brownell,  13R.  I.  ; 
Graul  V.  Strutzel,  53  Iowa,  712;  Bank  of  Red  Oak  v.  Orris,  40  Iowa,  332; 
Pryor  v.  Bowman,  38  Iowa,  92  ;  Blake  v.  McMillen,  33  Iowa,  150  ;  McEwer  v 
Kirtland,  33  Iowa,  348 ;  Fell  v.  Dial,  14  S.  C,  247  ;  Duffy  v.  O'Connor,  7  Bax- 
ter, 498.  Light  V.  Kingsbury,  50  Mo.,  331,  Adams,  J.,  saying:  "  This  is  a  ne- 
gotiable note  (payable  one  day  after  date),  indorsed  after  due.  Such  indorse- 
ment is  equivalent  to  drawing  a  new  bill  at  sight,  and  the  same  diligence  in  mak- 
ing demand  and  giving  notice  is  required  to  charge  the  indorsers." 

'  Van  Hoesen  v.  Van  Alstyne,  3  Wend.,  75. 

*  Gray  v.  Bell,  3  Rich.,  71,  O'Neall,  J,  ;  i  Parsons  N.  &  B.,  519,  note  v. 

'  McKewer  v,  Kirtland,  33  Iowa,  352,  approved  in  Graul  v.  Strutzel,  53  Iowa, 
712. 


§  997*  TO    WHOM    GIVEN.  55 

prevent  legal   proceedings  against  the  payee  and  indorser, 
is  that  of  a  guarantor.^ 

§  997.  Fixed  indorser s. — Where  the  indorsement  upon 
the  bill  or  note  was  made  before  its  maturity,  and  after  the 
bill  or  note  had  been  transferred  with  it  upon  it,  and  had 
been  returned  to  the  indorser  ;  and  he,  after  paying  it,  and 
after  the  liability  of  all  parties  had  been  fixed,  and  reissued 
it  with  their  indorsements  upon  it,  the  general  rule  requir- 
ing demand  of  the  maker,  and  notice  to  the  indorser, 
where  the  indorsement  was  made  after  maturity,  in  order 
to  charge  the  indorser,  would  not  apply.  For  in  such  case 
the  demand  had  been  made,  the  notice  given,  and  his  lia- 
bility •  determined  before  he  reissued  the  instrument. 
Thus,  where  the  indorser,  who  had  taken  up  a  bill  at  ma- 
turity, and  upon  which  his  own  and  prior  indorser's  liability 
had  been  fixed  by  demand  and  notice,  placed  it  in  the 
hands  of  an  auctioneer,  who  sold  it  to  the  plaintiff,  it  was 
held,  that  all  the  parties  were  bound  without  any  new  de- 
mand and  notice,  because  there  was  no  new  contract  of 
indorsement.  And  as  to  the  indorser  who  put  it  upon  the 
market  bearing  his  name,  such  act  was  a  repiesentation  of 
liability,  and  he  was  estopped  in  good  faith  and  sound 
morals  from  denying  it.^  The  like  rule  would  apply  where 
the  indorser  who  has  paid  it  reissues  an  overdue  note, 
bearing  his  name  thereon,  and  himself  persuades  the  in- 
dorsee to  take  it.^  In  general,  the  indorser  who  has  paid 
and  reissues  a  note  will  be  bound  as  a  fixed  indorser,  or  as 
one  entitled  to  notice  according  to  intention.*  When  a 
note  was  reindorsed  after  maturity  to  a  preindorser,  who 
then  reissued  and  reindorsed  it,  it  was  held  that  all  the  in- 
dorsers  were  liable  to  the  holder.* 

'  Crooks  V.  Tully,  50  Cal.,  255;  Reeves  v.  Howe,  16  Cal.,  152;  Geiger  v. 
Clark,  13  Cal.,  579.     But  guarantor  is  entitled  to  notice  of  non-payment. 

"^  St.  John  V.  Roberts,  31  N.  Y.,  441  (1865)  ;  see  also  Williams  v.  Matthews,  3 
Cow.,  252. 

'  Libby  v.  Pierce,  47  N.  H.,  314. 

*  Montgomery  R.R.  Co.  v.  Trebles,  44  Ala.,  258.     Set  post,  §  1242. 

'Scott  V.  First  N,  B.,  71  Ind.,  467. 


56  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.       §§  998,  999. 

§  998.  Notice  to  the  agent  of  the  party  for  the  general 
conduct  of  his  business  is  the  same  as  if  given  to  the  prin- 
cipal in  person.*  But  notice  to  the  party's  attorney  or  so- 
licitor, unless  he  is  specially  authorized  to  receive  it,  is  in- 
sufficient.^ If  an  agent  draw  a  bill  in  his  own  name,  notice 
should  be  given  to  him,  and  if  given  to  his  principal  it  will 
be  insufficient,  he  being  no  party  to  the  paper.^  If  the 
paper  be  signed  by  a  duly  authorized  agent  in  the  princi- 
pal's name,  notice  should  be  given  to  the  principal,  who  is 
the  party  liable.*  Whether  or  not  the  agent  would  be  re- 
garded as  authorized  to  receive  it,  is  questioned ;  and  it  has 
been  decided  that  authority  to  indorse  is  not  authority  of 
itself  to  receive  notice.^  The  mere  fact  that  a  party  is  the 
"  financial  agent "  of  his  principal  does  not  of  itself  con- 
stitute him  an  agent  to  receive  notice.*^  An  agent  consti- 
tuted before  the  breaking  out  of  a  war  which  severs  him 
from  his  principal,  with  authority  to  receive  notice  of  dis- 
honor, may  continue  to  act  for  that  purpose  ;  and  notice 
served  upon  him  will  suffice  to  charge  the  indorser.'  If  a 
note  be  payable  by  instalments,  demand  and  notice  as  to 
the  last  instalment  binds  the  indorser  as  to  that.^ 

§  999.  In  cases  of  partnership,  notice  must  be  given  to 
the  firm — but  notice  to  any  one  partner  is  notice  to  the 
firm  ;^  even  though  there  has  been  a  dissolution.*"  And  it 
matters  not  that  the  firm  was  dissolved  by  war,  and  that 
one  of  the  partners  was  separated  from  the  other  by  a-  hos- 

'  Cross  V.  Smith,  I  M.  &  Sel,  545  ;  Wilkins  v.  Commercial  Bank,  6  How. 
(Miss.),  217  ;  Fassin  v.  Hubbard,  55  N.  Y.,  471. 

=  Louisiana  State  Bank  v.  Ellery,  16  Mart.  (La.),  87  ;  Cross  v.  Smith,  i  M.  & 
Sel.,  545- 

»  Grosvenor  v.  Stone,  8  Pick.,  79.  '  Clay  v.  Oakley,  17  Mart.  (La.),  137. 

"  Valk  V.  Gaillard,  4  Strob.,  99 ;  Wilcox  v.  Routh,  9  Sm.  &  M.,  476.      • 

»  New  York,  etc.,  Co.  v.  Selma  Savings  Bank,  51  Ala.,  305. 

^  Hubbard  v.  Matthews,  54  N.  Y.,  50.  '  Eastman  v.  Turman,  24  Cal.,  383. 

»  Bayley,  285  ;  Story  on  Bills,  §§  299,  305  ;  Story  on  Notes,  §  368 ;  Chitty,  355  ; 
Gowan  v.  Jackson,  20  Johns,  176  ;  People's  Bank  v.  Keech,  26  Md.,  521. 

'"  Fourth  National  Bank  v.  Henschuh,  52  Mo.,  207 ;  Hubbard  v.  Matthews,  54 
N.  Y.,  50;  Brown  v.  Turner,  15  Ala.  N.  S.,  832;  Coster  v.  Thomason,  19  Ala. 
N.  S.,  717.     See  ante,  §  592,  vol.  i ;  Slocomb  v.  Lizardi,  21  La.  Ann.,  355. 


^§ggga,  looo.  to  whom  given.  57 

tile  line.^  If  an  indorser  be  a  member  of  the  firm,  the  notice 
to  the  firm  is  sufficient.'^  The  general  rule,  that  notice  to 
any  partner  is  notice  to  the  firm,  is  subject  to  this  excep 
tion  :  that  where  one  member  resides  at  a  distance,  and  an- 
other at  the  place  of  protest,  notice  must  be  given  to  the 
latter.     At  least,  it  has  been  so  held.' 

§  ggga.  Joint  indorsers. — If  there  are  joint  indorsers, 
not  partners,  notice  must  be  given  to  each  of  them,  and 
notice  to  one  only  would  not  even  bind  him.'*  But,  "  if  the 
drawer  of  a  bill,"  said  the  Supreme  Court  of  the  United 
States,  "  be  in  truth  the  partner  of  the  acceptor,  either 
generally,  or  in  the  single  adventure  in  which  the  bill  made 
a  part,  in  that  event  notice  of  dishonor  of  the  bill  by  the 
holder  to  the  drawer,  need  not  be  given.  The  knowledge 
of  one  partner  is  the  knowledge  of  the  other,  and  notice 
to  the  one,  notice  to  the  other."  ^  If  one  of  a  firm  die. 
notice  to  the  survivor  suffices.^ 

§  I  GOO.  If  the  party  entitled  to  notice  be  dead  at  the 
time  the  bill  or  note  becomes  payable,  and  this  is  known 
to  the  holder,  notice  should  be  sent  to  his  executor  or  ad- 
ministrator, if  there  be  any,  and  it  can  be  ascertained  by 


*  Hubbard  v.  Matthews,  54  N.  Y.,  50,  Johnson,  C. :  "  It  results  from  necessity 
if  the  liability  of  the  absent  partner  in  a  lirm  dissolved  by  the  event  of  war  is  to 
be  continued  at  all  in  respect  to  engagements  existing  at  the  time  when  war 
breaks  out,  that  he  must  be  deemed  to  be  represented  by  the  representative  of 
the  firm  remaining  within  the  jurisdiction  of  the  belligerent  whose  authority 
extends  over  the  place  of  business  of  the  firm,  and  that  as  in  respect  to  property 
and  rights  there  existing,  so  in  respect  to  obligations  and  liabilities  dated  before 
the  war,  he  must  share  the  fortunes  of  the  tirm." 

2  Rhett  V.  Poe,  2  How.,  457,  ^  Hume  v.  Watt,  5  Kan.,  34. 

*  Bank  of  U.  S.  v.  Bierne,  i  Grat.,  234;  Hubbard  v.  Matthews,  5-1  N.  Y..  50; 
People's  Bank  v.  Keech,  26  Md.,  521  ;  Willis  v.  Green,  5  Hill,  232  ;  Shepard  v. 
Hawley,  i  Conn.,  368  ;  Boyd  v.  Orton,  16  Wis.,  495  ;  Dabney  v.  Slidger,  4  Sm. 
&  M.,  749;  State  Bank  v.  Slaughter,  7  Blackf.,  133;  Union  Bank  v.  Willis,  8 
Mete,  512;  Bank  of  Chenango  v.  Root,  4  Cow.,  126;  Miser  v.  Trooinger,  7 
Ohio  St.  R.,  238 ;  Bealls  v.  Peck,  12  Barb.,  245  ;  Sayre  v.  Frick,  7  W.  &  S.,  383; 
Story  on  Bills,  §  199;  Wood  v.  Wood,  i  Han,  429;  contra.  Dodge  v.  Bank  of 
Ky.,  2  A.  K.  Marsh,  510;  Higgins  v.  Morrison,  4  Dana,  ico;  Thomson  on 
Bills,  361  ;  Story  on  Notes,  §  255,  note  2.     See  ante,  §  594,  vol.  I. 

*  Rhett  V.  Poe,  2  How.,  473. 

*  Hubbard  v.  Matthews,  54  N.  Y.,  50;  Slocomb  v.  Lizardi,  21  La.  Ann.,  355. 


58  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   lOOa 

reasonable  inquiry  who  or  where  he  is ;  and  under  such 
circumstances  notice  addressed  to  the  deceased  by  name 
would  be  insufficient.^  Notice  addressed  to  the  "  legal  rep- 
resentative," in  a  case  in  which  the  death  of  the  indorser 
was  recent,  and  no  personal  representative  had  as  yet  quali- 
fied, has  been  deemed  sufficient  f  but  it  has  been  held  that 
if  addressed  to  "  the  estate,"  it  would  not,  that  term  apply- 
ing as  well  to  the  heir-at-law  as  to  the  executor  or  admin- 
istrator.^ And  where  a  personal  representative  has  quali- 
fied, and  is  known,  or  could  be  ascertained  by  due  diligence, 
it  would  not  be  sufficient  to  address  notice  through  the 
mail  to  "the  administrator,"  "executor,"  or  "personal  rep- 
resentative," by  official  designation  only,  as  it  might  lead 
to  delay.  The  address  should  be  to  such  party  by  name.^ 
Notice  to  one  of  several  executors  or  administrators  is 
sufficient.^ 

It  is  said,  however,  that  in  all  these  cases  reception  of 
notice  by  the  personal  representative  in  a  reasonable  time 
will  be  sufficient — curing  all  defects  in  the  sending.®  Where 

'  Oriental  Bank  v.  Blake,  22  Pick.,  206 ;  Barnes  v.  Reynolds,  4  How.  (Miss.), 
114;  Cayuga  Co.  Bank  v.  Bennett,  5  Hill,  236;  i  Parsons  N.  &  B.,  501,  502; 
Goodnow  V.  Warren,  122  Mass.,  83. 

^  In  Boyd's  Adm'r  v.  City  Savings  Bank,  15  Grat.,  501,  it  appeared  that  Boyd, 
the  indorser  of  the  note,  was  dead  when  it  became  due  and  was  protested,  and 
had  no  personal  representative.  He  resided  in  Lynchburg  at  the  time  of  his 
death,  and  his  family  continued  to  reside  there  until  after  the  protest  of  the  note. 
Notice  of  dishonor  was  on  the  day  of  protest  deposited  by  the  notary  in  the  post- 
office  at  Lynchburg,  directed  to  "The  Legal  Representative  of  James  M.  Boyd, 
deceased,  Lynchburg  ";  and  this  was  all  the  notice  given.  The  Court  of  Appeals 
held  that  the  notice  was  sufficient,  saying  that  the  legal  representative  (upon  his 
qualification)  was  as  likely  to  receive  notice  through  this  channel  as  if  it  had 
been  left  at  the  late  residence  of  the  deceased  indorser  ;  and  that  the  former  was 
preferable,  inasmuch  as  "the  family  of  the  deceased,  at  the  time  of  the  protest, 
might  be  in  a  state  of  deep  affliction  (occasioned  by  his  recent  death),  when  it 
would  be  painful  both  to  them  and  the  notary  for  him  to  have  to  visit  them  on  a 
matter  of  business."  Pillow  v.  Hardeman,  3  Humph.,  538  ;  Planters'  Bank  v. 
White,  2  Humph.,  112.     See  post,  §  loii,  p.  66,  note  i. 

^  Cayuga  County  Bank  v.  Bennett,  5  Hill,  236  ;  Massachusetts  Bank  v.  Oliver, 
10  Cush.,  557. 

*  Smalley  v.  Wright,  40  N.  J.  L.  R.  (12  Vroom),  471. 

^  Bealls  V.  Peck,  12  Barb.,  245 ;  Lewis  v.  Bakewell,  6  La.  Ann.,  359  ;  Carolina 
N.  B.  V.  Wallace,  13  S.  C,  347. 

*  Cayuga  County  Bank  v.  Bennett,  5  Hill,  236 ;  Maspero  v.  Pedesclaux,  22  La. 
Ann.,  227  ;  i  Parsons  N.  &  B.,  502.     See  §§  1003,  1050. 


^^  1 00 1,   I002.  TO    WHOM    GIVEN.  59 

two  promissory  notes  fell  due  at  several  times,  and  the  in- 
dorser  of  both  being  deceased  at  their  maturity,  notice  was 
given  to  the  executor  named  in  his  will,  who  had  presented 
it  for  probate  ;  before  the  maturity  of  the  second  note  the 
executor  had  renounced  the  executorship,  and  an  adminis- 
trator had  been  appointed,  but  no  public  notice  of  the  fact 
had  been  given — it  was  held  that  notice  as  to  the  first  note 
was  sufficient,  but  not  as  to  the  second.^  In  a  case  where 
no  personal  representative  of  a  deceased  indorser  had  been 
appointed,  notice  left  at  his  residence  with  his  son-in-law 
was  deemed  sufficient.^  Notice  sent  to  a  person  who  was 
afterward  appointed  administrator  of  the  deceased  has  been 
held  insufficient,  on  the  ground  that  he  occupied  no  such  re- 
lation to  the  estate  at  the  time  of  its  reception,  that  he  was 
either  honorably  or  in  legal  duty  bound  to  do  anything  for 
its  protection.^ 

§  1 00 1.  If  there  be  no  personal  represeiitative,  notice 
sent  to  the  family  residence  of  the  deceased  will  be  suffi- 
cient ;^  and  it  is  likewise  sufficient  if  notice  be  addressed  to 
the  deceased  when,  without  negligence,  the  holder  is  not 
aware  of  his  death. ^  If  notice  is  left  at  the  family  residence, 
no  personal  representative  having  been  appointed,  it  will 
not  be  necessary,  when  one  is  appointed,  to  give  him  notice, 
the  rights  of  the  holder  being  fixed  by  his  doing  what  the 
circumstances  required  when  the  paper  fell  due.^ 

§  1002.  If  the  party  be  bankrupt,  it  is  best  to  give  notice 
to  him,  and  to  his  assignee  also.     If  there  be  as  yet  no  as- 

*  Goodnow  V.  Warren,  122  Mass.,  79.         ^  Weaver  v.  Penn,  27  La.  Ann.,  129. 
'Mathewson  v.  Strafford  Bank,  45  N.  H.,  104.     See  Goodnow  v.  Warren,  122 

Mass.,  82. 

*  Merchants'  Bank  v.  Birch,  17  Johns,  25  ;  Stewart  v.  Eden,  2  Gaines,  121  ; 
Goodnow  V.  Warren,  122  Mass.,  82.  Devens,  J.:  "It  hasbeen  held  that  if 
notice  be  sent  to  the  last  residence,  or  last  place  of  business  of  the  deceased, 
it  is  sufficient  to  render  his  estate  responsible,  as  it  may  be  reasonably  supposed 
that  it  will  thus  reach  those  interested  in  it."  Linderman  v.  Guldin,  34  Penn. 
St.,  54. 

*  Barnes  v.  Reynolds,  4  How.  (Miss.),  114;  Maspero  v.  Pedesclaux,  22  La. 
Ann.,  227. 

•Merchants'  Bank  v.  Birch,  17  Johns,  25. 


6o  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IOO3 

signee  appointed,  notice  to  him  is  sufficient ;  ^  and  perhaps 
it  might  be  sufficient  even  if  one  had  been  appointed.^  If 
given  to  the  assignee  alone,  it  would  probably  be  sufficient. 
If  the  bankrupt  has  absconded,  notice  should  be  given 
his  assignee,  if  any  there  be ;  ^  and  if  there  be  none,  to  any 
one  representing  his  estate.* 


SECTION  V. 

MODE  AND  FORMALITIES  OF  GIVING  NOTICE  WHEN  THE  PARTY 
GIVING  AND  THE  PARTY  TO  RECEIVE  IT  RESIDE  IN  THE 
SAME   PLACE. 

§  1003.  Notice  however  communicated  is  sufficient  if 
duly  raceived. — If  the  party  addressed  receives  the  notice  in 
due  season,  or  can  be  properly  inferred  by  the  jury  from 
the  facts  of  the  case  that  it  was  received,  the  mere  manner 
of  its  transmission  is  wholly  immaterial.^  A  personal  ser- 
vice of  notice  is  good  wherever  it  may  be  made,  provided 
it  be  done  in  proper  time  ;  at  an  improper  place  it  is  suffi- 
cient if  it  reaches  the  party  for  whom  it  was  intended  in 
due  season  ;  ®  and  so  likewise  if  it  be  sent  by  mail  where 
the  parties  reside  in  the  same  place,  it  is  good  if  it  duly 
reaches  the  party  addressed.''' 

The  distinction  between  the  different  modes  of  giving 
notice  is  this  :  that  where  the  holder  and  indorser  reside  in 
different  places,  the  former,  if  he  deposits  the  notice  in  the 
post-office  in  due  season,  has  no  further  burden  on  him  as 

'  Ex  parte  Moline,  19  Ves.,  216.  '^  i  Parsons  N.  &  B.,  500. 

'  Rhode  V.  Proctor,  4  B.  &  C,  517  ;  6  Dow.  &  R.,  610.  « Ibid. 

'  Hyslop  V.  Jones,  3  McLean,  69 ;  Dicken  v.  Hall,  87  Penn.  St.,  379  ;  First  N. 
B.  V.  Wood,  51  Vt.,  471. 

*Bank  of  United  States  v.  Corcoran,  2  Pet.,  121 ;  Foster  v.  McDonald,  5  Ala., 
376 ;  Manchester  Bank  v.  Fellows,  8  Fost.  (N.  H.),  302  ;  Whiteford  v.  Burck- 
meyer,  i  Gill,  127  ;  Bradley  v.  Davis,  26  Me.,  45;  Cabot  Bank  v.  Warner,  ic 
Allen,  524;  Shelbume  Nat.  Bank  v.  Townsley,  107  Mass.,  444;  Gilchrist  v. 
Downell,  53  Mo.,  591  ;  First  National  Bank  v.  Wood,  51  Vt.,  473  ;  Carolina 
National  Bank  v.  Wallace,  13  S.  C,  347.     See  §§  1000,  1650. 

'  Ibid. 


§   1004.       NOTICE  TO  PARTY  RESIDING  IN  SAME  PLACE.  6 1 

to  the  actual  receipt  of  it  by  the  latter ;  but  where  both 
parties  live  in  the  same  town,  the  sender  of  the  notice  is 
bound  to  show  that  it  was  actually  received  by  the  indorser 
in  due  season,^ 

§  1004.  Whether  notice  may  be  sent  by  telegraph. — The 
telegraph,  as  yet  unemployed  in  transmitting  notice  of  dis- 
honor of  commercial  paper,  might  be  made  available  and 
useful  for  that  purpose  ;^  but  the  proof  of  its  due  reception 
would  be  necessary,  as  communication  by  that  channel  does 
not  stand  on  the  same  footing  as  that  by  mail. 

If  a  system  of  postal  telegraphy  were  established  by  the 
government  (as  is  proposed),  it  would  doubtless  be  placed 
in  equal  dignity  with  the  mail  service,  and  then  become 
frequently,  if  not  generally,  the  medium  of  communicating 
notice.  Notice  may  also  be  sent  by  special  messenger,  as 
we  shall  see  hereafter.  We  shall  herein  consider,  (i)  When 
notice  must  be  personally  served  ;  and  (2)  How  and  where 
it  must  be  personally  served. 

§  1005.  In  the  first  place,  notice,  as  a  general  rule,  mus/ 
be  personally  served  when  parties  reside  in  same  place. — 
When  the  parties  reside  in  the  same  city  or  town,  the  party 
is,  as  a  general  rule,  entitled  to  personal  notice,  verbal  or 
written,  or  a  written  notice  must  be  left  at  his  dwelling- 
house  or  place  of  business.  And  notice  by  mail  in  such  a 
case  will  be  insufficient,^  unless  its  reception  in  due  time 
be  proved.* 

This  at  least  is  the  rule  in  America,  and  may  be  regarded 
as  the  law  in  all  of  the  States,  except  where  it  has  been 


'  Cabot  Bank  v.  Warner,  lo  Allen,  522.  '  i  Parsons  N.  &  B.,  487. 

'  Bowling  V.  Harrison,  6  How.,  248  ;  Williams  v.  Bank  U.  S.,  2  Pet.,  96;  Bus- 
sard  V.  Levering,  6  Wheat.,  104 ;  Nashville  Bank  v.  Bennett,  i  Yerg.,  166  ;  Boyd 
V.  City  Savings  Bank,  15  Grat.,  501  ;  Pierce  v.  Pendar,  5  Mete,  352;  Shelburne 
Falls  National  Bank  v.  Townsley,  102  Mass.,  177  ;  John  v.  City  Nat.  Bank,  63 
Ala.,  529  ;  Story  on  Bills,  §  312  ;  i  Parsons  N.  &  B.,  482 ;  Byles  on  Bills  (Shars- 
wood's  ed.)  [*272],  422  ;  Vance  v.  Collins,  6  Cal.,  535 ;  Keck  v.  Bringer,  19  La. 
Ann.,  183  ;  Davis  v.  Gowen,  19  Me.,  447. 

*■  Cabot  Bank  v.  Warner,  10  Allen,  524. 


62  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO06. 

changed  by  statute,  or  some  modification  has  been    made 
by  the  courts  in  consequence  of  the  growth  of  large  cities. 

§  loo^a.  Exception  when  instrument  protested  at  differ- 
ent place. — But  if  the  instrument  was  protested  by  a  notary 
at  a  place  different  from  that  of  the  parties'  residence,  the 
mail  may  then  be  used.^  And  the  notice  may  be  deposited 
in  the  post-office  at  the  place  of  protest,  or  at  the  place  of 
the  indorser's  residence,  if  in  due  season.* 

Thus  it  has  been  held  that  where  a  bill  was  dishonored 
in  Philadelphia,  and  notice  sent  to  an  indorser  in  Provi- 
dence, the  latter  might  give  notice  to  a  previous  party  re- 
siding in  Providence,  through  the  post-ofhce.^  And  so 
where  the  notary,  sending  notice  to  one  indorser,  inclosed 
to  him  under  the  same  envelope  a  notice  for  him  to  give  to 
a  prior  indorser  at  the  same  place,  it  has  been  held  that  the 
notice  for  such  prior  party  might  be  redeposited  in  the 
post-ofhce,  properly  addressed,  the  first  indorser  being  re- 
garded as  the  agent  of  the  notary  or  holder  who  might,  if 
he  had  pleased,  have  sent  the  notice  directly  by  mail."* 
And  so  where  the  notary,  who  protested  the  bill  at  Middle- 
town,  where  it  was  payable,  sent  notice  to  the  holder,  who 
resided,  as  did  also  the  indorser,  at  Hartford,  and  the  holder 
there  redeposited  it  in  the  post,  it  was  held  sufficient.^ 

S  1006.  When,  however,  an  indorser  uses  the  post-office 


'  Hartford  Bank  v.  Stedman,  3  Conn.,  489  ;  Manchester  Bank  v.  Fellows,  8 
Fost.,  302;  Warren  v.  Gilman,  17  Me.,  360;  Greene  v.  Farley,  20  Ala.,  322; 
Eagle  Bank  v.  Hathaway,  5  Mete,  212. 

=  Foster  v.  McDonald,  8  Ala.,  376  ;  Timms  v.  Delisle,  5  Blackf.,  447  ;  contra, 
M'Crummen  v.  M'Crummen,  17  Mart.  (La.),  158;  Patrick  v.  Beasley,  6  How. 
(Miss.),  609;  Greene  v.  Farley,  20  Ala.,  322. 

'  Eagle  Bank  v.  Hathaway,  5  Mete,  213,  Shaw,  C.  J.,  saying  :  "On  the  whole, 
as  the  transaction  to  be  notified  to  the  defendant  took  place  in  Philadelphia  ;  as 
notice  to  him  by  mail  from  there  would  have  been  good ;  as  the  cashier  was  the 
conduit  of  conveyance,  and  not  the  party  from  whom  the  notice  emanated  ;  as 
the  defendant,  if  he  were  looking  for  notice  of  the  dishonor  of  this  bill  of  ex- 
change payable  in  Philadelphia,  would  naturally  look  to  the  post-office  for  that 
notice,  we  are  of  opinion  that  notice  by  the  post-office  under  these  circum- 
stances must  be  deemed  good." 

*  Manchester  Bank  v.  Fellows,  8  Fost.,  313. 

'  Hartford  Bank  v.  Stedman,  3  Conn.,  489.  To  same  effect  see  Van  Brunt  v 
Vaughan,  47  Iowa,  145. 


§  I007-       NOTICE  TO  PARTY  RESIDING  IN  SAME  PLACE.  6^ 

to  communicate  notice  to  a  prior  indorser  in  the  same 
place  as  himself,  he  must  expedite  it  by  mail  in  time  for  it 
to  reach  him  as  early  as  if  it  had  been  addressed  to  him 
originally  from  the  place  of  protest,  and  had  not  been 
withdrawn  from  the  office  at  all.  In  Massachusetts,  where 
it  appeared  that  the  note  was  protested  in  New  York  City 
on  the  7th  of  July,  1866,  and  the  notices  were  inclosed  to 
the  first  indorser  at  Shelburne  Falls,  where  they  reached 
him  in  due  course  on  the  loth  inst.  ;  and  he  redeposited 
the  notice  for  his  immediate  prior  indorser,  who  also  re- 
ceived his  letters  through  the  Shelburne  Falls  office 
(though  residing  in  the  country),  in  the  post-office  there 
on  the  nth  inst.  ;  it  was  held  that  due  diligence  had  not 
been  exercised,  and  the  prior  indorser  was  discharged,* 

§  1007.  Where  the  parties  do  not  themselves  reside  at 
the  same  place,  but  the  note  is  payable  at  the  same  place 
where  the  party  to  be  notified  resides,  the  like  rule  prevails 
as  if  the  parties  resided  there.  Thus,  where  a  note  was 
payable  at  Vicksburg,  Mississippi,  and  the  holder  resided 
in  Maryland,  but  the  indorser  resided  in  Vicksburg,  the 
Supreme  Court  of  the  United  States  held  that  th.e  indorser 
could  not  be  notified  through  the  post-office  in  Vicksburg, 
and  sustained  the  charge  of  the  lower  court  to  the  jury, 
"that  to  charge  an  indorser,  if  he  lived  in  the  town  in  which 
the  note  was  made  payable,  the  notice  must  be  personal 
unless  he  had  agreed  to  receive  it  elsewhere,  or  unless  by 
custom  and  usage  of  the  bank  at  which  the  note  is  payable, 


■Shelburne  Falls  Nat.  Bank  v.  Townsley,  102  Mass.,  177.  Ames,  J.,  distin- 
guished the  case  from  that  of  Eagle  Bank  v.  Hathaway,  above  cited,  and  said  : 
"  That  case,  however,  differs  from  the  one  before  us,  in  showing  that  the  notifi- 
cation was  left  by  the  cashier  at  the  post-office  on  the  day  of  its  reaching  his 
hands,  and  that  it  must  have  reached  the  defendant  as  early  as  if  it  had  been 
directed  and  sent  to  him  by  mail  from  Philadelphia ;  so  that  substantially  he 
was  notified  by  the  notary  in  regular  course  of  mail.  But  considered  as  an  in-. 
dependent  notice,  emanating  from  an  indorser  who,  by  being  himself  properly 
notified,  has  become  chargeable,  and  desires  to  notify  his  immediate  indorser, 
and  thereby  to  hold  him,  a  notice  by  a  drop-letter,  given  on  the  next  day,  finds 
little  or  no  support  in  that  case."     See  also  107  Mass.,  444. 


64  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  IO08. 

the  notice  of  non-payment  was  left  at  the  post-office."* 
But  the  opposite  view  has  been  taken  in  some  cases.'^ 

§  1008.  Exception  when  penny  post  is  used. — There  is  an 
exception  to  the  general  rule  requiring  personal  service  of 
notice  when  the  parties  reside  in  the  same  place,  or  rather 
a  variation  of  the  general  rule,  in  large  towns  and  cities 
where  letter-carriers  are  employed  in  the  postal  service  to 
deliver  letters  at  the  houses  or  places  of  business  of  parties 
who  usually  receive  their  letters  through  them.  In  such 
cases,  if  the  notice  be  deposited  in  the  post-office  early 
enough  in  the  day  to  go  by  the  letter-carrier  (or  penny 
post,  as  this  system  is  often  called),  on  the  same  day  to  the 
pa-ty  entitled  to  notice,  it  will  be  deemed  sufficient.  In 
such  cases,  the  penny  post,  or  letter-carrier,  is  treated  as  an 
agent  for  the  purpose,  because  of  the  accustomed  use  of 
this  agency  as  a  medium  of  city  communication.  It  was 
recently  said  in  Pennsylvania,  where  notice  was  sent  in  this 
manner  in  the  city  of  Harrisburg,  by  Read,  J.  :  "  Now  that 
free  delivery  of  letters  is  established  and  regulated  by  law 
so  as  to  secure  a  certain  delivery  according  to  its  address, 
it  seems  proper  that  this  rule  should  be  adopted  in  this 
State  as  called  for  by  the  improvements  introduced  into 
the  post-offices  by  the  general  government."  ^ 

So  in  Maryland,  where  the  carrier  testified  that  he  uni- 
formly delivered  letters  for  the  indorser  to  him,  and  the 
penny  post  was  regularly  established,  the  same  doctrine  was 
held.* 

'  Bowling  V.  Harrison,  6  How.,  248  ;  see  also  Bank  v.  Slaughter,  7  Blackf., 

133- 

''  Gindrat  v.  Mechanics'  Bank,  7  Ala,,  324 ;  Greene  v.  Fariey,  20  Ala.,  324 ; 
Philipe  V.  Harberiee,  45  Ala.,  608  ;  Tyson  v.  Oliver,  43  Ala.,  608. 

=  Shoemaker  v.  Mechanics'  Bank,  59  Penn.  St.,  83  (1868). 

*  Walters  V.  Brown,  15  Md.,  292  (1859).  In  Virginia  it  is  now  provided  by 
statute  that  "  in  every  city  containing  five  thousand  inhabitants  or  more,  a  notice 
of  protest  of  any  note,  draft,  and  so  forth,  sent  by  mail  to  any  party  or  parties 
residing  therein,  and  liable  thereto,  shall  be  a  legal  service."  See  Acts  of  As- 
sembly, 1876-7,  p.  28.  In  Greenwich  Bank  v.  De  Groot,  14  N.  Y.  S.  C.  (7  Hun), 
21  r,  the  court,  speaking  of  the  N.  Y.  statute,  says  :  "  That  law  requires  the  no- 
tice to  be  deposited  in  the  post-office  of  the  city  or  town  where  the  paper  may 


§   lOOg.        NOTICE  TO  PARTY  RESIDING  IN  SAME  PLACE.  65 

§  1009.  It  must  be  proved,  when  the  penny  post  is  used, 
that  the  letter  containing  notice  was  deposited  in  the  post 
at  such  a  time  that,  according  to  the  course  of  the  post,  it 
would  be  delivered  to  the  party  to  whom  it  is  addressed  on 
the  day  he  was  entitled  to  receive  notice  of  dishonor  ;  ^  and 
it  has  been  said  by  high  authority,  that  if  there  be  no  penny 
post  that  goes  to  the  quarter  where  the  drawer  lives,  the 
notice  must  be  personal,  or  by  special  messenger  sent  to  his 
dwelling-house,  or  place  of  business.^  But  if  the  party  re- 
sides beyond  the  city  limits,  while  the  penny  post  might 
not  be  used,  because  unavailable,  yet  the  regular  post  might 
be,  according  to  the  modern  and  the  correct  view,  as  it 
seems  to  us. 

§  loio.  In  London  and  in  Edinburgh,  where  the  facilities 
of  postal  delivery  have  been  long  since  perfected,  the  use  of 
the  post-office  for  communicating  notice  to  parties  in  the 
city  has  been  recognized  and  favored  as  the  legitimate  and 
proper  method.^  And  the  modern  authorities  show  a  dis- 
position to  extend  and  encourage  it.  It  has  been  said  that 
the  requirement  that  notice  should  be  sent  otherwise  than 
by  post  "  has  lost  its  reasonable  force,  and  exists  only  by 
authority."  ^ 

§  1 01 1.  Exception  when  party  is  rece7itly  deceased. — 
Another  exception  to  the  rule  requiring  personal  notice 
when  the  parties  reside  in  the  same  place  arises  when 
the  party  entitled  to  notice  has  recently  died,  and  no  per- 
sonal representative  has  been  appointed.  In  such  a  case, 
where  notice  was  deposited  addressed  "  to  the  legal  repre- 
sentative of  J.  M.  B."  (the  deceased  indorser),  at  the  place 

be  payable  or  legally  presented  for  payment  or  acceptance  (chap  466,  Laws  of 
i^S?'  §  3)'  And  these  boxes,  by  a  liberal  construction  of  the  terms  of  the  stat- 
ute, may  be  regarded  as  the  post-office  for  that  purpose." 

'  Smith  V.  Mullet,  3  Camp.,  208  ;  Dobree  v.  Eastwood,  3  Car.  &  P.,  250  ; 
Walters  v.  Brown,  15  Md.,  292. 

^  3  Kent.  Com.,  107.  '  i  Parsons  N.  &  B.,  481 ;  Thomson  on  Bills,  339. 

*  I  American  Lead  Cas.,  403 ;  Redfield  &  Bigelow's  Lead  Cas.,  381  ;  i  Par- 
sons N.  &  B.,  484  ;  Eagle  Bank  v.  Hathaway,  5  Mete,  212. 

Vol.  II.— 5 


66  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IOI2. 

of  the  indorser's  late  residence,  where  the  holder  also  re- 
sided, it  was  held  sufficient.^ 

§  IOI2.  Exception  when  several  post-offices  in  a  town. — 
So,  likewise,  where  there  are  several  distinct  villages  or  post- 
offices  in  a  town,  between  which  there  is  a  regular  inter- 
course by  mail,  it  may  be  employed  for  the  conveyance  of 
notice,  notwithstanding  the  fact  that  the  parties  reside  in 
the  same  general  municipality.' 

And  where  the  indorser  resided  in  the  same  city,  but  ten 
miles  from  the  place  of  protest,  it  has  been  held  allowable 
to  use  the  post,  there  being  at  his  place  of  residence  an  of - 

'  Boyd's  Adm'r  v.  City  Savings  Bank,  15  Grat.,  5or  (i860),  Moncure,  J.,  say- 
ing :  "  Two  modes  of  giving  it  naturally  suggested  themselves  ;  one  by  sending 
it  through  the  post-office,  and  the  other  by  leaving  it  at  the  last  residence  of  the 
indorser,  where  his  family  still  resided  in  the  same  town  ;  and  the  notary  elected 
the  former.  Was  it  not  a  reasonable  choice  ?  Was  it  so  unreasonable  as  to  de- 
feat the  right  of  the  holder  against  the  estate  of  the  indorser?  No  unnecessary 
restraint  should  be  imposed  on  the  circulation  of  negotiable  paper.  No  difficult 
condition  should  be  required  to  be  performed  to  fix  the  liability  of  parties. 
What  was  the  notary  to  do  under  the  circumstances  of  this  case  ?  He  could  not 
deliver  the  notice  to  the  personal  representative  himself,  who  was  the  person  en- 
titled to  receive  it,  but  who  was  not  then  known  and  had  not  qualified.  All  he 
could  do  was  to  put  it  in  a  train  of  being  received  by  the  personal  representa- 
tive in  a  reasonable  time  after  his  qualification.  He  might  have  left  it  at  the  last 
residence  of  the  indorser,  as  the  cases  decide  ;  but  that  would  only  have  been  a 
means  of  conveying  it  to  the  personal  representative  after  his  qualification.  The 
notice  is  not  to  the  family,  but  to  the  personal  representative,  who  stands  in  the 
shoes  of  the  indorser.  Then,  as  a  means  of  conveying  it  to  the  personal  repre- 
sentative, is  not  the  p6st-office  at  least  as  good  a  place  of  deposit  as  the  last  resi- 
dence of  the  deceased  .'"...."  The  reason  for  requiring  notice,  in  the  case 
of  a  living  indorser,  to  be  left  at  his  domicile  or  place  of  business  rather  than  at 
the  post-office,  does  not  apply  to  the  case  of  a  deceased  indorser  who  is  without 
a  representative.  In  the  former  case  the  law  presumes  that  the  indorser  is  al- 
ways at  his  domicile  or  place  of  business,  or  has  some  person  there  to  attend  to 
his  business ;  and  a  notice  left  there  is  considered  to  be  at  home,  and  as  having 
in  effect  been  personally  served.  In  the  latter  case,  no  such  presumption  can 
be  made.  A  notice  left  at  the  domicile  of  a  deceased  indorser  for  his  representa- 
tive, when  one  qualifies,  is  not  at  home,  but  is  merely  in  transitu,  and  so  is  a 
notice  left  at  the  post-office  for  such  representative.  If  notice  given  through 
the  post-office  would  be  just  as  effectual  as  notice  left  at  the  last  residence  of  the 
indorser,  there  is  one  reason  at  least  which  would  make  the  former  preferable, 
and  which  was  mentioned  in  the  argument  of  the  counsel  for  the  defendant  ia 
error  ;  and  that  is,  the  family  of  the  deceased  at  the  time  of  the  protest  might  be 
in  a  state  of  deep  affliction  (occasioned  by  his  recent  death),  when  it  would  be 
painful  both  to  them  and  the  notary  for  him  to  have  to  visit  them  on  a  matter  ot 
business." 

"^  Shaylor  v.  Mix,  4  Allen,  351  ;  Farmers'  Bank  v.  Butler,  3  Litt.,  498;  Curtis 
V.  State  Bank,  6  Black.,  312;  Brindley  v.  Barr,  3  Harr.  (Del.),  419;  Gist  v.  Ly- 
brand,  3  Ohio,  307  ;  Louisiana  State  Bank  v.  Rowell,  18  Mart.  (La.),  506  BeU 
V.  Hagerstown  Bank,  7  Gill,  216. 


§   IOI3.        NOTICE  TO  PARTY  RESIDING  IN  SAME  PLACE.  6; 

fice  at  which  it  was  not  shown  that  he  did  not  receive  his 
mail* 

§  1013.  Effect  of  usage. — The  usage  of  a  bank  to  de- 
posit notice  in  the  post-office,  it  has  been  held,  would 
be  binding  upon  those  dealing  with  it.^  But  to  be  effect- 
ual such  usage  should  be  proved  with  certainty  and  clear- 
ness.^ The  true  rule  is  implied  by  the  decision  of  the 
Supreme  Court  hereinbefore  quoted.*  To  be  binding,  the 
usage  to  employ  the  post-office  to  notify  a  party  of  the 
same  place,  must  be  clear,  definite,  and  well  known  ;  and 
when  this  is  the  case  the  postal  service  should  be  deemed 
as  appropriate  a  method  of  transmission  as  any  other.^ 

§  1014.  As  to  who  are  to  be  regarded  as  of  the  same 
place. — According  to  one  class  of  cases  all  persons  are  to  be 
regarded  as  of  the  same  place  who  receive  their  mails 
through  the  same  post-office  ;  and  although  the  party  en- 
titled to  notice  may  in  fact  have  his  residence  several  miles 
distant  in  the  country,  those  cases  do  not  admit  the  post- 
office  in  the  city  or  town  where  he  gets  his  mail  matter,  and 
where  the  holder  is  to  be  used  as  a  means  of  communicat- 
ing notice.  They  base  the  decision  upon  the  doctrine  that 
the  mail  is  to  be  used  as  a  means  of  transmission  only,  and 
not  as  a  place  of  deposit.^ 

Thus,  in  Tennessee,  it  was  held  that  where  notice  of  pro- 
test in  Nashville,  where  the  note  was  payable,  was  mailed 


'  Palon  V.  Lent,  4  Diier,  231. 

*  Gindrat  v.  Mechanics'  Bank,  7  Ala.,  324 ;  Chicopee  Bank  v.  Eager,  9  Mete, 
583  ;  I  American  Lead.  Cas.,  403. 

^  Thorn  v.  Rice,  15  Me.,  263.  *  'iztante,  §  1007. 

'  Bowling  V,  Harrison,  6  Howard,  248  ;  Carolina  N.  B.  v.  Wallace,  13  S.  C, 
347- 

°In  Shelburne  Falls  National  Bank  v.  Townsley,  102  Mass.,  177,  it  is  said  . 
"  The  post-office  is  not  a  place  of  deposit  for  notice  to  indorsers,  except  where 
the  notice  is  to  be  transmitted  by  mail  to  another  office."  Farmers'  Bank  v. 
Battle,  4  Humph.,  86.  See  also  Eagle  Bank  v.  Hathaway,  5  Mete,  212  ;  Ran- 
som  V.  Mack,  2  Hill,  587;  Ireland  v.  Kip,  10  Johns,  490;  11  Johns,  231; 
Louisiana  State  Bank  v.  Rowell,  6  Mart.,  506;  Barker  v.  Hall,  Mart.  &  Yerg., 
183  ;  Patrick  v.  Beazley,  6  How.  (Miss.),  609;  ForbeS  v.  Omaha  N.  B.,  10  Nelx, 
338. 


68  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IOI5. 

there  to  the  indorser,  who  resided  seven  and  a  half  miles 
distant,  was  not  sufficient,  although  he  transacted  his  busi- 
ness at  Nashville  and  received  his  mails  there.^  So  in  New 
York,  where  the  indorser  resided  three  or  four  miles  from 
the  post-office,  and  beyond  the  ordinary  range  of  letter- 
carriers,  but  in  the  same  city,  and  received  his  letters  at  the 
same  office  where  notice  was  deposited,  the  same  doctrine 
was  announced,  though  the  case  did  not  present  the  ques- 
tion as  to  an  indorser  actually  residing  beyond  the  city 
limits  in  the  country.^  And  so  in  Nebraska,  where  in 
dorser  resided  about  a  mile  outside  of  the  city  of  Omaha, 
where  the  paper  was  payable  at  a  bank  and  received  his 
letters  at  the  Omaha  post-office,  which  was  the  nearest  to 
his  residence,  but  had  no  place  of  business  in  the  city, 
notice  addressed  to  him  by  mail  to  Omaha  was  deemed  in- 
sufficient.^ 

§  1 01 5.  But  where  the  party  has  no  regular  place  of 
business  in  the  city  or  town  where  the  holder  resides  or  the 
instrument  is  payable,  and  resides  some  distance  in  the 
country,  but  receives  his  mails  in  the  city  or  town,  the 
mere  fact  that  he  would  get  the  letter  out  of  the  same 
office  it  was  put  in,  instead  of  a  distant  one,  should  not 
vitiate  the  method  of  communication,  every  reason  of  con- 
venience and  certainty  which  apply  in  one  case  applying 
with  equal  force  in  the  other.  To  hold  otherwise  would 
require  the  holder  to  give  personal  notice  to  an  indorser 
who  did  not  reside  in  the  same  place  as  himself,  or  to  send 
it  by  mail  to  a  post-office  where  the  indorser  did  not  usually 
receive  his  letters. 

The  Supreme  Court  of  the  United  States  has  adopted 
this  view  in  preference  to  the  more  exacting  view  of  the 
authorities  referred  to  ;  and  has  held  that  where  the  plain- 
tiff bank  at  which  the  note  was  payable  was  located  in 

'  Barker  V.  Hall,  Mart.  &  Yerg.,  183. 

*  Ireland  v.  Kip,  10  Johns,  490;  11  Johns,  231  ;  Edwards  on  Bills,  602. 

'Forbes  v.  Omaha  N.  B.,  10  Neb.,  338. 


§   IOI5.        NOTICE  TO  PARTY  RESIDING  IN  SAME  PLACE.  69 

Georgetown,  and  the  indorser,  when  the  note  fell  due,  re- 
sided two  or  three  miles  distant  in  the  country,  having  re- 
moved after  it  was  made  from  Washington  city,  but  re- 
ceived his  letters  through  the  Georgetown  post-office,  notice 
deposited  in  the  Georgetown  post-office,  addressed  to  him 
at  that  place,  was  sufficient.^ 

'  In  the  case  of  Bank  of  Columbia  v.  Lawrence,  I  Pet.,  578,  the  court  (Thomp- 
son. J.)  said  :  "  The  indorser,  who  had  removed  to  the  country  from  Washing- 
ton, as  stated  in  the  text,  continued  the  owner  of  the  house  in  Washington  in 
which  he  had  formerly  lived,  and  which  was  in  the  occupation  of  his  sister-in- 
law.  He  was  accustomed  to  go  there  two  or  three  times  a  week;  and  it  appeared 
that  he  was  employed  in  winding  up  his  business  there,  and  settling  accounts  ; 
that  his  books  were  kept  there;  and  his  bank  notices  were  sometimes  left  there; 
and  also  that  his  newspapers  and  foreign  letters  were  sent  there  for  him.  His 
coming  to  Washington  and  employing  himself  as  stated,  was  generally  known  to 
those  having  business  with  him."  It  was  contended  that  notice  should  have  been 
sent  to  Washington  by  the  plaintiff's  bank  located  at  Georgetown  ;  but  the  court 
thought  the  method  adopted  the  proper  one  ;  and  Thompson,  J.,  said  :  .  .  .  , 
"  If  it  should  be  admitted  that  the  defendant  had  what  is  usually  called  a  place 
of  business  in  the  city  of  Washington,  and  that  notice  served  there  would  have 
been  good,  it  by  no  means  follows  that  service  at  his  place  of  residence  in  a  dif- 
ferent place  would  not  be  equally  good.  Parties  may  be,  and  frequently  are,  so 
situated  that  notice  may  well  be  given  at  either  of  several  places.  But  the  evi- 
dence does  not  show  that  the  defendant  had  a  place  of  business  in  the  city  of 
Washington,  according  to  the  usual  commercial  understanding  of  a  place  of  busi- 
ness. There  was  no  public  notoriety  of  any  description  given  to  it  as  such.  No 
open  or  public  business  carried  on,  but  merely  occasional  employment  there  two 
or  three  times  a  week  in  a  house  occupied  by  another  person,  and  the  defendant 
only  engaged  in  settling  up  his  old  business.  In  this  view  of  the  case,  the  in- 
quiry is  narrowed  down  to  the  single  point,  whether  notice  through  the  post-office 
at  Georgetown  was  good,  the  defendant  residing  in  the  country  two  or  three 
miles  distant  from  that  place,  in  the  county  of  Alexandria.  The  general  rule  is 
that  the  party  whose  duty  it  is  to  give  notice  in  such  cases  is  bound  to  use  due 
diligence  in  communicating  such  notice.  But  it  is  not  required  of  him  to  see 
that  the  notice  is  brought  home  to  the  party.  He  may  employ  the  usual  and 
ordinary  mode  of  conveyance  ;  and,  whether  the  notice  reaches  the  party  or  not, 
the  holder  has  done  all  that  the  law  requires  of  him.  It  seems  at  this  day  to  be 
well  settled,  that  when  the  facts  are  ascertained  and  undisputed,  what  shall  con- 
stitute due  diligence  is  a  question  of  law.  This  is  certainly  best  calculated  to 
have  fixed  or  uniform  rules  on  the  subject,  and  is  highly  important  for  the  safety 
of  holders  of  commercial  paper.  And  these  rules  ought  to  be  reasonable  and 
founded  in  general  convenience,  and  with  a  view  to  clog  as  little  as  possible,  con- 
sistently with  the  safety  of  parties,  the  circulation  of  paper  of  this  description ; 
and  the  rules  which  have  been  settled  on  this  subject  have  had  in  view  these 
objects.  Thus,  when  a  party  entitled  to  notice  has  in  the  same  city  or  town  a 
dwelling-house  and  counting-house  or  place  of  business  within  the  compact  part 
of  such  city  or  town,  a  notice  delivered  at  either  place  is  sufficient;  and  if  his 
dwelling  and  place  of  business  be  within  the  district  of  a  letter-carrier,  a  letter 
containing  such  notice,  addressed  to  the  party  and  left  at  the  post-office,  would 
also  be  sufficient.  All  these  are  usual  and  ordinary  modes  of"  communication, 
and  such  as  afford  reasonable  ground  for  presuming  that  the  notice  will  be 
brought  home  to  the  party  without  unreasonable  delay.  So  when  the  holder  and 
indorser  live  in  different  post  towns,  notice  sent  by  the  mail  is  sufficient,  whether 
it  reaches  the  indorser  or  not.     And  this  for  the  same  reason,  that  the  mail 


70  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  IOI5. 

The  opposite  view  is  severe  and  technical,  and  does  not 
rest,  that  we  perceive,  upon  any  principle  of  convenience, 
utility,  or  justice.     And  the  authorities,  which  are  numerous. 


being  the  usual  channel  of  communication,  notice  sent  by  it  is  evidence  of  due 
diligence.  And  for  the  sake  of  general  convenience,  it  has  been  found  neces- 
sary to  enlarge  this  rule.  And  it  is  accordingly  held,  that  when  the  party  to  be 
affected  by  the  notice  resided  in  a  different  place  from  the  holder,  the  notice 
may  be  sent  by  the  mail  to  the  post-office  nearest  to  the  party  entitled  to  such 
notice.  It  has  not  been  thought  advisable,  nor  is  it  believed  that  it  would  com- 
port with  practical  convenience,  to  fix  any  precise  distance  from  the  post-office 
within  which  the  party  must  reside  in  order  to  make  this  a  good  service  of  the 
nolice.  Nor  would  we  be  understood  as  laying  it  down  as  a  universal  rule,  that 
the  notice  must  be  sent  to  the  post-office  nearest  to  the  residence  of  the  party 
to  whom  it  is  addressed.  If  he  was  in  the  habit  of  receiving  his  letters  through 
a  more  distant  post-office,  and  that  circumstance  was  known  to  the  holder  or 
party  giving  the  notice,  that  might  be  the  more  proper  channel  of  communica- 
tion, because  he  would  be  most  likely  to  receive  it  in  that  way  ;  and  it  would  be 
the  ordinary  mode  of  communicating  information  to  him,  and,  therefore,  evi- 
dence of  due  diligence.  In  cases  of  this  description,  where  notice  is  sent  by 
mail  to  a  party  living  in  the  country,  it  is  distance  alone,  or  the  usual  course  of 
receiving  letters,  which  must  determine  sufficiency  of  the  notice.  The  residence 
of  the  defendant,  therefore,  being  in  the  county  of  Alexandria,  can  not  affect 
the  question.  It  was  in  proof  that  the  post-office  in  Georgetown  was  the  one 
nearest  his  residence,  and  only  two  or  three  miles  distant,  and  through  which 
he  usually  received  his  letters.  The  letter  containing  the  notice,  it  is  true,  was 
directed  to  him  at  Georgetown.  But  there  is  nothing  showing  that  this  occa- 
sioned any  mistake  or  misapprehension  with  respect  to  the  person  intended,  or 
any  delay  in  receiving  the  notice.  And  as  the  letter  was  there  to  be  delivered 
to  the  defendant,  and  not  to  be  fonvarded  to  any  other  post-office,  the  address 
was  unimportant,  and  could  mislead  no  one.  No  cases  have  fallen  under  the 
notice  of  the  court  which  have  suggested  any  limits  to  the  distance  from  the 
post-office  within  which  a  party  must  reside  in  order  to  make  the  service  of  the 
notice  in  this  manner  good.  Cases,  however,  have  occurred  where  the  distance 
was  much  greater  than  in  the  one  now  before  the  court,  and  the  notice  held 
sufficient.  16  Johns,  218.  In  cases  where  the  party  entitled  to  notice  resides 
in  the  country,  unless  notice  sent  by  mail  is  sufficient,  a  special  messenger  must 
be  employed  for  the  purpose  of  serving  it.  And  we  think  that  the  present  case 
is  clearly  one  which  does  not  impose  upon  the  plaintiffs  such  duty.  We  do  not 
mean  to  say  that  no  such  cases  can  arise,  but  they  will  seldom,  if  ever,  occur  ; 
and,  at  all  events,  such  a  course  ought  not  to  be  required  of  a  holder,  except 
under  very  special  circurr.stances.  Somb  countenance  has  lately  been  given  to 
this  practice  in  England  in  extraordinary  cases,  by  allov/ing  the  holder  to  recover 
of  the  indorser  the  expense  of  serving  notice  by  a  special  messenger.  The  case 
of  Pearson  v.  Crallan,  2  Smith,  404 ;  Chitty,  222,  n.,  is  one  of  this  description. 
But  in  that  case,  the  court  did  not  say  that  it  was  necessary  to  send  a  special 
messenger ;  and  it  was  left  to  the  jury  to  decide  whether  it  was  done  wantonly 
or  not.  The  holder  is  not  bound  to  use  the  mail  for  the  purpose  of  sending 
notice.  He  may  employ  a  special  messenger  if  he  pleases  ;  but  no  case  has  been 
found  where  the  English  courts  have  directly  decided  that  he  must.  To  compel 
the  holder  to  incur  such  expense  would  be  unreasonable,  and  the  policy  of 
adopting  a  rule  that  will  throw  such  an  increased  charge  upon  commercial  paper 
on  the  party  bound  to  pay,  is  at  least  very  questionable.  We  are,  accordingly, 
of  opinion  that  the  notice  of  non-payment  was  duly  served  upon  the  defendant, 
and  that  the  court  erred  in  refusing  so  to  instruct  the  jury.  Judgment  reversed 
and  venire  facias  de  novo  awarded." 


§   1 015.        NOTICE  TO  PARTY  RESIDING  IN  SAME  PLACE.  7 1 

concurring  in  the  opinion  expressed  by  the  United  States 
Supreme  Court,  commend  themselves  to  approbation.*  It  has 
been  justly  said  that  the  corporate  limits  of  the  city  define 
the  limits  as  to  the  reqirement  of  personal  notice.^ 

Where  a  prior  indorser  resided  in  Frankfort,  Ky.,  and 
the  bill  was  there  protested  and  notice  sent  to  the  holder  at 
Shelbyville,  and  then  transmitted  to  the  indorser  at  Frank- 
fort, by  mail,  it  was  held  insufficient  under  the  Kentucky 
statute.^ 


'  Walker  v.  Bank  of  Augusta,  3  Kel.,  486 ;  Bank  United  States  v.  Norwood, 
I  Harr.  &  J.,  423;  Gist  v.  Lybrand,  3  Oiiio,  307  ;  Carson  v.  Bank  of  Alabama, 
4  Ala.,  148  ;  Jones  v.  Lewis,  g  Watts  &  S.,  14;  Timmsv.  Delisle,  5  Blackf.,  447  : 
Bell  V.  State  Bank,  7  Blackf.,  457  ;  Foster  v.  Smeath,  2  Rich.,  338  ;  Walker  v. 
Bank  of  Missouri,  8  Mo.,  704;  Barrett  v.  Evans,  28  Mo.,  323;  Bondurant  v. 
Everett,  i  Mete.  (Ky.),  658,  decided  in  1858  (overruling  Farmers' Bank  v.  Butler, 
3  Litt..  498,  decided  in  1823).  In  this  case  the  bill  was  payable  at  Mount  Ster- 
ling, Ky.,  and  the  drawer  lived  two  or  three  miles  from  that  place.  It  was  pro- 
tested, and  notices  deposited  in  the  post-office  at  Mount  Sterling,  addressed  to 
the  indorser  at  Cincinnati  and  to  the  drawer  at  Mount  Sterling.  The  court 
held  it  sufficient,  and,  overruling  the  case  above  referred  to,  said  :  "  A  great 
change  has  occurred  in  the  business  and  condition  of  the  commercial  world 
since  1823,  when  the  case  in  '  Littel '  was  decided.  Facilities  for  the  transmis- 
sion of  intelligence  from  point  to  point  have  been  increased  ;  new  and  more 
convenient  postal  arrangements  have  been  effected,  and,  in  consequence  thereof, 
conveyance  of  letters  by  private  hand  has  been  almost  abandoned.  Persons 
resident  in  the  same  town  or  city  frequently  communicate  with  each  other 
through  the  post-office  in  such  place,  because  it  is  now  the  legal  duty  of  post- 
masters to  deliver  such  letters,  which  was  not  the  case  in  1823.  Almost  every 
person  residing  near  a  post-office  resorts  there  regularly  for  his  letters,  as  is 
shown  to  have  been  the  case  with  Bondurant  here.  And  it  is  rendered  reasona- 
bly certain  that  he  must  have  received  the  notice  deposited  in  the  office  by  the 
notary  at  an  earlier  day  than  he  could  have  obtained  it  if  sent  to  Cincinnati  and 
returned." 

^  Barrett  v.  Evans,  28  Mo.,  323. 

'Todd  V.  Edwards,  7  Bush.  (Ky.),  93  ;  Peters,  J. :  "As  to  the  manner  ot 
giving  notice  of  the  dishonor  of  a  bill,  that  subject  is  in  many  States  of  the 
Union  regulated  by  special  statute ;  but  where  there  is  no  statutory  regulation 
the  rule  seems  to  be  that  where  the  party  to  be  charged  resides  in  the  same  city 
or  town  where  the  bill  is  to  be  presented  and  demand  made,  notice  must  be  per- 
sonal, or  left  at  his  dwelling-house  or  place  of  business.  Edwards  on  Bills  and 
Notes,  456.  By  an  act  of  the  legislature  in  this  State,  approved  January  16, 
1864  (Myer's  Supplement,  354),  it  is  made  the  duty  of  notaries  public,  upon  pro- 
testing bills  of  exchange,  etc.,  to  give  or  send  notice  of  the  dishonor  of  such 
paper  to  such  parties  thereto  as  are  required  by  law  to  be  notified,  to  fix  their 
liability  on  such  paper ;  and  when  the  residence  of  any  such  parties  is  unknown 
to  the  notary  public,  he  shall  send  the  notices  to  the  holder  of  such  paper,  and 
he  shall  state  in  hi?,  protest  the  names  of  the  parties  to  whom  he  sent  or  gave 
such  notices,  and  the  time  and  the  manner  of  giving  the  same,  and  such  statement 
in  such  protest  shall  be  prima  facie  evidence  that  such  notices  were  given  ot 
sent  as  therein  stated  by  such  notary." 


72  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  IO16. 

§  1 01 6,  hi  the  second  place,  how  and  where  7iotice  must 
be  personally  served. — If  the  notice  is  to  be  given  to  a  party 
to  whom  it  is  not  necessary  or  allowable  to  transmit  it  by 
mail,  it  should  be  sent  to  or  given  at  his  place  of  domicile 
or  place  of  business,  and  delivery  of  notice  at  either  will  be 
sufficient,^  even  when  they  are  in  different  towns.^  When 
the  party  keeps  a  counting-room  or  other  business  place, 
and  has  a  private  residence  also,  it  is  usual  to  send  notice  to 
the  place  of  business  rather  than  to  the  dwelling,  and  if 
notice  is  so  sent  to  his  place  of  business  during  hours  when 
he  or  some  of  his  people  might  be  reasonably  expected 
there,  it  is  sufficient ;  and  if  no  one  be  there  in  the  usual 
hours,  and  in  the  ordinary  course  of  business,  it  is  not  nec- 
essary to  leave  a  written  notice,  or  to  send  to  the  house 
where  he  lives,  or  to  make  farther  search  for  him,  or  in- 
quiries about  him,  it  being  considered  that  he  hss  dispensed 
with  notice.^  This  has  been  doubted,  and  while  the  law  is 
to  this  effect,  in  our  judgment  it  might  be  safer  to  send 
the  notice  to  the  residence  when  no  one  is  found  at  the 
place  of  business.^  In  a  recent  Alabama  case  the  views  of 
the  text  have  been  approved,  and  the  doubts  expressed 
were  regarded  as  unfounded.^ 

If  the  indorser  holds  out  by  his  course  of  conduct  in  the 
transaction  that  a  certain  place  is  his  place  of  business,  it  is 
sufficient  if  notice  be  sent  there.® 

'  Story  on  Bills,  §  297  ;  3  Kent  Com.,  106 ;  I  Parsons  N.  &  B.,  488,  489 ;  Ire- 
land V.  Kip,  10  Johns,  491  ;  Van  Vechten  v.  Pruyn,  3  Kern,  549 ;  Bank  of 
Columbia  v.  Lawrence,  i  Pet.,  578  ;  Williams  v.  Bank  U.  S.,  2  Pet.,  96 ;  Sander- 
son V.  Reinstadler,  31  Mo.,  483;  Nevins  v.  Bank,  10  Mich.,  547  ;  Grinman  v. 
Walker,  9  Iowa.,  426. 

"  Bank  of  Geneva  v.  Howlett,  4  Wend.,  328  ;  Donner  v.  Remer,  21  Wend,  10. 

'  Bayley  on  Bills,  p.  176;  Crosse  v.  Smith,  i  Maule  &  S.,  545  ;  Goldsmith  v. 
Blane,  i  Maule  &  S.,  554;  Bancroft  v.  Hale,  Holt,  476;  Allen  v.  Edmundson, 
Car.  &  K.,  547  ;  Story  on  Bills,  §  300  ;  Byles  on  Bills  (Sharswood's  ed)  [*273j 
423;  Lord  V.  Appleton,  15  Me.,  579;  State  Bank  v.  Hennen,  16  Mart.  (La.), 
226;  Thomson  on  Bills,  337  ;  post,  §1119. 

*  I  Parsons  N.  &  B.,  488. 

'John  V.  City  National  Bank,  62  Ala.,  529.  See  also  John  v.  Selma  Bank,  57 
Ala.,  96. 

•Berridge  v.  Fitzgerald,  L.  R.,  4  Q.  B.,  641  (1869). 


§   TO  I  7-        NOTICE  TO  PARTY  RESIDING  IN  SAME  PLACE.  J^ 

When  the  party  has  two  or  more  places  of  business  in 
the  same  town,  the  holder  may  send  notice  to  either.^ 

§  1 017.  Notice  left  with  a  clerk,  or  person  in  charge^ 
at  the  party  s  place  of  business  i?i  his  absentee,  or  at  his 
place  of  business,  without  proof  as  to  the  person  with  whom 
it  was  left,^  is  sufficient,  and  proof  that  such  person  was 
not  the  party's  agent  has  been  held  irrelevant,  notice  being 
left  at  the  right  place."  So  leaving  it  with  his  private  sec- 
retary at  his  public  office  is  sufficient.^ 

If  the  party  be  not  found  at  his  dwelling,  it  is  sufficient 
to  leave  notice  with  his  wife,®  or  with  any  other  person  on 
his  premises.''  A  verbal  message  left  at  the  party's  house 
with  his  wife  has  been  held  sufficient,^  and  the  certificate  of 

the   notary,  "  left  at   his  house  at ,"  would  answer 

the  requirements  of  the  law.^ 

§  10 1 8.  What  place  is  deejned  residence  or  place  of  btcsi- 
ness. — A  room  where  a  party  is  accustomed  to  resort,  but 
where  he  carries  on  no  trade  or  employment,  is  not  his 
place  of  business  ;^°  and  it  has  been  held  that  the  fact  that 
the  indorser  occupied  a  room  in  another's  house  for  settling 
up  his  former  business,  and  there  kept  his  books  of  ac- 
count, and  received  his  correspondence,  did  not  constitute 


'  Phillips  V.  Alderson,  5  Humph.,  403  ;  Commercial  Bank  v.  Strong,  28  Vt., 
316. 

'Mercantile  Bank  v.  McCarthy,  7  Mo.,  Ap.,  318;  Edson  v.  Jacobs,  14  La., 
494;  Commercial  Bank  v.  Gove,  15  La.,  113. 

'Bank  of  Louisiana  v.  Mansaker,  15  La.,  115;  Mechanics'  Banking  Associa- 
tion V.  Place,  4  Duer,  212. 

*  Jacobs  V.  Town,  2  La.  Ann.,  964.  '  Merz  v.  Kaiser,  20  La.  Ann.,  377. 
*Blakely  v.  Grant,  6  Mass.,  386;  Fisher  v.  Evans,  5  Bin.,  542. 

'  Cromwell  v.  Hynson,  2  Esp.,  511  ;  Housego  v.  Cowne,  2  M.  &:  W.,  348. 

*  Housego  V.  Cowne,  2  M.  «&  W.,  348,  in  which  Bollana,  B.,  said  :  "  A  person 
not  a  merchant  who  draws  a  bill  of  exchange,  undertakes  to  have  some  one  at 
his  house  to  answer  any  application  that  may  be  made  respecting  it  when  it 
becomes  due." 

*  Adams  v.  Wright,  15  Wis.,  408,  but  it  was  held  in  this  case  that  proof  that 
notice  was  left  with  a  boy  in  the  yard,  who  said  that  he  was  the  indorser's  son, 
and  who  went  toward  the  house,  was  insufficient. 

"  Stephenson  v.  Primrose,  8  Port.  (Ala.),  155. 


74  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IOI9. 

it  his  place  of  business.^  It  will  not  be  sufficient  merely  to 
leave  notice  in  the  building  in  which  the  party  transacts 
business — it  must  be  at  his  very  place  of  business^ — not  to 
leave  it  at  the  store  of  the  son  of  the  indorser — the  latter 
residing  in  the  same  building,  but  having  his  usual  place  of 
business  elsewhere.^  If  the  dwelling  or  chamber  occupied 
by  the  indorser  were  closed,  and  he  had  left  the  place,  it 
would  be  useless  and  unnecessary  to  proceed  further.* 

§  1 01 9.  If  the  party  lodge  at  a  private  boarding-house, 
it  is  to  all  intents  and  purposes  his  dwelling ;  and  if  notice 
be  delivered  there  to  the  proprietor,  or  to  a  servant  of  the 
house,  or  to  a  fellow-boarder  in  the  absence  of  the  party 
himself,  it  is  sufficient.^  If  the  party  lodge  at  a  pubhc 
house,  and  the  notary,  after  inquiry,  learns  that  he  is  not 
in,  it  will  suffice  to  leave  notice  at  his  room,  or  at  the 'door 
of  his  room  ;^  and  it  seems  that  it  will  suffice  to  leave  notice 
for  a  guest  at  a  hotel  with  the  bar-keeper  or  other  attend- 
ant.'^ But  in  all  cases  the  guest  should  be  inquired  for 
first.  If  it  do  not  appear  that  he  was  really  at  the  hotel, 
or  that  the  notary  inquired  for  him,  or  left  notice  with 


*  Bank  of  Columbia  v,  Lawrence,  i  Pet.,  578. 
^  Kleinman  v.  Boernstein,  32  Mo.,  311. 

'  Bank  of  U.  S.  v.  Corcoran,  2  Pet.,  121,  in  which  case  the  court  said  :  "  The 
store  of  the  son  was  as  distinct  and  separate  from  the  father  as  if  they  had  been 
under  different  roofs.  The  former  was  entered  from  the  street,  and  the  latter 
from  an  alley  or  passage  ;  and  it  does  not  appear  that  there  was  any  inside  com- 
munication between  the  two The  service  of  the  note  was  no  more  a 

compliance  with  the  requisition  of  the  law  than  if  it  had  been  delivered  to  the 
son  in  the  street  or  elsewhere,  or  left  at  his  dwelling-house." 

*  Plowe  V.  Bradley,  19  Me.,  35. 

'  Bank  U.  S.  v.  Hatch,  6  Pet.,  250,  in  which  case  the  court  said :  "  This  is  not 
like  the  case  of  a  public  inn,  and  a  delivery  to  a  mere  stranger  who  happens  to 
be  there  z'n  transitu,  and  can  not  be  presumed  to  have  any  knowledge  or  inter- 
course with  the  party.  Boarders  at  the  same  house  may  be  presumed  to  meet 
daily,  and  to  feel  some  interest  in  the  concerns  of  each  other,  and  to  perform 
punctually  such  common  duties  of  life  as  this."  See  also  Stedman  v.  Gooch,  i 
Esp.  R.,  4;  McMurtrie  v.  Jones,  3  Wash.  C.  C,  206  ;  Miles  v.  Hall,  12  Sm.  &  M., 
332. 

*  Howe  V.  Bradley,  19  Me.,  31. 

'  Bradley  v.  Davis,  26  Me.,  45  ;  Dana  v.  Kemble,  19  Pick.,  1 12  ;  Graham  v. 
Sangston,  i  Md.,  59. 


§   I02I.    NOTICE  TO  PARTY  RESIDING  IN  ANOTHER  PLACE.        75 

some  competent  person  for  him,  the  defect  would  be  fatal.^ 
It  would  not  suffice  to  leave  notice  with  another  guest  at  a 
hotel.2 


SECTION   VI. 

MODE   OF   SERVING  NOTICE   WHEN   THE   PARTY  GIVING  AND  THE 
PARTY  TO   RECEIVE   IT   RESIDE   IN   DIFFERENT   PLACES. 

§  1020.  The  usual  mode  of  serving  notice  when  the  par- 
ties reside  in  different  places  is  by  mail.  But  in  some  cases 
a  special  messenger  is  employed.  We  shall  consider  the 
service  by  mail  and  by  messenger  consecutively  :  (i)  How, 
when,  and  whereto  notice  may  be  transmitted  by  mail ;  and 
(2)  When  special  messenger  may  be  employed. 

§  102 1.  In  the  Jirst place,  how,  when,  and  whereto  notice 
may  be  transmitted  by  mail. — W^hen  the  parties  reside  in 
different  places,  or  the  party  entitled  to  notice  resides  at  a 
place  other  than  the  particular  place  of  which  the  bill  or 
note  is  payable,  it  will,  in  general,  be  sufficient  for  the 
holder  to  put  notice  of  dishonor  in  the  post-office,  ad- 
dressed to  the  party  entitled  thereto,  within  the  proper 
time.  This  done,  his  duty  is  discharged,  and  it  is  not  nec- 
essary that  the  notice  should  be  received — the  holder  not 
being  responsible  for  any  miscarriage  of  the  mail.^  What 
constitutes  due  diligence  in  seeking  the  party  entitled  to 
demand  and  notice,  or  his  postal  address,  is  elsewhere  con- 
sidered ;  *  as  is  also  the  case  where  two  parties  entitled  to 
notice  reside  in  the  same  place  and  the  holder  resides  in  a 
different  place.^ 

'  Ashley  v.  Gunton,  15  Ark.,  41 5.  '  Bank  U.  S.  v.  Hatch,  6  Pet,,  250. 

'  Farmers'  Bank  v.  Gurnell,  26  Grat.,  137  ;  Bussard  v.  Levering,  6  Wheat.,  102  ; 
Lindenberger  v.  Beall,  6  Wheat.,  104  ;  Munn  v.  Baldwin,  6  Mass.,  316;  Cabot 
Bank  v.  Warner,  10  Allen,  524 ;  Shelburne  National  Falls  Bank  v.  Townsley,  ic3 
Mass.,  177  ;  Miller  v.  Hackley,  5  Johns,  375  ;  Ellis  v.  Commercial  Bank,  7  How. 
(Miss.),  294;  Friend  v.  Wilkinson,  9  Grat.,  31;  Sanderson  v.  Judge,  2  H. 
Black.  R.,  509;  Woodcock  v.  Houldsworth,  16  M.  &  W.,  126;  Chitty  on  Bills, 
658  ;  Story  Prom.  Notes,  §  328 ;  Story  on  Bills,  §  300  ;  i  Parsons  N.  &  B.,  478 
Byles  on  Bills  (Sharswood's  ed.)  [^270],  41S  ;  Thomson  on  Bills,  338;  Parker 
V.  Gordon,  7  East.,  385  ;  Kuth  v.  Weston,  3  Esp.,  54  ;  stt  post,  §  1068. 

*  See  §§  1 1 14,  1 1 1 5  et  seq.  *  See  ante,  §  1005^. 


']6  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §    I022. 

§  \02\a.  The  notice  must  be  properly  addressed  to  the 
party  at  a  distance  entitled  to  receive  it ;  and  if  it  be  di- 
rected to  "  Darcy  "  as  indorser,  instead  of  "  Davey,"  the 
correct  name,  it  is  negligence  which  discharges  him.^  A 
bank  holding  a  note  with  the  indorser's  name  ambiguously 
written  should  inform  the  notary  who  the  indorser  is.^ 

§  1 02  2.  To  what  post-office  7iotice  skotild  be  directed  when 
sent  by  mail. — The  notice  should  be  directed  to  the  post- 
office  at,  or  nearest  to,  the  party's  place  of  residence,  unless 
he  is  accustomed  to  receive  his  letters  atanother  post-office, 
in  which  case  it  should  be  directed  thereto.*  If  he  live  at 
one  place  and  has  his  place  of  business  at  another,  notice 
may  be  sent  to  either;*  and  the  place  where  the  party 
actually  resorts  to  for  his  letters  is  always  the  appropriate 
one,  when  known,  for  notice  to  be  addressed  to,  whether 
or  not  the  party  lives  there  or  has  there  his  place  of  busi- 
ness.^ If  the  place  be  that  of  his  actual  residence  at  the 
time,  it  need  not  be  his  domicile.^ 

§  1023.  Memorandum  of  address. — The  indorser  has  a 
right  to  direct  to  what  postal  address,  or  to  what  place, 
notice  shall  be  sent,  and  it  will  always  suffice  to  pursue  his 
direction  although  he  may  have  a  place  of  residence  or 
business  elsewhere.'''  Sometimes  the  place  to  which  he  de- 
sires notice  to  be  sent  is  designated  by  memorandum  on 
the  instrument,  as,  for  example,  by  writing  the  words  "214 
E.  1 8th  Street,"^  or  by  adding  his  address  to  his  signature, 

^Darey  v.  Jones,  13  Vroom,  28.  ^  Ibid. 

'  Bank  of  Columbia  v.  Lawrence,  i  Pet.,  582  ;  Bank  of  Geneva  v.  Hewlett,  4 
Wend.,  328  ;  Mercer  v.  Lancaster,  5  Barn,  160 ;  Jones  v.  Lewis,  8  W.  &  S.,  14. 

*  Bank  U.  S.  v.  Carneal,  2  Pet.,  549;  Williams  v.  Bank  U.  S.,  2  Pet.,  96; 
Cuyler  v.  Nellis,  4  Wend.,  398;  Reid  v.  Payne,  16  Johns,  218;  Montgomery 
Co.  Bank  v.  Marsh,  3  Seld.,  481. 

*  See  ante,  note  3,  p.  75  ;  i  Parsons  N.  &  B.,  498,  and  cases  cited. 
'  Young  V.  Durgin,  1 5  Gray,  264. 

^  Eastern  Bank  v.  Brown,  17  Me.,  356  ;  Crowley  v.  Barry,  4  Gill,  194  ;  Bell  v. 
Hagerstown  Bank,  7  Gill,  216  ;  Bank  of  Columbia  v.  Magruder,  6  Har.  &  J.,  172  ; 
Carter  t;.  Union  Bank,  7  Humph.,  548  ;  Tyson  v.  Oliver,  43  Ala.,  455  ;  Dicken 
V.  Hall,  87  Penn.  St.,  379. 

"  Bartlett  v.  Robinson,  39  N.  Y.,  187  ;  see  also  Davis  v.  Bank  of  Tennessee,  4 
Sneed,  390. 


^    1025,    NOTICE  TO  PARTY  RESIDING  IN  ANOTHER  PLACE.        ']'] 

as,  for  instance,  "Memphis,  Tenn.,"^  or  "Walnut  Bend, 
Arkansas,"^  or  "13  Chambers  Street,  New  York,"^  01 
"W.  Moors,  Manchester,'"*  or  "T.  M.  Barron,  London,"' 
and  he  thereby  impliedly  directs  notice  to  be  sent  to  the 
place  designated.^ 

§  1024.  It  is  not  sufficient  to  direct  notice  generally  to 
a  parish,  county,  or  township  within  which  there  are  a 
number  of  post-offices ;  '^  but  it  has  been  held  that  it  was 
sufficient  to  direct  notice  to  the  party  at  the  shire  town  of 
the  county,  although  there  was  a  post-office  nearer  to  him 
which  he  was  in  the  habit  of  using.^  Where  there  are  two 
post-offices  in  the  town  where  the  party  resides,  notice  may 
be  directed  to  the  town  generally,  unless  the  holder  knows, 
or  should  know,  that  he  receives  his  letters  at  one  of  them, 
in  which  case  notice  should  be  directed  there.^  It  has  been 
held  that  in  London  delivery  of  a  letter  to  a  bellman  in  the 
street  is  not  equivalent  to  a  deposit  in  the  post-office, ^°  but 
this  was  doubted." 

§  1025.  If  the  party  live  hi  07ie  place  and  have  his  place 
of  business  at  another,  the  holder  of  a  bill  or  note  protested 

'  Carter  v.  Union  Bank,  7  Humph.,  548. 

*  Peters  v.  Hobbs,  25  Ark.,  67.  '  Morris  v.  Husson,  4  Sandf.,  93. 

*  Mann  v.  Moors,  Ryan  &  M.,  149.  °  Burmester  v.  Barron,  17  Q.  B.,  828. 
'  See  also  Baker  v.  Morris,  25  Barb.,  138;  Davis  v.  Bank  of  Tennessee,  4 

Sneed,  390  ;  Farmers'  Bank  v.  Battle,  4  Humph.,  86. 

^  Beenel  v.  Toumillon,  6  Rob.  (La.),  500. 

'  Weakly  v.  Bell,  9  Watts,  273  ;  Story  on  Bills,  §  297  ;  i  Parsons  N.  &  B., 
497.  In  Bank  U.  S.  v.  Lane,  3  Hawks,  453,  the  notice  was  sent  to  the  shire 
town  to  the  indorser,  who  was  the  high  sheriff  then  in  attendance  at  court ;  and 
it  was  held  sufficient,  although  neither  his  residence  nor  post-office  was  at  that 
place. 

°  Morton  v.  Westcott,  8  Cush.,  425  ;  Cabot  Bank  v.  Russell,  4  Gray,  167 
Burlingame  v.  Foster,  128  Mass.,  125  ;  Bank  of  Manchester  v.  Slason,  13  Vt., 
334  ;  Downer  v.  Remer,  21  Wend.,  10.  In  Saco  National  Bank  v.  Sanborn,  63 
Me.,  340  (1873),  the  indorser  lived  at  the  time  he  became  indorsor  at  the  town 
of  Baldwin.  There  was  no  post-office  of  that  name,  but  there  weie  three  post- 
offices  in  the  town  named  North,  East,  and  West  Baldwin,  respectively.  Notice 
addressed  to  Baldwin  was  deemed  sufficient — the  indorser  having  responded  to 
a  previous  notice  so  sent  without  intimation  that  it  was  not  properly  directed. 

'"  Hawkins  v.  Rutt,  Peake's  N.  P.  C,  186. 

"  In  Skilbeck  v.  Carbett,  14  L.  J.  Q.  B.,  339 ;  7  Q.  B.,  846  (53  E.  C.  L.  R.), 
Lord  Denman  says:  "A  bellman  is  an  ambulatory  post-office.''  See  Byles  on 
Bills,  [*27o],  419. 


78  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO26. 

at  a  third  place  should  send  notice  to  the  place  at  which 
he  usually  receives  his  letters  ;  ^  but  if  the  holder  does  not 
know  that  he  usually  receives  at  the  place  where  he  is  en- 
gaged in  business,  it  will  be  sufficient  to  send  it  to  the  place 
where  he  lives.^  But  when  a  bill  or  note  is  protested  at  the 
place  where  the  party  entitled  to  notice  has  a  place  of  resi- 
dence, notice  should  not  be  sent  away  from  there  to  another 
place  where  he  transacts  business.^  In  New  York,  the  in- 
dorser  of  a  note,  who  had  a  known  residence  in  the  village 
where  the  note  was  protested,  and  who  was  usually  at  home 
three  days  in  the  week,  was  held  to  be  discharged,  the  notice 
having  been  sent  by  mail  to  another  city,  where  his  place  of 
business  was,  where  he  spent  four  days  of  the  week,  and  re- 
ceived his  letters  and  papers,  there  being  no  evidence  that 
the  notice  actually  reached  him  in  due  time,  so  as  to  render 
it  equivalent  to  personal  service.* 

When  the  party  has  his  residence  part  of  the  year  at  one 
place  and  part  at  another,  notice  may  be  sent  to  either,^  at 
least  when  the  holder  does  not  know,  or  is  not  to  be  charged 
with  knowledge  that  he  is  accustomed  to  receive  his  letters 
at  one  of  them.^  But  in  the  case  of  a  temporary  sojourn,  as 
for  the  summer  at  a  watering  place,  country  place,  or  village, 
the  notice  should  be  sent  to  the  place  of  the  party's  perma- 
nent residence."" 

§  1026.  When  a  party  about  to  be  absent  directs  notice 
to  be  sent  to  him  at  a  place  distant  from  his  residence,  so 
that  its  transmission  thither,  and  thence  to  the  prior  parties, 
will  occupy  more  time  than  if  the  notice  had  passed  through 

'  Montgomery  Co.  Bank  v.  Marsh,  3  Seld.,  481  ;  Reed  v.  Payne,  16  Johns, 
218  ;  Bank  of  Geneva  v.  Howlett,  4  Wend.,  328  ;  Van  Vechten  v.  Pruyn,  3 
Kern,  549. 

"  Seneca  Co.  Bank  v.  Neass,  2  Corns.,  442  ;  5  Denio,  329. 

*  Story  on  Bills  (Bennett's  ed.),  §  297. 

*  Van  Vechten  v,  Pruyn,  3  Kern,  549,  Comstock,  J. 

*  Exchange,  etc.,  v.  Boyce,  3  Rob.  (La.),  307. 

*  The  notice  should  be  sent  where  it  is  most  likely  to  reach  the  party,  as  said 
in  Chouteau  v.  Webster,  6  Mete,  i. 

'  Runyon  v.  Mountfort,  Busbee,  371 ;  Stewart  v.  Eden,  2  Caines,  121. 


§    1027.    NOTICE  TO  TARTY  RESIDING  IN  ANOTHER  PLACE.       79 

the  ordinary  place  of  residence,  a  notice  to  him  at  the  sub- 
stituted and  more  distant  place  will  not  only  be  a  good 
notice  against  him,  but  as  well  against  all  prior  parties.^ 

But  when  the  party  goes  to  a  place  distant  from  his  resi- 
dence for  the  purpose  of  a  business  negotiation  which  will 
occupy  a  few  weeks,  it  would  be  insufficient  to  send  notice 
there  without  instructions  to  do  so.^ 

§  1027.  In  the  case  of  parties  residing  temporarily  i7i  a 
certain  place — members  of  Congress  or  of  a  State  legislature 
residing  at  their  respective  capitals,  while  the  bodies  to  which 
they  belong  are  in  session,  for  instance— it  is  sufficient  and 
proper  that  notice  should  be  sent  to  them  at  such  place,  or 
left  there  at  their  place  of  residence  ;'^  but  after  the  adjourn- 
ment of  the  session  the  rule  would  no  longer  apply,  and 
notice  should  be  sent  to  the  party's  permanent  place  of  resi- 
dence.*    And  while  Congress  is  in  session  it  will  not  be  suf- 


'  Shelton  v.  Braithwaite,  8  M.  &  W.,  252  ;  Byles  on  Bills  (Sharswood's  ed.). 

*272],  422. 

"Walker  v.  Stetson,  14  Ohio  St.,  89. 

'  Chouteau  v.  Webster,  6  Mete,  i ;  Graham  v,  Sangston,  i  Md.,  59 ;  Marr  v. 
Johnson,  9  Yerg.,  i  ;  contra.  Walker  v.  Tunstall,  3  How.  (Miss.),  259 ;  2  Sm.  & 
M.,638. 

*  Bayley's  Adm'r  v.  Chubb,  16  Grat..  284.  In  this  case  it  was  held  that  where 
notice  was  left  at  the  dwelling-house  of  a  member  of  Congress  in  Washington, 
after  the  adjournment  of  Congress,  and  after  he  had  left  the  city,  and  it  appeared 
that  he  kept  up  his  domicile  in  the  district  he  represented,  and  it  was  his  habit 
to  leave  Washington  directly  after  Congress  adjourned,  it  was  insufficient. 
Daniel,  J.,  who  delivered  the  opinion  of  the  court,  distinguished  this  case  from 
that  of  P.  Chouteau  v.  Daniel  Webster,  6  Mete,  i,  in  which  a  notice  sent  to  Mr. 
Webster  while  he  was  a  Senator,  and  the  Senate  was  in  session,  was  held  suffi- 
cient ;  so  he  said  :  "  In  the  case  of  Graham  v.  Sangston,  i  Md.  R.,  59,  the  indors- 
er  at  the  time  of  the  maturity  of  the  bill  was  a  member  of  the  General  Assembly 
of  Maryland,  then  in  session,  and  boarded  at  a  hotel  in  Annapolis,  and  the 
notary  gave  notice  by  leaving  the  notice  at  the  room  of  the  indorser  at  the  hotel  ; 
but  whether  the  indorser  was  in  Annapolis  on  the  day  that  the  notice  was  given 
did  not  appear  ;  nor  was  there  any  proof  in  respect  to  the  general  domicile  of  the 
indorser.  The  notice  was  held  sufficient."  The  judge  referred  also  to  Walker  v. 
Tunstall,  reported  in  3  How.  (Miss.),  259,  and  in  2  Sm.  &  M.,  638,  as  opposed 
to  Chouteau  v.  Webster,  and  the  result  of  which  decision  is,  that  "  notice  sent  to 
a  member  of  Congress  who  has  no  known  place  of  residence,  is  good  if  directed 
to  Washington,  whilst  Congress  is  in  session,  and  he  is  there  engaged  in  the  dis- 
charge of  his  official  duties  ;  but  that  such  notice  is  not  sufficient  if  he  has  a 
known  place  of  residence,  except  upon  a  failure  of  the  notary  to  ascertain  the 
residence  after  having  used  due  diligence  to  ascertain  it."  "  And,"  he  added, 
"  it  seems  to  me  that  the  rule  declared  in  Chouteau  v.  Webster  is  the  more  rea- 


So  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO28 

ficient  to  deposit  notice  for  the  member  in  the  post-office 
of  the  Senate  or  House  of  Representatives,  as  it  should  be 
served  personally  by  a  party  in  the  same  place  at  his  resi- 
dence, or  where  he  might  personally  be.^ 

It  has  been  held  that  even  when  the  indorser  who  was  a 
member  of  Congress  was  known  to  be  in  Washington,  no- 
tice sent  to  his  residence  in  his  district  was  sufficient.^ 

§  1028.  Several  post-offices  where  party  receives  letters. 
— Where  there  are  two^  or  three'*  post-offices  at  which  the 
indorser  is  in  the  habit  of  receiving  his  letters,  notice  may 
be  sent  to  either ;  and  where  he  lives  at  equi-distance  from 
two  post-offices,  notice  addressed  to  one  will  suffice,  al- 
though he  was  accustomed  to  receive  his  letters  at  the 
other.^  Where  the  party  lives  in  the  United  States,  it  is 
especially  important  in  sending  notices  by  mail  to  put  the 
full  address,  town  and  State,  as  there  ve  many  cases  in 
which  the  same  name  is  applicable  to  towns  and  cities  in 
different  States.  An  omission  to  name  the  State,  where 
there  is  more  than  one  place  bearing  the  name  of  the  town, 
would  be  fatal  if  the  notice  were  not  duly  received  at  the 
right  place.® 

§  1029.  Address  of  parties  in  large  cities. — It  has  been 
held  in  England  not  sufficient  to  address  the  notice  to  a 
person  at  a  large  town,  as,  for  instance,  to  "  W.  Haynes, 
Bristol,"  '^  without  specifying  in  what  part  of  it  he  resides, 
because  there  might  be  in  so  large  a  town  many  persons  to 


sonable  one  ;  but  I  do  not  feel  disposed  to  extend  it  still  further  than  any  case 
has  gone  yet,  and  make  it  embrace  a  notice  sent  to  a  member  of  Congress  at 
Washington  after  the  adjournment  of  Congress,  and  after  the  member  had  in 
fact  left  the  city.  The  presumptions  which  upheld  the  notice  during  the  session 
of  Congress  seem  to  me  to  have  nothing  to  sustain  or  justify  them  after  that 
body  has  adjourned.     The  presumption  is  then  the  other  way." 

'  Hill  V.  Norvell,  3  McLean,  583.  ^  Marr  v.  Johnston,  9  Yerg.,  i. 

'  Shelburne  Falls  National  Bank  v.  Townsley,  102  Mass.,  177;  Bank  of  Lou- 
isiana V.  Tournillon,  9  La.  Ann.,  132. 

*  Bank  U.  S.  v.  Cameal,  2  Pet.,  543. 

^  Rand  v.  Reynolds,  2  Grat.,  171  ;  FoUain  v.  Dupre,  il  Rob.  (La.),  454. 

'  Beckwith  v.  Smith,  22  Me.,  125.  '  Walter  v.  Haynes,  Ryan  &  M.,  149. 


§  I029<^.    NOTICE  TO  PARTY  RESIDING  IN  ANOTHER  PL'\CE.      8 1 

whom  SO  general  an  address  might  apply,  the  surname  alone 
being  given  without  any  special  designation  that  might 
identify  him.  But  unless  the  name  were  very  common — 
John  Smith,  for  instance — an  address  to  a  large  city,  giving 
the  full  Christian  name  as  well  as  the  surname,  would 
doubtless  be  regarded  as  sufficient.  And  in  Massachusetts, 
where  notice  was  addressed  to  "  Mrs.  Susan  Collins,  Bos- 
ton," it  was  held  sufficient  to  charge  her  as  indorser,  it  not 
appearing  that  there  was  any  other  person  of  the  same 
name.  But  Metcalf,  J.,  said  :  "If  notice  in  this  case  had 
been  directed  to  '  Mrs.  Collins,  Boston,'  without  her  first 
name,  we  should  probably  have  held  it  to  be  insufficient, 
even  without  the  authority  of  Walter  v.  Haynes.  And  we 
incline  to  the  opinion  that  such  a  direction  would  be  in- 
sufficient prima  facie,  though  the  town  to  which  it  should 
be  sent  was  not  a  large  one.  For  we  know  that  there  are 
in  small  towns  in  this  State  numerous  persons  of  the  same 


§  1029^.  When,  however,  the  address  of  the  notice  cor- 
responds with  the  address  which  has  been  placed  by  the 
party  upon  the  bill  as  an  indication,  as,  for  instance,  "  W. 
Moors,  Manchester,"^  or  "T.  M.  Barron,  London,"  it 
would  be  sufficient  to  follow  it.  At  least  a  jury  might  infer 
due  notice.^ 

If  the  party  hold  himself  out  as  a  resident  in  a  certain 
place  he  is  estopped  from  afterward  denying  it,  and  notice 
sent  there  is  sufficient  ;^  but  if  a  party  about  to  absent  him- 
self informs  the  holder  where  he  is  going,  notice  should  be 
sent  to  the  place  mentioned.^ 

If  no  one  be  found  at  the  party's  place  of  residence,  a 
notice  put  in  the  keyhole  is  sufficient.® 

'  True  V.  Collins,  3  Allen,  440. 

^  INIann  v.  Moors,  Ryan  &  M.,  249;  see  ante,  §  1023. 

'  Burmester  v.  Barron,  17  Q.  B.,  878  ;  see  also  Clarke  v.  Sharpe,  3  M.  &  W., 
166. 

*  Lewiston  Falls  Bank  v.  Leonard,  43  Me.,  144. 

'  Hodges  V.  Gait,  8  Pick.,  251.  *  Stewart  v.  Eden,  2  Caines,  121. 

Vol.  II.— 6 


82  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §  IO3O, 

§  1030.  The  place  of  date  of  a  bill  is  not  conclusive  evi- 
dence that  the  drawer  resides  there,  and  is,  therefore,  an 
unsafe  guide  to  the  party  sending  notice  ;  much  less  can  it  be 
relied  upon  as  indicating  the  place  of  residence  of  an  indorser. 
But  it  is  prima  facie  evidence  that  the  drawer  resides  there, 
and  unless  met  with  proof  to  the  contrary,  notice  sent  to  the 
drawer  at  the  place  of  date  of  the  bill  would  be  sufficient. 
In  England  it  has  been  held  that  sending  notice  to  the 
drawer  addressed  to  London,  where  the  bill  was  dated,  suf- 
ficed, although  the  residence  of  the  acceptor  was  stated  in 
the  acceptance,  and  by  inquiry  of  him  it  would  have  been 
ascertained  that  the  drawer  resided  in  Chelsea,  and  he  never 
got  the  letter.^  But  in  the  United  States  a  stricter  rule 
has  been  generally  applied  ;  and  if  it  is  shown  that  the 
drawer  did  not  reside  at  the  place  of  date,  and  did  not  duly 
receive  the  notice,  it  has  been  held  that  he  will  be  dis- 
charged unless  the  holder  proves  that  he  had  been  unable 
to  ascertain  his  place  of  residence  after  due  diligence  in  in- 
quiring had  been  used.^  The  same  rule  would,  a  fortiori, 
apply  to  the  case  of  an  indorser. 

In  Alabama,  the  Supreme  Court  has  gone  so  far  as  to 
hold  that  the  fact  that  the  bill  purports  on  its  face  to  have 
been  made  at  a  certain  place,  is  not  alone  sufficient  evidence 
of  the  residence  or  post-office  of  the  drawer.^  Clearly,  we 
should  say,  the  date  v^  prima  facie  evidence  of  the  drawer's 
residence  or  post-office.  And  even  when  it  is  proved  not 
to  be  so  in  fact,  unless  the  holder  could  be  shown  to  have 
had  knowledge  that  it  was  not  so  in  fact,  the  English  rule, 
which  allows  him  to  follow  the  intimations  of  the  instru- 
ment, seems  to  us  the  more  just  and  reasonable.* 

'  Burmester  v.  Baron,  17  O.  B.,  828;  see  also  Clarke  v.  Sharpe,  3  M.  &  W., 
166;  Thomson  on  Bills  (WiTson's  ed.),  353. 

''  Lowery  v.  Scott,  24  Wend.,  858  ;  Barnwell  v.  Mitchell,  3  Conn.,  loi  ;  Fisher 
V.  Evans,  5  Binn.,  541  ;  Foard  v.  Johnson,  2  Ala.,  565  ;  Pierce  v.  Strathers,  27 
Penn.  St.,  249;  Hill  v.  Varrell,  3  Greenl.,  233;  Robinson  v.  Hamilton,  4  Stew. 
&  P.,  91.     See  Mason  v.  Pritchard,  9  Hei:.kell,  792. 

'  Sprague  v.  Tyson,  44  Ala.,  340  (1870)  ;  Tyson  v.  Oliver,  43  Ala.,  458  (1869) 
sec  cases  cited  in  Chapter  on  Protest. 

■•  See  chapter  XX,  on  Presentment  for  Payment,  sec.  v,  §  639,  vol.  I. 


§   IO3I.    NOTICE  TO  PARTY  RESIDING  IN  ANOTHER  PLACE.        83 

§  103 1.  It  has  been  said  in  some  cases  that  the  place  of 
^3X^  \s  2\so  prima  facie  evidence  of  the  residence  of  the 
indorser  of  a  bill  or  note  ;  but  this  is  straining  the  presump- 
tion too  far.^  It  is  but  slight  at  best,  even  in  the  case  of 
the  drawer.^  But  coupled  with  other  circumstances,  the 
date  of  the  bill  might  be  evidence  of  the  place  of  residence 
of  the  indorser.  They  should,  however,  be  strong  and  per 
suasive,^  for  there  is  no  prima  facie  presumption  that  an 
indorser  resides  at  the  place  of  date,*  or  at  the  place  of  pay- 
ment.^ 

§  1032.  Removal  of  party  entitled  to  notice. — If  at  the 
time  the  bill  or  note  is  drawn  or  indorsed  the  party  resides 
at  a  certain  place,  the  holder  may,  as  a  general  rule,  pre- 
sume that  he  resides  there  at  its  maturity,  and  send  no- 
tice accordingly,^  and  the  presumption  of  continued  resi- 
dence is  all  the  stronger  when  the  paper  was  discounted 
there  at  the  time  it  was  executed."^     Where  the  removal 

■  Sasscer  v.  Whitely,  10  Md.,  98  ;  Moodie  v.  Morrall,  3  Const.  R.  (S.  C),  3^7  ; 
Branch  Bank  v.  Pierce;  3  Ala.,  321. 

-  Lowery  v.  Scott,  24  Wend.,  358.  In  this  case  the  bill  was  dated  Michigan 
City,  Indiana,  but  the  drawer  resided  at  Waterford,  New  York.  Notice  was 
sent  to  Michigan  City,  Indiana,  and  it  not  appearing  that  inquiry  had  been  made 
to  ascertain  the  drawer's  residence,  it  was  held  insufficient.  Bronson,  J.,  said  : 
"  In  the  case  of  an  indorser  it  clearly  would  not  be  sufficient  to  send  notice  to  the 
place  where  the  bill  is  dated,  without  showing  something  more.  But  it  is  said 
that  will  do  in  the  case  of  a  drawer.  Although  there  might  be  a  slight  pre- 
sumption that  the  drawer  resides  at  the  place  where  the  bill  purports  to  have 
been  made,  it  can  not  be  very  strong,  for  it  is  matter  of  common  experience  that 
men  draw  bills  when  absent  from  home,  on  business  or  for  pleasure,  and  date 
them  at  the  place  where  they  are  drawn.  As  the  plaintiffs  are  indorsees,  and 
not  original  parties  to  the  bill,  it  is  not  to  be  presumed  that  they  knew  where 
the  drawer  resided.  But  I  think  they  were  bound  to  make  some  inquiry  on  the 
subject  at  the  place  where  the  payment  was  demanded." 

=  In  Wood  V.  Corl,  4  Mete,  203,  the  note  was  dated  at  Buffalo,  and  the  notar)' 
testified  that  it  was  reported  that  the  indorser  lived  there.  Notice  to  indorser 
sent  to  Buffalo  was  held  sufficient.  In  Page  v.  Prentice,  5  B.  Monr.,  7,  the  bill 
was  dated  at  Louisville,  and  notice  sent  so  directed  to  the  indorser  was  held  suf- 
ficient, it  appearing  that  process  had  been  served  on  him  in  the  county  in  which 
Louisville  is  located. 

*  Lowery  v.  Scott,  supra.  '  Gilchrist  v.  Donnell,  53  Mo.,  591. 

»  Knott  V.  Venable,  42  Ala.,  186  ;  Harris  v.  Memphis  Bank,  4  Humph.,  519  , 
Farmers'  Bank  v.  Harris,  2  Humph.,  311  ;  Dunlap  v.  Thompson,  5  Yerg..  67 
Bank  of  Utica  v.  Phillips,  3  Wend.,  408  ;  Saco  Nat.   Bank  v.  Sanborn,  63  Me., 
J40.     But  quere  ?  see  First  Nat.  Bank  v.  Wood,  51  Vt.,  473. 

'  Ward  V.  Perrin,  54  Barb.,  89. 


84  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO32. 

was  under  circumstances  of  peculiar  notoriety,  it  was 
held,  in  a  Tennessee  case,  insufficient  to  send  notice  to 
the  prior  place  of  residence ;  ^  and  in  Virginia  it  has 
been  recently  said  by  the  Supreme  Court  of  Appeals 
through  Staples,  J.  :  "  Where  the  holder  and  indorser 
reside  near  to  each  other  in  a  small  city  like  Alexan- 
dria, the  jury  may  presume  from  the  proximity  of  the  par- 
ties, and  the  frequency  of  their  communication,  and  the 
circumstances  of  notoriety  attending  the  removal,  that  the 
holder  was  apprised  of  the  change  of  domicile  "  ^ — which 
ruling  vitiated  notice  left  at  the  prior  residence  of  the  in- 
dorser. 

In  a  New  York  case,  where  the  indorser  of  a  note  pay- 
able one  year  after  date  resided  at  Rochester  at  the  time  of, 
and  for  ten  years  prior  to,  the  indorsement,  and  continued 
to  reside  there  until  six  months  before  it  fell  due,  and  the 
plaintiff  was  informed  by  the  indorser's  relatives  that  she 
continued  to  reside  there,  notice  addressed  to  Rochester  was 
held  sufficient.  And  Earl,  Commissioner,  said  :  "  I  think 
it  would  not  be  unreasonable  to  hold  that  in  all  cases,  no 
matter  how  long  the  paper  has  to  run,  a  notice  of  protest 
addressed  to  the  indorser  at  the  place  where  he  resided 
when  he  made  the  indorsement  should  be  sufficient  to 
charge  him,  although  he  may  have  changed  his  residence. 
The  holder  should  be  permitted  to  act  in  good  faith  upon 
the  presumption  of  his  continued  residence  unless  he  has 
received  information  of  his  chanije   of  residence."^     This 


'  Planters'  Bank  v.  Bradford,  4  Humph.,  39. 

'  McVeigh  v.  Allen,  29  Grat.,  596  (1877),  citing  Harris  v.  Memphis  Bank,  4 
Humph.,  519;  Farmers'  M.  Bank  v.  Harris,  2  Humph.,  311;  Bank  of  Utica  v. 
Phillips,  3  Wend.,  408. 

'Requa  v.  Collins,  51  N.  Y.,  148  (1872),  Earl,  C,  continued:  "In  Bank  of 
Utica  V.  Davidson,  5  Wend.,  588,  a  note  was  presented  for  discount  by  the  agent 
of  the  maker,  who  informed  the  clerk  of  the  bank  that  the  indorsers  resided  in 
Bainbridge,  and  the  clerk  made  a  memorandum  of  this  fact.  When  the  note 
became  due  it  was  protested,  and  a  notice  of  protest  was  directed  to  the  defend- 
ant, one  of  the  indorsers,  at  Bainbridge,  no  further  inquiries  as  to  his  residence 
having  been  made.  It  turned  out  that  the  defendant  had,  a  short  time  before  he 
indorsed  the  note,  removed  from  Bainbridge,  a  distance  of  twelve  or  fourteen 


§    I033-    NOTICE  TO  PARTY  RESIDING   IN  ANOTHER  PLACE.       85 

rule  is  wise  and  just,  and  is  fairly  deduciblc  from  the  authori- 
ties, though  it  would  seem  to  have  been  limited  in  a  pre- 
vious New  York  case  to  paper  having  the  usual  time  of 
bankable  paper  to  run.^ 

§  1033.  In  the  second  place,  when  special  messenger  may 
be  employed. — The  holder  is  not  bound  to  send  notice  by 
mail ;  and  he  may,  if  he  pleases,  in  all  cases  send  it  by  a 
special  messenger.^  In  such  cases  it  will  be  sufficient  if  the 
notice  reaches  the  party  entitled  thereto  on  the  same  day 
that  it  would  have  reached  him  in  due  course  of  mail,  al- 
though later,  if  within  business  hours ;  ^  but  if  it  arrives  the 
day  after,  and  the  delay  is  not  explained  and  excused,  it 
will  be  fatal*  And  the  holder  is  responsible  if  his  messen- 
ger do  not  deliver  the  notice  within  the  necessary  time,  and 
the  party  is  discharged,^  unless  there  were  no  public  means 
of  communication,  and  the  holder  exercised  reasonable  care 
in  selecting  his  messenger.^ 

miles,  to  Masonville,  in  another  county.  The  notice  was  held  sufficient  to  charge 
the  defendant,  upon  the  ground  that  due  diligence  had  been  used.  In  Bank  of 
Utica  V.  Bender,  21  Wend.,  643,  the  drawer  took  to  the  bank  a  bill  of  exchange, 
indorsed  by  the  defendant,  which  was  dated  at  Chittenango,  and  there  wrote 
under  the  name  of  the  defendant  'Chittenango,' to  indicate  his  place  of  resi- 
dence. This  memorandum  by  the  drawer,  of  course,  had  no  greater  effect  than 
if  he  had  at  the  time  given  the  parol  information  that  the  indorser  resided  at 
Chittenango.  He  in  fact  resided  at  Manlius,  and  had  resided  there  for  twenty 
years.  The  bill  was  protested  for  the  non-payment,  and  notice  of  protest  mailed 
to  Chittenango,  without  any  further  inquiry  as  to  the  indorser's  residence.  It 
was  held  that  the  notice  was  sufncient,  and  that  the  defendant  was  charged.  In 
Ward  V.  Perrin,  54  Barb.,  89,  the  action  was  against  the  indorser  of  a  note  pay- 
able four  months  from  date.  At  the  time  when  the  indorsement  was  made,  and 
for  about  two  months  thereafter,  the  indorser  resided  in  Rochester.  About  two 
months  before  the  note  fell  due  he  removed  from  Rochester  to  Bergen.  The 
note  was  protested,  and  notice  of  protest  was  mailed  to  the  defendant  at  Ro- 
chester. The  court  held,  that  the  holders  of  the  note  were  not  bound  to  make 
.any  further  inquiries,  and  that  they  could  act  upon  the  information  as  to  the  in- 
dorser's residence  which  they  received  when  they  discounted  the  note ;  that  they 
had  the  right,  when  the  note  matured,  to  assume  that  the  indorser  continued  to 
reside  in  Rochester,  and  to  act  accordingly  in  taking  the  requisite  steps  to  charge 
him,  unless  they  knew  that  in  the  meantime  he  had  changed  his  residence." 

'Bank  of  Utica  v.  Phillips,  3  Wend.,  408. 

"  Bank  of  Columbia  v.  Lawrence,  i  Pet.,  578  ;  Parsons  v.  Crallan,  2  J.  P. 
Smith,  404  ;  Doobree  v.  Eastwood,  3  C.  &  P.,  250  (14  E.  C.  L.  R.) ;  Jarvis  v.  St. 
Croix  Manuf.  Co.,  23  Me.,  287 ;  Storj'  on  Bills,  §  295. 

'  Bancroft  v.  Hall,  Holt,  476  ;  Story  on  Bills,  §  295. 

*  Jarvis  v.  St.  Croix  Manuf.  Co.,  23  Me.,  287 ;  Darbishire  v.  Parker,  6  East.,  6 ; 
Byles  on  Bills  (Sharswood's  ed.)  [*27i,  272],  421. 

'  Van  VeclV.en  v.  Pruyn,  3  Kern.,  549.  •  i  Parsons  N.  &  B.,  479. 


86  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO34. 

"  It  is  difficult  to  lay  down  a  precise  rule  as  to  the  extent 
of  delay  in  the  arrival  of  a  private  conveyance  which  will 
nullify  the  notice,  although  such  delay  as  prevents  the  person 
getting  notice,  even  for  one  post,  from  sending  advice  to  his 
correspondent,  will  probably  be  fatal.  It  would  likewise 
appear  that  in  such  a  case  the  holder  must  prove  the  safe 
arrival  of  the  letter.  But  when  a  person,  instead  of  send- 
ing notice  directly  by  post,  writes  to  a  correspondent  on 
the  spot  to  give  notice,  and  that  correspondent  goes  to  the 
defendant's  warehouse  for  this  purpose,  sooner  than  a  letter 
could  have  reached  him  by  post,  but  is  prevented  by  find- 
ing the  warehouse  shut  during  business  hours,  the  defend- 
ant can  not  plead  the  lateness  of  the  notice."^ 

§  1034.  It  has  been  held  in  some  cases  that  where  the 
party  entitled  to  notice  resides  at  a  point  remote  from  any 
post-office,  the  holder  must  send  notice  by  a  special  messen- 
ger.^ But  it  seems  to  us  that  it  could  not  be  reasonably 
expected  of  the  holder  to  send  notice  to  a  party  exiled 
from  communication  with  the  world  ;  or  reasonable  to  pre- 
sume that  the  party  did  not  at  convenient  periods  inquire 
at  the  nearest  post-office — and  that  sending  the  notice  to 
such  post-office  is  all  that  should  be  required.^ 

"  One  who  becomes  a  party  to  a  commercial  instrument 
should  be  considered  as  rendering  himself  subject  to  com- 
mercial law  and  usage,"  is  the  very  just  observation  of  the 
annotators  of  the  American  Leading  Cases  on  this  ques- 
tion.^ And  the  language  of  the  court  in  a  case  just  quoted, 
if  a  little  stilted,  embodies  the  true  wisdom  of  the  subject, 
as  it  seems  to  us.  Ford,  J.,  said:^  "If  persons  residing 
far  from   a  post-town,  aside   from  the  common  walks  of 


'  Thomson  on  Bills,  340 ;  Bancroft  v.  Hall,  Holt,  476. 

^  Fish  V.  Jackman  (i  Appleton),  19  Me.,  467  ;  Farmers'  Bank  v.  Butler,  3  Lit., 
498  ;  Bedford  v.  Hickman,  i  Yerg.,  166. 

'  State  Bank  v.  Ayres,  2  Halst.,  130 ;  Story  on  Bills,  §  297. 
*  I  American  Leading  Cases,  403. 
'  State  Bank  v.  Ayres,  2  Halst.,  130. 


^   1035.       TIME  WITHIN  WHICH  NOTICE  MUST  BE  GIVEN-  87 

gregarious  commerce,  will  give  their  names  in  guaranty  of 
commercial  paper,  it  is  better  that  they  should  be  held  to 
inquire  for  letters  at  the  nearest  post-ofihce  about  the  time 
such  paper  comes  to  maturity,  than  that  the  holder  should 
be  compelled  to  send  a  special  messenger  one  hundred  and 
fifty  miles  to  serve  personal  notice,  or  that  an  established 
svstem  of  notice,  sufficiently  complex  already,  should  be 
forced  to  give  way  to  the  introduction  of  novel  exceptions, 
imposing  burdensome,  expensive,  and  hazardous  duties  on 
all  men  of  business  merely  out  of  favor  to  eccentric  resi- 
dences." When  the  messenger  was  necessary,  or  most  con- 
venient, his  reasonable  expenses  are  chargeable  to  the  party 
receiving  notice.-^ 

SECTION  VII. 

TIME   WITHIN   WHICH   NOTICE   MAY  AND   MUST   BE   GIVEN. 

§  1035.  In  the  first  place^  as  to  the  time  within  which 
notice  may  be  given. — It  is  quite  clear  that  notice  of  dis- 
honor implies  the  dishonor  as  taking  place  before  the  no- 
tice. Knowledge  by  anticipation  that  the  instrument  will 
be  dishonored  does  not  affect  the  rule,  and  if  notice  be 
given  beforehand  it  is  premature  and  ineffectual.^ 

The  lanoruao^e  of  the  earlier  authorities  was,  that  notice 
of  dishonor  should  be  given  "  within  a  reasonable  time  " 
after  the  dishonor  had  occurred,  and  the  like  expression  is 
still  sometimes  met   with  ;  ^  but  the   period    allowed   the 

'  Pearson  v.  Crallan,  2  J.  P.  Smith,  404  (King's  Bench). 

"^  Jackson  v.  Richards,  2  Caines,  343  ;  Chitty  on  Bills  P482],  544. 

^  Story  on  Bills,  §  285  ;  i  Parsons  N.  &  B.,  507  ;  Chitty  on  Bills,  ch.  8,  p.  366. 
There  was  formerly  a  statute  in  Virginia  which  allowed  eighteen  months  as  a 
reasonable  time  within  which  to  give  notice  of  protest  of  a  bill  of  exchange. 
It  was  considered  in  Stott  v.  Alexander,  i  Wash.,  335  (i794).  in  which  case  the 
bill  was  protested  in  September,  1787,  and  notice  given  in  June,  1788,  and  the 
court,  by  its  president,  Edmond  Pendleton,  said:  "No  facts  being  stated  to 
take  this  case  out  of  the  general  rule  before  mentioned,  and  established  by  the 
act  of  the  Assembly,  we  are  of  opinion  that  the  notice  is  reasonable."  This 
statute  was  repealed  in  1792,  and  is  quoted  as  a  curious  relic.  Both  in  England 
and  Scotland  formerly  there  was  no  fixed  lime  within  which  it  was  necessary  to 
give  notice  ;  the  new  rule  is  as  certain  as  a  statute.     See  Thomson  on  Bills,  346. 


88  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO36. 

holder  is  now  so  definitely  limited  and  fixed  that  this  phrase 
is  entirely  too  loose  and  general  to  convey  a  correct  idea 
of  the  requirements  of  the  law.^ 

§  1036.  As  to  the  time  of  the  day  of  dishonor  at  which 
the  holder  may  give  notice,  it  is  well  settled  that  as  soon  as 
the  demand  is  made,  and  the  dishonor  has  occurred,  the 
holder  need  not  wait  until  the  close  of  business  hours  to 
send  notice.^  Mr.  Chitty  has  well  expressed  the  law  on 
this  subject :  "  It  has  been  doubted  whether,  in  the  case  of 
an  inland  bill  or  promissory  note  payable  after  date  or 
sight,  or  on  a  particular  event,  the  holder  can  legally  give 
notice  of  the  non-payment  on  the  day  when  it  falls  due,  or 
whether  the  drawee  or  maker  is  not  entitled  to  the  whole 
of  that  day  to  pay  it  in,  without  any  reference  to  banking 
hours,  and  whether  it  can  be  considered  as  dishonored  until 
the  whole  of  that  day  has  elapsed.^  But  though  in  general, 
when  a  payment  is  to  be  made  on  a  day  certain,  the  party 
is  not  in  default  until  the  expiration  of  it,  the  law  merchant 
considers  the  contract  of  an  acceptor  of  a  bill,  or  maker  of 
a  note,  to  have  been  to  pay  on  demand  at  any  part  of  that 
day,  and  therefore  it  seems  clear  that  notice  of  non-payment 
may  be  given  on  the  last  day  of  grace,  whenever,  after  due 
presentment  and  demand,  the  drawee  makes  an  unqualified 
refusal  to  pay  at  all.^     And  in  a  more  recent  case  it  was 


'  I  Parsons  N.  &  B.,  507. 

»  Bank  of  Alexandria  v.  Swan,  9  Pet.,  33  ;  Lenox  v.  Roberts,  2  Wheat.,  373  ; 
Coleman  v.  Carpenter,  9  Barr.,  178  ;  Price  v.  Young-,  i  McCord,  339.  In  eX 
parte  Moline,  19  Ves.,  216,  a  demand  on  the  acceptor  at  11  A.M.,  and  notice 
sent  immediately,  warranted  proof  of  debt  against  the  drawer,  who  had  become 
bankrupt.  Lord  Eldon  said  :  "  I  do  not  recollect  any  decision  that  if  an  ac- 
ceptor declares  at  1 1  o'clock  in  the  morning  that  he  will  not  pay,  notice  of  that 
to  the  drawer  is  not  good.  If  the  law  does  not  impose  on  the  holder  the  duty 
of  inquiring  again  before  5  o'clock,  it  would  be  extraordinary  that  this  informa- 
tion to  the  drawer  of  an  answer  precluding  any  hope  of  obtaining  anything  by 
calling  again,  should  not  have  effect."  Story  on  Bills,  §  290  ;  Byles  (Shars- 
wood's  ed.)  [*276],  428  ;  Thomson  on  Bills,  348  ;  Edwards  on  Bills,  615,  622. 

=  Leftly  V.  Mills,  4  T.  R.,  170 ;  Haynes  v.  Birks,  3  Bos.  &  P.,  602 ;  Colkett  v. 
Freeman,  2  T.  R.,  59  ;  Hartley  v.  Case,  i  Carr.  &  P.,  555  ;  4  B.  &  C,  339. 

*  Burbridge  v.  Manners,  2  Camp.,  195  ;  Hartley  v.  Case,  I  Carr.  &  P.,  556; 
ix parte  Moline,  19  Ves.,  216  ;  King  v.  Crowell,  61  Me.,  244. 


§   I037-        TIME  WITHIN  WHICH  NOTICE  xMUST  BE  GIVEN.  89 

held  that  notice  of  dishonor  may  be  given  on  the  same  day 
that  the  bill  falls  due,  although  there  may  not  have  been 
an  absolute  refusal,  but  a  mere  neglect  to  pay  on  present- 
ment.^ If  the  house  at  which  the  bill  is  payable  be  shut 
up,  and  no  one  there,  it  is  the  same  as  a  refusal.^  It  should 
seem  that  in  these  cases  of  notice  of  dishonor,  given  on  the 
day  on  which  the  bill  is  payable,  the  notice  will  be  good  or 
bad,  as  the  acceptor  may  or  may  not  afterward  pay  the  bill ; 
if  he  does  not  afterward  pay  it  [on  that  day],  the  notice  is 
good  ;  and  if  he  does,  it  of  course  comes  to  nothing."^ 

§  1037.  Notice  on  very  day  of  disJionor  not  obligatory. — 
It  is  also  certain  that  the  holder  is  not  obliged  to  give  no- 
tice immediately  on  the  very  day  of  the  dishonor,^  although 
he  has  the  option  to  do  so  if  he  pleases  ;  and  in  point  of 
fact  it  is  usual  for  the  holder  or  notary  to  prepare  and  send 
notice  forthwith  after  dishonor.  It  is  difficult  to  express  a 
precise  rule  which  will  apply  to  all  cases,  and  to  fix  defi- 
nitely within  what  time  after  the  day  of  dishonor  the  notice 
must  be  sent ;  and  it  is  to  be  determined  by  reference  to 
the  residence  of  the  parties,  the  means  and  frequency  of 
communication,  and  the  time  of  departure  of  the  mails  or 
other  conveyance  by  wdiich  notice  may  be  transmitted. 
Notice  left  with  an  indorser  on  Sunday  has  been  held  suffi- 
cient, the  following  Monday  being  in  time  to  serve  it.^ 

§  1038.  In  tJie  second  place,  as  to  the  time  luithin  luhich 
notice  may  be  given,  when  the  holder  and  the  party  enti- 
tled to  notice  reside  in  the  same  place  :  the  settled  rule  is 
that  the  holder  has  until  the  expiration  of  the  following 
day  to  give  notice  ;  and  he  is  not  confined  within  the  busi- 

*  Clowes  V.  Chaldecott,  7  L.  J.  K.  B.,  147. 

".  Hine  v.  Allely,  4  Barn.  &  Ad.,  624  ;  i  Nev.  &  M.,  433. 

'  Chitty  on  Bills  (13  Am.  ed.)  [*482],  544 ;  Hartley  v.  Case,  i  Car.  &  P.,  556, 
Abbott,  C.  J. 

^  Darbishire  v.  Parker,  6  East.,  8;  2  Smith,  195  ;  Tindall  v.  Brown,  i  T.  R., 
168  ;  Burbridjre  v.  Manners,  3  Camp.,  193  ;  Russell  v.  Langstafte,  Doug.,  515  ; 
Muilman  v.  D'Eguino,  2  H.  Black,  565  ;  Chitty  on  Bills  [*4S2j,  544. 

*  Carlisle  Deposit  Bank  v.  Rheem,  10  Phila.,  462. 


90  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO39. 

ness  hours  of  the  day  to  give  the  notice  at  the  party's 
dweUing.*  He  may  give  it  there  at  any  time  before  the 
hours  of  rest  ;  but  if  he  gives  it  at  the  place  of  business,  it 
must  be  done  during  the  hours  of  business.^ 

§  1039.  ^^^  ^'^^  third  place,  as  to  the  time  within  which 
notice  must  be  given  when  the  parties  reside  in  different 
places,  and  there  is  mail  communication  between  them,  the 
rule  laid  down  by  the  United  States  Supreme  Court  is, 
that  the  notice  should  be  deposited  in  the  post  in  time  to 
be  sent  by  the  mail  of  the  day  after  dishonor,  provided 
such  mail  is  not  closed  before  early  and  convenient  busi- 
ness hours  of  that  day ;  in  which  case  it  must  be  sent  by 
the  next  mail  thereafter.^ 

In  other  words,  the  notice  must  be  sent  by  the  first  mail 
which  leaves  after  the  day  of  dishonor  is  past,  and  does  not 
close  before  early  and  convenient  business  hours  of  the  day 
succeeding  the  day  of  dishonor  ;  the  design  of  the  law  being 
to  afford  the  holder  an  opportunity  to  mail  the  notice  on 
the  day  succeeding  that  of  dishonor. 

This  rule  is  sanctioned  by  numerous  and  eminent  au- 
thorities, either  expressly  or  by  implication,  and,  it  seems 
to  us,  adopts  the  only  principle  which  may  be  safely  fol- 
lowed in  all  cases.* 

*  Jameson  v.  Svvinton,  2  Taunt.,  224  ;  Bayley  on  Bills,  176. 

"  Adams  v.  Wright,  14  Wis.,  408  ;  Cayuga  Co.  Bank  v.  Hunt,  2  Hill  (N.  Y.), 
635  ;  Crosse  v.  Smith,  i  Maule  &  S.,  545  ;  Garnett  v.  Woodcock,  6  Maule  &  S., 
44 ;  Parker  v.  Gordon,  7  East.,  385  ;  Allen  v.  Edmundson,  2  Carr.  &  K.,  547 
Story  on  Bills,  §  290. 

s  Fullerton  v.  Bank  U.  S.,  i  Pet.,  605 ;  Bank  of  Alexandria  v.  Swann,  9  Pet., 
33;  Lenox  v.  Roberts,  2  Wheat.,  373;  U.  S.  v.  Barker,  12  Wheat.,  559;  4 
Wash.,  465.  These  cases  do  not  state  the  rule  as  broadly  as  laid  down  in  the 
text,  but  they  are  not  inconsistent  with  it,  as  explained  in  the  case  of  Lawson  v. 
Farmers'  Bank,  I  Ohio  St.,  206 — a  most  learned  and  instructive  case  on  the 
subject  of  notice. 

*  Farmers'  Bank  v.  Duvall,  7  Gill  &  J.,  78  ;  Lawson  v.  Farmers'  Bank,  i  Ohio 
St.,  206;  Carter  v.  Burley,  9  N.  H.,  558  ;  Sussex  Bank  v.  Baldwin,  2  Har.,  487  ; 
Wemple  v.  Dangerfield,  2  Sm.  &  M.,  445  ;  Downs  v.  Planters'  Bank,  i  Sm.  & 
M.,  261  ;  Mitchell  v.  Cross,  2  R.  L,  437;  Burgess  v.  Vreeland,  4  N.  J.,  71  ; 
Howard  v.  Ives,  i  Hill  (N.  Y.),  263;  Hartford  Bank  v.  Stedman,  3  Conn..  489; 
Chick  V.  Pillsbury,  24  Me.,  458  ;  Eagle  Bank  v.  Chapin,  3  Pick.,  iSo;  Manches- 
ter Bank  v.  Fellows,  8  Fost.,  302  ;  i  Parsons  N.  &  B.,  51 1  ;  Redfield  &  Bigelow's 
Lead.  Cases,  393  ;  i  American  Lead.  Cases,  390 ;  Story  on  Bills,  §  288 ;  Darbi- 
shire  v.  Parker,  6  East.,  3  ;  Haynes  v.  Birks,  3  Bos.  &  Pull.,  599. 


§    1 040.        TIiME  WITHIN  WHICH  NOTICE  MUST  BE  GIVEN.  9 1 

§  1 040;  Chancellor  Kent  has  expressed  the  opinion  that 
it  would  be  sufficient  to  mail  the  notice  at  any  time  on  the 
day  after  dishonor/  but  this  is  a  greater  relaxation  than  the 
leading  cases  recognize,  and  is  going  further  than  necessary 
to  extend  a  liberal  time  to  the  holder. '^  In  many  cases  it 
is  said  that  notice  must  be  sent  by  the  mail  of  the  next 
day  after  dishonor ;  but  most  of  these  cases,  as  observed 
by  Professor  Parsons,  were  cases  which  held  that  notice  so 
sent  is  sufficient,  which  is  undoubtedly  true.^  "  By  the 
next  practicable  mail,"  after  the  day  of  dishonor,  is  the 
language  adopted  by  a  number  of  authorities;^  but  they 
are  not  altogether  concurrent  in  the  definition  of  the  phrase, 
and  the  rule  of  the  text  seems  less  susceptible  than  any 
other  of  misinterpretation,  or  of  working  injustice  to  any 
of  the  parties. 

Chitty  considers  that  "  when  the  parties  do  not  reside  in 
the  same  place,  and  the  notice  is  to  be  sent  by  the  general 
post,  then  the  holder  or  party  to  give  the  notice  must  take 
care  to  forward  notice  by  the  post  of  the  next  day  after  the 
dishonor,  or  after  he  received  notice  of  such  dishonor, 
whether  that  post  sets  off  from  the  place  where  he  is  early 
or  late."*^  Story  regards  the  rule  as  "not  so  strict  as  it  is 
laid  down  by  Mr.  Chitty,"  and  adds  :  "  It  would  be  more 
correct  to  say  that  the  holder  is  entitled  to  one  whole  day 
to  prepare  his  notice,  and  that,  therefore,  it  will  be  sufficient 
if  he  sends  it  by  the  next  post  that  goes  after  twenty-four 
hours  from  the  time  of  the  dishonor.  Thus,  suppose  the 
dishonor  is  at  four  o'clock  p.m.  on  Monday,  and  the  post 
leaves  on  Tuesday  at  nine  or  ten  o'clock,  it  seems  to  me  that 
the  holder  need  not  send  by  that  post,  but  may  safely  wait 
and  put  the  notice  into  the  post-office  early  enough  to  go  by 

'  3  Kent  Com.,  106,  note  e.  ^  i  Parsons  N.  &  B.,  508,  509. 

'  I  Parsons  N.  &  B.,  510,  511. 

*  Kaskell  v.  Boardman,  8  Allen,  40,  in  which  case  Bigelow,  C.  J.,  said  :  "  The 
rule  is  that  notice  should  go  by  the  next  practicable  pest  after  the  holder  receiv- 
ed notice  of  dishonor  of  the  note."     Story  on  Bills,  §  382. 

'  Chitty  on  Bills  [*486],  548. 


92  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO4I. 

the  post  on  Wednesday  morning  at  the  same  hour.  I  have 
seen  no  late  case  which  imports  a  different  doctrine  ;  on  the 
contrary,  they  appear  to  me  to  sustain  it.  But  as  I  do  not 
know  of  any  direct  authority  which  positively  so  decides, 
this  remark  is  merely  propounded  for  the  consideration  of 
the  learned  reader."  ^  The  rule  stated  by  the  text  seems 
to  us  the  best.  It  is  as  liberal  as  is  necessary  for  the  holder. 
It  prevents  undue  delay  as  to  the  party  to  be  notified,  and 
it  is  sustained  by  direct  and  high  authority. 

§  1 04 1.  Reaso7iable  hour  of  day  for  mailing  notice.— 
What  hour  of  the  next  day  after  dishonor  may  be  consid- 
ered as  reasonably  early  and  convenient  within  the  meaning 
of  this  rule  must  depend  upon  the  habits  of  the  business 
community  in  each  place,  and  no  precise  hour  can  be  arbi- 
trarily named.  If  the  mail  closes  before  early  business 
hours  of  the  day  after  dishonor,  wdiether  it  be  during  the 
night  before,^  or  at  three,^  four,*  five,^  or  six,^  o'clock  a.m. 
thereof,  the  notice  need  not,  under  the  rule,  be  sent 
thereby.  Seven  o'clock  seems  debatable,"^  at  least  the  hour 
is  not  clearly  within  early  business  hours,  unless  at  some 
particular  localities,  and  sunrise  is  certainly  too  soon.^ 

Of  course,  three  p.m.  would  be  too  late  ;^  and  it  has  been 
held  that  where  the  mail  closes  at  half-past  ten  a.m.  notice 
should  have  been  sent  by  it ;  ^°  so  where  it  closed  at  ten 
A.M.,"  and  likewise  where  it  closed  at  ten  minutes  past  nine 

'  Story  on  Bills  (Bennett's  ed.),  p.  326,  §  290,  note  i. 

*  See  ante,  §  1039 ;  Geill  v.  Jeremy,  I  Moo.  &  M.,  61. 
°  Mitchell  V.  Cross,  2  R.  I.,  437. 

*  Wemple  v.  Dangerfield,  2  Smedes  &  M.,  445. 
^West  V.  Brown,  6  Ohio  St.,  542. 

*  Chick  V.  Pillsbury,  24  Me.,  458  ;  Davis  v.  Hanly,  7  Eng.  (Ark.),  645. 

'  In  Stephenson  v.  Dickson,  24  Penn.  St.,  148,  7  o'clock  was  held  not  an  un- 
reasonably early  hour ;  but  in  Commercial  Bank  v.  King,  3  Rob.  (La.),  243,  it 
was  held  certainly  sufficient  to  show  that  notice  was  deposited  in  the  post  at 
seven  o'clock. 

*Deminds  v.  Kirkman,  i  Smedes  &  M.,  644. 

*  Seventh  Ward  Bank  v.  Hanrick,  2  Story,  416. 

"U.  S.  V.  Barker,  4  Wash.  C.  C,  464;  12  Wheat.,  559. 
"  Haskell  v.  Boardman,  8  Allen,  38. 


§    1 042.        TIME  WITHIN  WHICH  NOTICE  MUST  BE  GIVEN.  93 

A.M.^  But  in  another  locality  half-past  nine  a.m.  was 
thought  unreasonably  early  ;^  while  in  another  still,  it  has 
been  held  that  proof  that  the  notice  was  deposited  in  the 
post  at  nine  a.m.  was  insufficient* 

So  that  the  notice  goes  by  some  mail  of  the  day  after 
dishonor,  it  is  not  material  by  which  mail  of  that  day,  and 
that  a  mail  left  earlier  than  that  by  which  notice  was  con- 
veyed makes  no  difference,*  the  law  taking  no  notice  of 
fractions  of  a  day.  Certainly  it  must  go  by  the  mail  of  the 
next  day  (if  it  leave  not  too  early,  as  we  have  said)  ;  or  if 
there  be  no  mail  next  day,  it  must  go  by  the  next  mail 
thereafter.^ 

§  1042.  If  the  party  to  whom  notice  is  to  be  given  have 
himself,  by  his  mode  of  drawing  or  indorsing,  thrown  diffi- 
culty in  the  way  of  the  holder,  the  time  allowed  the  latter 
will  be  extended,  as,  for  instance,  where  the  drawer  wrote 
his  name  so  badly  that  the  holder  mistook  the  spelling  of 
it,  and  the  letter  containing  the  notice  consequently  miscar- 
ried.^ 

§  1043.  Days  not  computed. — Christmas  day,  Sunday,' 
the  Fourth  of  July,^  or  any  day  of  public  thanksgiving,^  or 
of  religious  festival,^"  (upon  which  a  man  is  forbidden  by 

'  Lawson  v.  Farmers'  Bank,  i  Ohio  St.,  206. 

'Burgess  v.  Vreeland,  4  N.  J.,  71.  In  New  York,  half-past  nine  A.M.  was 
regarded  as  too  early,  the  party  who  was  chargeable  with  giving  notice  being 
"  an  aged  man,  and  a  lawyer  out  oi"  practice  25  years."  Smith  v.  Poillon,  23 
Hun,  N.  Y.,  632.  (It  seems  queer  to  consider  age  as  a  circumstance  regulating 
the  duty  and  obligation  of  the  holder).  In  England  half-past  nine  was  held  too 
early.  Hav\kes  v.  Salter,  4  Bing.,  71$  (i3  E-  C.  L.  R.)  ;  Byles  on  Bills  [*274], 
426. 

'Downs  V.  Planters'  Bank,  i  Smedes  &  M.,  261. 

'Undo  V.  Unsworth,  2  Camp.,  602;  Martin  v.  Ingersoll.  8  Pick.,  i. 

'  Deblieux  v.  Bullard,  i  Rob.  (La.),  66.  In  this  case  it  was  said  it  might  be 
given  on  Sunday. 

*  Hewitt  V.  Thompson,  1  M.  &  Rob.,  543. 

'Byles  on  Bills  (Sharswood's  ed.)  [*277],  429;  Chitty  on  Bills  (13  Am.  ed.), 
[*488],  551,  552;  I  Pars.  N.  &  B.,  515.  See  chapter  XX,  sec.  iv,  §§  627,  628, 
vol.  I. 

*  Cuyler  v.  Stevens,  4  Wend.,  566. 

'  Byles  on  Bills  (Sharswood's  ed.)  [*277],  429. 

"  Lindo  V.  Unsworth,  2  Camp.,  602 ;  Martin  v.  Ingersoll,  8  Pick.,  r. 


94  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO44. 

his  religion  to  transact  secular  affairs),  is  counted  out  of 
computation  of  time  within  which  notice  must  be  given. 
But  notice  is  not  invalid  because  given  on  the  Fourth  of 
July  or  other  holiday  ;^  and  although  notice  need  not  be 
forwarded  until  the  day  after  dishonor  or  of  its  reception, 
still  it  is  not  irregular  or  improper  to  do  so  if  the  party 
chooses,  the  time  being  allowed  for  his  convenience.* 
If  notice  is  received  on  Sunday,  it  need  not  be  for- 
warded until  the  Tuesday  following,  as  he  is  not  bound 
to  open  the  letter  containing  it  or  to  recognize  it  until 
Monday ;  ^  and  if  received  on  Saturday  it  need  not  be  for- 
warded until  Monday.^ 

§  1044.  Each  holder  has  a  day  to  give  notice  to  his  pred- 
ecessor on  the  paper. — The  party  receiving  the  notice  may 
desire  to  communicate  it  to  parties  antecedent  to  him,  and 
others  before  him  likewise  to  transmit  it  to  those  antece- 
dent to  them.  In  such  cases  the  general  rule  also  is,  that 
each  successive  party  who  receives  notice  of  dishonor  is 
entitled  to  a  full  day  to  transmit  it  to  any  antecedent  party 
wiio  is  chargeable  over  to  him  upon  payment  of  the  bill  or 
note.^  So  that,  if  a  party  receives  notice  on  one  day,  he  is 
not  bound  to  forward  it  to  a  prior  indorser  until  the  next 
day,  and  not  then  if  the  mail  leaves  before  early  business 
hours.     Thus,  an  indorser  who  received  notice  at  eight  or 

'Deblieux  v.  Bullard,  i  Rob.  (La.),  66.  In  this  case  it  was  said  it  might  be 
given  on  Sunday. 

-  Bussard  v.  Levering,  6  Wheat.,  102  ;  Lindenberger  v.  Beall,  6  Wheat.,  104  ; 
Curry  v.  Bank  of  Mobile,  8  Port.  (Ala.),  360 ;  McClane  v.  Fitch,  4  B.  Mon.,  599; 
Coleman  v.  Carpenter,  9  Penn.  St.,  178  ;  Haslett  v.  Ehrick,  i  Nott  &  McC,  116; 
Corp  V.  McComb,  i  Johns'  Cas.,  328;  Smith  v.  Little,  10  N.  H.,  526;  Lawson  v. 
Farmers'  Bank,  i  Ohio  St.,  206. 

=  Bayley  on  Bills,  172  ;  Bray  v.  Hadwen,  5  Maule,  68  ;  i  Parsons  N.  &  B., 
515  ;  Wright  v.  Shawcross,  2  Barn.  &  Aid.,  501,  note  ;  Haynes  v.  Birks,  3  B.  & 
P.,  599  ;  Chitty  on  Bills  (13  Am.  ed.),  [*488],  551. 

*  Howard  v.  Ives,  i  Hill,  263  ;  Friend  v.  Wilkinson,  9  Grat.,  31. 

^  Jameson  v.  Swinton,  2  Taunt.,  224;  Geill  v.  Jeremy,  i  Mood.  &  Malk.,  61 
Rovve  V.  Tipper,  13  C.  B.,  249  ;  Lawson  v.  Farmers'  Bank,  i  Ohio  St.,  206.  See 
I  Pars.  N.&  B.,  513,  and  cases  cited  ;  Story  on  Bills,  §  291  ;  Byles  on  Bills  (Shars- 
vvood's  ed.)  [*277],  430  ;  Thomson  on  Bills,  348  ;  Smith  on  Mercantile  Law, 
149;  Simpson  v.  Turney,  5  Humph.,  419  ;  Shelburne  Falls  N.  Bank  v.  Towns- 
ley,  102  Mass.,  177  ;  107  Mass.,  444 ;  Seaton  v.  Scovill,  18  Kans.,  435. 


§  1045.         TIME  WITHIN  WHICH  NOTICE  MUST  BE  GIVEN.  95 

half-past  eight  in  the  morning,  has  been  held  not  bound  to 
send  it  to  a  prior  party  by  a  mail  leaving  at  twelve  o'clock 
the  same  day,  Lord  Ellenborough  saying  :  "  It  has  been 
laid  down,  I  believe,  since  the  case  of  Darbishire  v.  Parker, 
as  a  rule  of  practice,  that  each  party,  into  whose  hands  a 
dishonored  bill  may  pass,  should  be  allowed  one  entire  day 
for  the  purpose  of  giving  notice  ;  a  different  rule  would 
subject  every  party  to  the  inconvenience  of  giving  an  ac- 
count of  all  his  other  engagements,  in  order  to  prove  that 
he  could  not  reasonably  be  expected  to  send  notice  by  the 
same  day's  post  which  brought  it.^ 

Upon  receiving  notice  of  dishonor,  the  indorser  should 
— if  there  be  prior  parties  whom  he  wishes  to  hold  liable — 
immediately  notify  not  only  the  one  immediately  antecedent 
to  him,  but  all  of  them  ;  for  otherwise,  by  the  negligence 
of  his  previous  indorser,  or  of  some  one  of  the  successive 
indorsers,  he  may  lose  recourse  against  some  or  all  of  them 
but  the  one  notified  by  him. 

§  1045.  Over  diligence  of  one  party  does  not  supply  negli- 
gence of  another. — The  overdiligence  of  one  party  to  a  bill 
or  note  in  giving  notice  can  not  supply  the  lack  of  dili- 
gence in  another ;  and  though  the  drawer  or  indorser 
sought  to  be  charged  received  the  notice  as  early  as  he 
would  have  been  entitled  to  it  had  it  passed  in  due  course 
through  the  intermediate  parties,  yet  the  holder,  in  order 
to  bind  him,  must  show  due  diligence  in  each  and  every 
one  of  such  intermediate  parties.^  "  If,"  said  Tucker,  P., 
in  Brown  v.  Ferguson,  4  Leigh,  -^"j,  "there  be  a  defect  in 
any  link  of  the  chain  of  notices,  it  is  fatal  to  the  holder's 

'  Bray  w.  Hadwen,  5  Maule  &  Sel,  68. 

*  Brown  v.  Ferguson,  4  Leigh,  37;  Simpson  v.  Turney.  5  Humph.,  419; 
Smith  V.  Roach,  7  B.  Alon.,  17  ;  Whitman  v.  Farmers'  Bank.'S  Port.  (Ala.),  257  • 
Stix  V.  Mathews,  63  Mo.,  371  ;  Etting  v.  Schuylkill  Bank,  2  Barn.  355  ;  Fitch- 
burg  Bank  v.  Perley,  2  Allen,  433  ;  American  Life  Ins.  Co.  v,  Emerson,  4  Smed. 
&  M.,  1 77  ;  Carter  v.  Burley,  9  N.  H.,  55S ;  Mitchell  v.  Cross,  2  R.  I.,  439  ;  Man- 
chester Bank  v.  Fellows,  8  Fost.,  302 ;  Kennedy  v.  Geddes,  8  Port.  (Ala.),  263 
Rowe  V.  Tipper,  13  C.  B.,  249  (76  E.  C.  L.  R.) ;  i  Pars.  N.  &  B.,  514 ;  Story  on 
Bills,  §  294 ;  Thomson  on  Bills,  348,  349  ;  Turner  v.  Leach,  4  B.  &  Aid.,  451, 


g6  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO46. 

demand.  We  can  not  eke  out  the  underdiligence  of  one 
party  by  the  overdihgence  of  another ;  .  .  .  .  for  as  the 
recourse  of  any  immediate  indorser  against  those  who  lie 
behind  him  arises  from  his  own  liability  to  pay  the  bill  to 
whom  he  passed  it,  the  laches  which  takes  away  his  liability 
takes  away  theirs  also."  Nor  can  any  party  by  waiving 
his  own  discharge  and  paying  the  bill  or  note,  waive  the 
discharge  of  antecedent  parties.^  Moreover,  the  holder 
giving  notice  to  the  first,  or  any  prior  party,  must  give  it 
to  him  in  a  day,  as  well  as  to  the  last  indorser.^ 

But  if  the  holder  of  a  dishonored  promissory  note,  under 
cover  to  whom  a  notice  to  an  indorser  of  its  protest  is  season- 
ably sent  by  mail  by  the  notary,  from  another  post-town 
where  the  note  was  payable,  replaces  it  in  the  post-office 
without  unreasonable  delay,  properly  addressed  to  the  in- 
dorser, it  is  immaterial  to  the  sufficiency  of  the  notice  to 
bind  the  indorser,  that  in  the  ordinary  course  of  the  mails 
he  might  have  received  it  sooner  if  it  had  been  mailed  to 
him  directly  by  the  notary.'^ 

§  1046.  Transmission  of  7iotice  over  seas. — In  the  case 
of  a  foreign  bill  protested  in  one  of  the  United  States,  and 
the  party  entitled  to  notice  resides  in  some  other  nationality 
beyond  seas,  it  is  sufficient  to  send  notice  by  the  first  regu- 
lar ship  ;  and  it  is  no  objection  that  if  sent  by  a  chance 
ship  it  would  reach  him  sooner.^     It  should  be  sent  by  the 

•  Turner  v.  Leach,  4  B.  &  Aid.,  451  (6  E.  C.  L.  R.) 

'  Dobree  v.  Eastwood,  3  Car.  &  P.,  250 ;  Rowe  v.  Tipper,  18  C.  B.,  249  {"j^i 
E.  C.  L.  R.)  ;  see  Thomson  on  Bills,  349  ;  Huntley  v.  Sanderson,  i  Cr.  &  M., 
466. 

'  Shelburne  Falls  Nat.  Bank  v.  Townsley,  loi  Mass.,  444. 

*  Muilman  v.  D'Eguino,  2  H.  Black,  565  ;  Darbishire  v.  Parker,  6  East.,  3.  In 
Stainback  v.  Bank  of  Virginia,  1 1  Grat.,  260,  a  bill  drawn  by  a  house  in  Peters- 
burg, Va.,  on  a  house  in  London,  was  protested  for  non-acceptance  on  April  5th, 
1843.  The  next  Cunard  steamer  sailed  from  Liverpool  for  the  United  States  on 
the  19th,  and  notice  of  dishonor  was  sent  by  it.  At  that  time  the  Cunard  line 
carried  the  mail  between  the  two  countries  under  a  contract  with  the  British 
Government,  and  it  was  the  usual  mode  of  transmitting  letters.  There  were, 
however,  regular  lines  of  sailing  packets  between  London  and  Liverpool  and 
the  United  States,  for  which  letter-bags  were  made  up  at  the  London  post-office, 
and  such  packets  sailed  from  London,  or  Liverpool,  on  the  7th,  loth,  and  17th 


§  I047-      ALLEGATION  AND  PROOF  OF  NOTICE.  97 

ship  going  to  the  port  at  which  the  party  resides,  or  to 
some  neighboring  or  convenient  port  according  to  the  usual 
course  of  transportation  of  letters  of  business,  if  a  reason- 
able time  before  its  departure  is  left  for  writing  and  for- 
warding the  notice.^ 

"  If,  with  the  ports  of  the  country  where  the  bills  are 
protested,  the  communication  is  irregular,  or  at  different 
seasons  by  different  routes  or  ways  of  conveyance,  that 
should  be  adopted  to  send  the  notice,  which  may  reasonably 
be  presumed  to  be  the  most  certain  and  expeditious,  under 
all  the  circumstances."* 

If  the  party  delay  sending  notice  until  after  a  regular 
ship  to  the  place  where  notice  is  addressed  has  departed, 
sending  it  by  the  next  ship  will  be  too  late,  unless  the  delay 
be  excused  by  circumstances.^ 


SECTION  VIII. 

THE  ALLEGATION  AND  PROOF  OF  NOTICE. 

§  1047.  First,  as  to  the  allegation  of  notice. — Byles  states 
that  "it  was  formerly  considered  doubtful Mvhether  such 
facts  as  dispense  with  presentment,  protest,  or  notice  of  dis- 
honor could  or  could  not  be  given  in  evidence,  in  support 
of  the  common  allegations  of  presentment,  protest,  or  no- 
tice in  the  declaration."  But  that  "  it  is  now,  however, 
clear  that  facts  dispensing  with  presentment  or  notice,  such 
as  absence  of  effects  in  the  drawee's  hands,  or  a  counter- 
mand of  payment  by  the  drawer,  must  be  specially  alleged 

of  April,  1843.  But  it  was  probable  that  the  steamer  of  the  19th  would  arrive 
before  any  of  them.  The  notice  was  held  duly  transmitted,  Samuels,  J.,  saying 
that  any  other  course  would  have  sacrificed  the  object  of  the  law.  Byles  on 
Bills  (Sharswood's  ed.)  [*272],  421  ;  Bayley  on  Bills,  179. 

'  Story  on  Bills,  §  286  ;  i  Pars.  N.  &  B.,  485,  note. 

'  Story  on  Bills,  §  286. 

'  Lenox  v.  Leverett,  10  INIass.,  i, 

«  Citing  Cory  v.  Scott,  3  B.  &  Aid.,  619;  Bayley  on  Bills  (5th  ed.),  406. 

Vol.  II.— 7 


98  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §   IO48. 

in  the  declaration,  and  that  proof  of  those  facts  is  inade* 
quate  to  the  support  of  a  positive  averment  of  present- 
ment, protest  or  notice."  ^  He  adds :  "  But  if  it  should 
distinctly  appear  in  evidence  that  there  has  been  a  neglect 
to  present,  and  that  the  defendant,  being  aware  of  the 
omission,  afterward  promised  to  pay,  so  that  the  promise 
is  used  as  a  waiver,  it  is  conceived  that  the  declaration  must 
still  be  special.  It  may  be  otherwise,  when  there  has  been 
a  neglect  to  give  notice  of  dishonor,  and  a  promise  to  pay, 
with  notice  of  the  omission,  has  been  afterward  made  be- 
fore action  brought,  for  then  the  defendant  has,  in  the 
words  of  the  declaration,  had  notice  of  the  dishonor,  which 
notice,  under  the  circumstances,  may  be  deemed  as  against 
him  due  notice.  But  the  law  on  this  subject  does  not  ap- 
pear to  be  very  clearly  settled.^  It  seems,  however,  that 
notice  too  late  in  the  usual  course,  but  reasonable  and  suffi- 
cient under  the  special  circumstances,  may  be  proved  under 
the  ordinary  allegation."^ 

§  1048.  hi  the  U^iited  States  the  authorities  on  this  sub- 
ject are  not  entirely  harmonious ;  but  the  view  of  Mr. 
Greenleaf  is  that  circumstances  of  excuse  or  dispensation 
with  presentment,  protest,  and  notice  may  be  shown  under 
an  averment  of  due  presentment,  protest,  and  notice,  "  the 
evidence  being  regarded  not  strictly  as  matter  in  excuse, 
but  as  proof  of  a  qualified  presentment  and  demand,  or  of 
acts  which,  in  their  legal  effect  and  by  the  custom  of  mer- 
chants, are  equivalent  thereto."^  This  we  think  is  the 
better  view,  and  it  is  sustained  by  decisions  of  the  highest 
respectability.     In  Massachusetts  it  is  settled  by  a  series  of 


*  Byles  on  Bills  [*409],  595,  596,  and  P293],  453 ;  citing  Bourgh  v.  Legge,  5 
M.  &  V^.,  418  ;  see  Terr>'  v.  Parker,  6  Ad.  &  E.,  502  ;  s.  C.  N.  &  P.,  752  ;  Carter 
V.  Flower,  16  M.  &  W.,  749. 

"^  Citing,  see  Brownell  v.  Bonney,  i  Q.  B.,  30;  3  M.  &  Ry.,.359 ;  S.  C.  Dans.  & 
L.,  151  ;  Firth  v.  Thrush,  8  B.  &  C,  387;  Baldwin  v.  Richardson,  i  B.  &  C, 
24s  ;  s.  C.  2  D.  &  Ry.,  285. 

^  Citing  Carter  v.  Flower,  16  M.  &  W.,  749. 

*  2  Greenleaf  on  Evidence,  §  197. 


§   I049-  ALLEGATION  AND  PROOF  OF  NOTICE.  99 

decisions  that  in  an  action  by  the  indorsee  against  the  in 
dorser  of  a  note,  evidence  of  a  waiv^er  of  demand,  protest, 
and  notice  is  sufficient  in  support  of  an  averment  of  de- 
mand, protest,  and  notice,^  and  in  other  States  the  same 
view  has  been  adopted.^  Edwards  states  on  English  au- 
thority that  a  waiver  of  notice  before  dishonor  can  not  be 
proved  under  an  allegation  of  due  notice  ;^  but  this  is  not 
the  prevailing  rule  in  the  United  States."* 

§  1049.  So  it  may  be  regarded  as  established  in  the 
United  States,  that  evidence  of  due  diligence  in  the  holder 
to  obtain  payment,  and  to  make  protest  and  give  notice,  is 
admissible  under  the  general  averment  of  due  demand,  pro- 
test, and  notice.^  Thus,  where  the  maker  of  a  note  could 
not  be  found  at  his  store,  and  a  demand  was  made  on  his 
clerk,  it  was  not  thought  necessary  to  aver  this  fact  specifi- 
cally, but  that  it  might  be  shown  under  an  allegation  of  due 
demand  upon  the  maker.  So  where  the  drawer  of  a  check 
stopped  payment,  and  due  notice  was  averred,  it  was  held 
that  the  averment  might  be  disregarded  as  surplusage,  and 
the  defendant  was  held  bound.^ 

§  1050.   Second,  as  to  proof  of  notice. — The  burden  of 
proving  that  notice  was   duly  given  so  as  to   charge  the 


'  Armstrong  v.  Chadwick,  127  Mass.,  756  ;  Harrison  v.  Bailey,  99  I\Tass.,  620  ; 
Taunton  Bank  v.  Richardson,  5  Pick.,  436,  444 ;  Jones  v.  Fales,  4  Mass.,  245  ; 
City  Bank  v.  Cutter,  3  Pick.,  414;  North  Bank  v.  Abbott,  13  Pick.,  465  ;  Kent  v. 
Warner,  12  Allen,  561.  This,  iiowever,  has  been  there  regarded  as  an  excep- 
tion "  to  an  established  and  most  salutary  rule  of  evidence,"  and  held  not  ap- 
plicable to  other  executory  agreements,  in  Colt  v.  Miller,  10  Cush.,  51. 

^  Tobey  v.  Berly,  26  111.,  426;  Norton  v.  Lewis,  2  Conn.,  478  (waiver  before 
maturity);  Camp  v.  Bates,  11  Conn.,  488,  493  (waiver  after  maturity);  Wind- 
ham Bank  v.  Norton,  22  Conn.,  214,  219;  Kennen  v.  McRea,  7  Port.  (Ala.),  176, 
186.  See  also  Spann  v.  Balzell,  i  Florida,  302;  Shirley  v.  Fellows,  9  Porter,' 
300;  McVeigh  v.  Bank  of  Old  Dominion,  26  Gratt.,  799,  Moncure,  P.  ;  Redfield 
&  Bigelow's  Lead.  Cases,  417 ;  2  Smith's  Lead.  Cases,  74. 

=  Edwards  on  Bills,  636.  «  Norton  v.  Lewis,  2  Conn.,  478, 

*  Stewart  v.  Eden,  2  Caines,  127  ;  Williams  v.  Matthews,  3  Cow.,  262 ;  Ogden 
V.  Conley,  2  Johns,  274;  see  also  Saunderson  v.  Judge,  2  H.  Bl.,  510;  contra, 
Curtis  V.  State  Bank,  6  Blackf.,  314.  In  England  the  rule  is  different.  Allen  v. 
Edmundson,  17  L.  J.  N.  S. ;  Common  Law,  291  (1848) ;  2  Exch.,  719. 

'  Purchase  v.  Mattison,  6  Duer,  592  ;  see  also  Jacks  v.  Darrin,  3  E.  D.  Smith, 
558  (Professor  Parsons  in  vol.  2,  N.  &  B.,  p.  72,  quotes  these  cases  by  mistake 
for  the  opposite  doctrine). 


lOO  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.         §I05I 

drawer  of  a  bill,  or  the  indorser  of  a  bill  or  note,  rests  upon 
the  plaintiff.  And  this  burden  he  may  bear  in  two  ways  ; 
First,  by  proving  due  and  legal  diligence  used  in  giving 
notice  to  the  party  entitled  thereto,  in  which  case  the  legal 
presumption  of  its  due  receipt  will  attach  and  obviate  the 
necessity  of  further  evidence.^  Or  second,  by  proving  that 
notice  was  actually  received  in  due  time,  in  which  case  it 
matters  not  what  means  of  communication  was  employed.^ 
Presumptions  of  due  notice  may  also  be  created  by  proof 
of  promise  to  pay,  or  part  payment,  in  the  manner  else- 
where considered.^  An  admission  or  acknowledgment  of 
notice  is  presumptive  evidence  of  notice.^ 

§  105 1.  The  plaintiff  must  distinctly  show  that  notice 
was  given  on  the  proper  day ;  it  will  not  suffice  to  show 
that  it  was  given  on  one  of  two  days,  because  the  latter 
would  be  too  late.^  But  when  it  is  shown  that  the  notice 
was  on  the  proper  day  deposited  in  the  post-office,  properly 

'  Lambert  v.  Ghiselin,  9  How.,  552 ;  Saco  National  Bank  v.  Sanborn,  63  Me., 
340  ;  Shed  v.  Brett,  i  Pick.,  401,  the  court  saying:  "An  averment  of  notice  wiil 
be  sufficiently  proved  by  showing  that  the  steps  necessar)'  to  give  the  notice  have 
been  taken  ;  if  subsequently  received,  it  will  relate  to  the  time  when  it  was  sent ; 
if  never  received,  the  fact  of  having  put  it  in  the  proper  train  is  enough." 

^  Dickens  v.  Beal,  10  Pet.,  572  ;  First  N.  B.  v.  Wood,  51  Vt.,  471.  See  §§  looo, 
1003. 

'  See  chapter  xxxv. 

*  Todd  V.  Neal's  Adm'r,  49  Ala.,  266  ;  Donegan  v.  Wood,  49  Ala.,  242. 

^Lawson  v.  Sherwood,  i  Stark.,  314  (2  E.  C.  L.  R.)  In  Friend  v.  Wilkinson 
&  Hunt,  9  Grat.,  31,  two  bills  payable  in  Cincinnati  were  protested  for  non-pay- 
ment, on  February  ist,  1850,  and  notice  was  due  to  the  Bank  of  Virginia,  at 
Charleston,  Kanawha  Co.,  Va.,  which  had  transmitted  it  for  collection.  Judge 
Allen,  who  rendered  the  opinion  of  the  court,  said :  "  A  notice  of  protest  dated 
at  Cincinnati  on  the  first  of  February,  1850,  was  sent  by  mail  to  the  cashier  of 
the  Bank  of  Virginia,  at  Charleston,  Kanawha  County,  Va.,  and  was  received  on 
the  night  of  the  7th  of  February,  inclosed  in  a  letter  postmarked  Cincinnati, 
Ohio,  and  was  handed  to  Friend,  the  indorser,  on  the  next  day.  It  was  further 
proved  that  a  letter  would  arrive  at  Charleston  in  four  or  five  days  after  it  was 
mailed  in  Cincinnati,  if  it  came  by  the  direct  route.  If  sent  by  another  route,  a 
letter  might  be  ten  or  twelve  days  on  the  way ;  or  that  it  might  be,  and  letters 
sometimes  were,  delayed  at  Chilicothe,  Ohio,  by  the  regulations  in  regard  to  the 
departure  of  the  mail  on  the  regular  route  from  Cincinnati.  Upon  this  proof  the 
question  arises  whether  Friend  had  due  notice  of  the  dishonor  of  the  bill.  The 
Bank  of  Virginia,  at  Charleston,  Kanawha,  is  to  be  treated  as  a  distinct  holder, 
the  bill  having  been  placed  there  for  presentment  and  collection  ;  and  notice  was 
given  by  it  in  due  time  after  it  was  received  from  Cincinnati.  The  party  not 
residing  in  or  near  the  city  of  Cincinnati,  a  notice  sent  by  the  mail  of  the  next 
day,  or  the  next  practicable  mail,  would  be  sufficient,  and  the  burden  of  proving 
a  reasonable  notice  is  on  the  plaintiff.    It  is,  where  notice  is  required,  a  condition 


§  1052.  ALLEGATION  AND  PROOF  OF  NOTICE.  lOl 

addressed  in  respect  to  name  and  post-office,  no  further 
proof  is  necessary,  as  due  diligence  will  then  have  been  ex- 
ercised.^ If  notice  be  given  by  letter,  its  contents  may  be 
shown  without  a  notice  to  produce  the  letter.'^  If  it  were 
given  by  one  of  two  duplicate  notices,  evidence  may  be 
given  of  sending  one,  and  then  the  other  offered  to  the 
jury  without  notice  to  produce  the  one  sent.^  A  finding 
that  a  notice  the  contents  of  which  are  unknown  was 
served  is  not  equivalent  to  finding  that  notice  of  protest,, 
much  less  that  sufficient  notice  of  protest,  was  served."* 

§  1052.   Postmark  as  evidence. — A  postmark  is  prima 
faciei  but  not  conclusive  ®  evidence  that  notice  was  mailed 

precedent  to  his  right  to  recover,  and  he  must  show  a  strict  performance.  In 
this  case  it  does  not  appear  whether  there  was  a  daily  mail  between  Cincinnati 
and  Charleston  or  not,  nor  when  the  notice  was  put  in  the  post-office  to  be 
mailed.  It  is  dated  on  the  first  and  was  received  on  the  night  of  the  7th  of 
February ;  and  the  proof  is  that  a  letter  would  arrive  at  Charleston  in  four  or  five 
days  after  it  was  mailed  at  Cincinnati  if  it  came  by  the  direct  route.  The  notice 
therefore  might  have  been  placed  in  the  office  and  mailed  on  the  morning  of  the 
4th,  and  have  arrived  after  night  on  the  7th,  according  to  this  eudence.  Being 
protested  on  the  ist,  it  should  have  been  placed  in  the  office  to  be  sent  by  the 
mail  of  the  next  day,  unless  that  was  Sunday,  and  if  so,  by  the  mail  of  the  third 
of  February  if  there  was  such  mail,  or  if  not,  by  the  next  practicable  mail  ;  and 
it  was  incumbent  on  the  plaintiff  below  to  show  the  time  it  was  so  placed  in  the 

office  to  be  mailed The  notice  may  have  been  put  in  the  office  to  be 

mailed  on  the  2d,  and  not  have  been  received  until  the  night  of  the  7th  ;  if  so, 
it  would  have  been  sufficient ;  but  it  might  have  been  put  in  the  office  and  mailed 
on  the  3d  or  4lh  and  received  at  the  same  time  ;  if  so,  it  was  too  late,  unless 
that  was  the  first  mail  after  the  dishonor  of  the  bill.  And  these  were  matters 
which  the  plaintiff  were  bound  to  prove,  and  probably  could  have  done  so  by  an 
examination  of  the  notary.'' 

'  Bussard  v.  Levering,  6  Wheat.,  102  ;  Dickens  v.  Beal,  10  Pet.,  572  ;  Shed  v. 
Brett,  I  Pick.,  401  ;  Briggs  v.  Hervey,  130  Mass.,  186. 

"Eagle  Bank  v.  Chapin,  3  Pick.,  180  ;  Lindenberger  v.  Beall,  6  Wheat.,  104  ; 
Leavitt  v.  Simes,  3  N.  H.,  14;  Kine  v.  Beaumont,  3  Brod.  &  B.,  288;  7  J.  B. 
Moore,  112  ;  Roberts  v.  Bradshaw,  i  Stark.,  28,  overruling  earlier  cases  ;  2  Par- 
sons N.  &  B.,  490,  note. 

^  Ackland  v.  Pearce,  3  Camp.,  599 ;  Roberts  v.  Bradshaw,  i  Stark.,  28  ;  2  Par- 
sons N.  &  B.,  491. 

^  Couch  V.  Sherrill,  17  Kansas,  622,  Brewer,  J.  :  There  is  no  presumption  in 
favor  of  the  action  of  the  notary  as  official  action,  because  it  is  no  part  of  his 
official  duty  as  notary  to  serve  notice.  If  he  serve  any  notice  it  is  as  agent  of 
the  holder,  and  not  as  notary.  Hence,  the  finding  as  to  notice  is  to  be  treated 
as  though  notice  had  been  served  by  the  holder.  Now  what  notice  was  served  ? 
....  It  does  not  even  appear  to  have  been  notice  of  protest." 

^Earl)  V.  Preston,  i  Pat.  &  Heath,  228  ;  Crawford  v.  Branch  Bank,  i  Ala.,  205  ; 
New  Haven  Co.  Bank  v.  Mitchell,  15  Conn.,  206;  Arcangelow  v.  Thompson,  2 
Camp.,  G20;  Rex  v.  Plumcr,  Rus.  &  Ry.,  264;  Langdon  v.  Hulls,  5  Esp.,  156; 
Fletchei  v.  Braddyll,  3  Stark.,  64. 

*Stocken  v.  Collin,  7  M.  &  \V.,  545 ;  9  C.  &  P.,  653  (38  E.  C.  L.  R.) 


I02  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §    IO53 

on  the  day  designated ;  and  when  one  puts  a  letter  in  the 
mail  on  the  day. that  it  ought  to  be  received  he  must  show 
that  it  was  posted  in  time  to  be  received  on  that  day.^ 
Genuineness  of  the  postmark  may  be  proved  by  any  wit- 
ness, whether  a  post-ofhce  employe  or  not.^ 

§  1053.  When  there  are  a  nu77tber  of  parties  entitled  to 
notice  it  is  sufficient  in  order  to  hold  any  one  of  them  bound, 
to  show  that  notice  reached  him  in  such  a  time  as  it  would 
occupy  for  the  intermediate  parties  to  transmit  it  to  him 
in  due  course  of  the  mails,  allowing  each  one  his  day.^  But 
the  courts  can  not  take  judicial  cognizance  of  the  course  of 
the  mails,  and  that  must  be  shown  by  the  plaintiff.^  It 
would  be  better  for  him  also  to  show  that  he  gave  notice  in 
due  season  to  his  immediate  indorser.^  When  the  plaintiff 
has  shown  that  notice  reached  the  remote  party  within  the 
time  which  would  regularly  be  consumed,  it  will  be  for 
him  to  show  a  defective  link  in  the  chain  of  notices,  if  any 
there  be. 

§  1054.  When  the  mail  is  the  proper  channel  for  the 
communication  of  notice,  it  is  not  necessary  to  show  the 
distinct  fact  that  the  particular  letter  containing  the  notice 
was  put  in  the  mail,  by  ocular  evidence  thereof.  Proof 
that  notice  was  put  with  letters  for  the  post-office  by  one 
clerk,  and  that  the  letters  of  that  day  were  deposited  by 
another  clerk,  would  be  sufficient.^  And  it  would  likewise 
be  sufficient  to  show  that  it  was  put  with  letters  customarily 
made  up  in  the  usual  course  of  business  for  the  postman, 
and  that  he  invariably  carried  all  the  letters  found  upon  the 

*  Fowler  v.  Henden,  4  Tyrw.,  1002 ;  Byles  on  Bills  (Sharswood's  ed.)  [*275], 
427. 

«V^oodcock  V.  Houldsworth,  16  M.  &  W.,  124;  Fletcher  v.  Braddyll,  3 
Stark.,  64. 

'  Jones  V.  Warden,  6  W.  &  S.,  399;  Etting  v.  Schuylkill  Bank,  2  Penn.  St.  R., 
345  ;  Marsh  v.  Maxwell,  2  Camp.,  210. 

"  Friend  v.  Wilkinson,  9  Grat.,  31  ;  Carter  v.  Burley,  9  N.  H.,  558  ;  Early  v 
Preston,  2  Pat.  &  Heath,  228. 

'  I  Parsons  N.  &  B.,  518.  °  Commercial  Bank  v.  Strong,  28  Vt.,  316 


§»   I055-  ALLEGATION  AND  PROOF  OF  NOTICE.  IO3 

table.^  But  it  has  been  held  that  proof  that  a  letter  was 
put  on  the  table  with  others,  and  that  it  was  the  regular 
course  of  business  for  the  porter  to  take  them  to  the  post- 
office,  would  not  be  sufficient — at  least  unless  it  were 
proved  that  the  porter  always  carried  the  letters  so  pre- 
pared, which,  without  any  distinct  remembrance  as  to  that 
particular  one,  the  court  intimated  would  be  satisfactory.^ 

Delivering  the  notice  to  the  assistant  postmaster  in  an 
adjoining  room  would  suffice,  that  being  the  usage  of  the 
place  ;  ^  but  a  clerk's  statement  that  notice  was  put  in,  he 
not  remembering  whether  by  himself  or  another,  would 
not.* 

§  1055.  The  protest  of  a  foreign  bill  \s,  by  the  law^  mer- 
chant, evidence  of  its  presentment  and  dishonor ;  but  ex- 
cept where  it  is  so  provided  by  statute,  it  is  not  evidence 
in  respect  to  notice  ;  and  where  statute  does  not  authorize 
the  admission  of  the  certificate  of  protest  as  evidence  of  no- 
tice, it  is  usual  to  take  the  notary's  deposition  to  prove  it, 
or  that  of  some  other  witness,  or  to  call  the  notary  or  wit- 
ness to  testify  ore  tenus  at  the  trial.^ 

Statutory  enactments  have  very  generally  changed  this 
doctrine  of  the  law  merchant,  and  though  sustained  by  au- 
thority, a  distinguished  author  has  denied  it.^ 

If  the  notary  has  kept  no  record  of  the  notice,  his  oral 
testimony  is  competent  to  prove  the  contents." 

§  1056.  Where  a  notary  testified  that  it;  was  usual  for 

^  Skilbeck  v.  Garbett,  7  Q.  B.,  846;  see  Brailsford  v.  Williams,  15  Md.,  150  ; 
Flack  V.  Green,  3  Gill  &  J.,  474 ;  Miller  v.  Hackles,  5  Johns,  375. 

'  Hethering^on  v.  Kemp,  4  Camp.,  193;  Byles  on  Bills  (Sharswood's  ed.), 
420. 

^  Mount  Vernon  Bank  v.  Holden,  2  R.  I.,  467. 

*  Havvkes  v.  Salter,  i  M.  &  P.,  750. 

'  See  chapter  xxvill,  on  Protest,  sec.  v,  §  960  <f/  seq  ;  Harrison  v.  Robinson, 
4  How.,  336  ;  Lambert  v.  Ghiselin,  9  How.,  532;  Dickens  v.  Beal,  10  Pet.,  582; 
Miller  v.  Hackley,  5  Johns,  384  ;  Lloyd  v.  McGair,  3  Barr,  482  ;  Walker  v.  Turner, 
3  Grat,  536. 

'  2  Parsons  N.  &  B.,  498  ;  see  chapter  xxviil,  on  Protest,  sec.  iv. 

^  Terbell  v.  Jones,  15  Wis.,  253. 


I04  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.  §    ^^57- 

• 

him  to  send  notices  of  dishonor  on  the  evening  of  the  day 
of  protest,  and  he  had  no  doubt  it  was  duly  done  in  this 
instance,  it  was  held  sufficient  evidence  of  notice.^  But 
where  a  notary  testified  as  to  a  similar  habit,  and  presumed 
notice  was  given,  but  had  no  distinct  recollection,  it  was 
held  otherwise.^  A  clerk's  conclusion  from  circumstances 
which  he  remembered,  though  he  did  not  recollect  having 
delivered  notice,  that  he  had  done  so,  was  thought  sufficient 
in  another  case.^  It  was  likewise  held  in  Maine,  that 
where  the  notary  testified  he  had  prepared  notice  and  given 
it  to  S.  to  deliver,  and  S.  had  no  recollection  of  that  partic- 
ular notice,  but  it  was  his  habit  to  deliver  notice,  generally, 
the  usage  operated  sufficient  evidence  of  notice.* 

§  1057.  Wheft  the  notary  who  gave  the  notice  is  dead, 
the  entries  respecting  it  in  his  books  are  good  secondary 
evidence,^  even  where  protest  is  not  required  by  law,  as  in 
the  case  of  a  note  or  an  inland  bill.^  But  the  entry  can 
prove  no  more  than  what  it  states ;  and  if  it  omits  to  state 
the  residence  of  the  indorser,  the  post-office  to  which  notice 
was  addressed,  or  any  other  material  fact,  it  can  not  be  in- 
ferred.''' The  notary's  register  would  be  no  evidence  after 
his  death  if  the  entries  were  made  by  a  clerk  still  living, 
and  although  he  be  absent  and  out  of  reach,^  but  if  such 
clerk  were  deceased  it  would  be.^  Entries  made  by  officials 
deceased  at  the  time  of  trial  are  in  general  admissible,  and 
the  principle  has  been  held  to  apply  to  the  case  of  deceased 


'  Miller  v,  Hackley,  5  Johns,  375  ;  see  also  Carson  v.  Bank  of  the  State,  4 
Ala.,  148. 

=  Hofifv.  Baldwin,  12  Mart.  (La.),  699;  see  also  Bullard  v.  Wilson,  17  Mart. 
(La,),  196. 

'  New  Haven  Co.  Bank  v.  Mitchell,  15  Conn.,  206. 

*  Union  Bank  v.  Stone,  50  Me.,  595. 

*  Robins  v.  Pinckard,  5  Sm.  &  M.,  51. 

*  Nicholls  V.  Webb,  8  Wheat.,  326  ;  Butler  v.  Webb,  2  Wend.,  369.  See 
chapter  xxvili,  on  Protest,  sec.  iv. 

'  Farmers'  Bank  v.  Duvall,  7  Gill  &  J.,  78  ;  Halliday  v.  Martinet,  20  Johns, 
168. 

*  Wilbur  V.  Selden,  6  Cow.,  162.  '  Gawtry  v.  Doane,  51  N  Y.,  90. 


§    1058.  ALLEGATION  AND  PROOF  OF  NOTICE.  IO5 

messengers  and  bookkeepers/  cashiers  of  banks,^  and  clerks,' 
as  well  as  to  notaries.^  "  The  rule  is,"  says  Bronson,  J., 
"  that  entries  and  memoranda  made  in  the  usual  course  of 
business  by  notaries,  clerks,  and  other  persons,  may  be  re- 
ceived in  evidence  after  the  death  of  the  persons  who  made 
them."  5 

§  1058.  When  diligence  is  question  of  law,  and  when  of 
fact. — When  the  facts  are  ascertained,  it  is  simply  a  ques- 
tion of  law  for  the  court  to  determine  whether  or  not  rea- 
sonable diligence  has  been  exercised ;  ^  but  when  the  facts 
are  disputed,  it  is  a  question  for  the  jury  upon  hypothetical 
instructions  of  the  court.^ 

§  1058^.  Diligence  suffices. — When  due  diligence  has 
been  exercised  and  notice  sent  accordingly,  the  holder  is 
not  obliged  to  give  any  further  notice,  although  he  after- 
ward discovers  that  the  notice  was  sent  to  the  wrong  place. 
Such  is  the  doctrine  of  the  United  States  Supreme  Court, 
which  has  said  on  this  subject,  where  the  holder,  after  due 
inquiry,  sent  notice  :  "  The  liability  of  the  indorser  was 
fixed  by  the  notice  sent  to  Nottingham.  The  plaintiffs 
had  acquired  a  right  of  action  against  him  by  this  notice, 
and  might  have  brought  their  suit  against  him  the  next 
day.  Could  that  right  be  divested  by  the  information 
which  was  subsequently  given  to  them  ?  We  think  not, 
and  that  all  of  the  cases  in  relation  to  this  subject  imply 


»  Welsh  V.  Barratt,  15  Mass.,  380.  '  Nichols  v.  Goldsmith,  7  Wend.,  160. 

*  Ocean  National  Bank  v.  Carll,  16  N.  Y.  S.  C.  (10  Hun),  241. 

*  Halliday  v.  Martinet,  20  Johns,  168  ;  Nicholls  v.  Webb,  8  Wheat.,  326  ; 
Nichols  V.  Goldsmith,  7  Wend.,  160;  Homes  v.  Smith,  16  Me.,  181  ;  Price  v. 
Torrington,  i  Salk.,  285. 

*  Brewster  v.  Doane,  2  Hill,  537. 

"  Bank  of  Columbia  v.  Lawrence,  i  Pet.,  578  ;  Harris  v.  Robinson,  4  How., 
336;  Walker  v.  Stetson,  14  Ohio  St.,  89;  Belden  v.  Lamb,  17  Conn.,  442; 
Wheeler  v.  Field,  6  Mete,  290;  Bank  of  Utica  v.  Bender,  21  Wend.,  643; 
Rhett  V.  Poe,  2  How.,  457  ;  Edwards  on  Bills,  648 ;  Lane  v.  Bank  of  West  Ten- 
nessee, 9  Heisk.,  419. 

'  See  chapter  XVII,  on  Presentment  for  Acceptance,  sec.  iii,  §  466,  vol.  i  ;  and 
chapter  xx,  on  Presentment  for  Payment,  sec.  iii,  §612,  vol.  I. 


I06  NOTICE  OF  DISHONOR  OF  INSTRUMENTS.        §   1058^. 

the  contrary."^  In  New  York  a  contrary  view  has  been 
taken,  but  without  apparent  confidence,^  and  it  would  be 
more  reasonable  to  regard  the  holder  as  having  complied 
with  his  obligation  when  he  had  acted  with  due  diligence 
to  ascertain  the  indorser's  whereabouts. 


'  Lambert  v.  Ghiselin,  9  How.,  552. 

'  Beale  v.  Parish,  20  N.  Y.,  407,  overruling  24  Barb,,  243. 


CHAPTER  XXX. 

CIRCUMSTANCES     OF     A     GENERAL     NATURE      WHICH      EXCUSE 
WANT    OF    PRESENTMENT,    PROTEST,    AND    NOTICE. 

§  1059.  The  circumstances  of  a  general  nature  which  ex- 
cuse the  holder  when  there  has  been  a  failure  on  his  part  to 
make  due  presentment  of  the  bill  or  note  to  the  drawee, 
acceptor,  or  maker,  or  to  convey  due  notice  of  dishonor  to 
the  drawer  or  indorser,  may  be  classified  as  follows  : 

(i)  The  breaking  out  of  a  war  between  the  country  of 
the  holder  and  that  of  the  party  to  whom  presentment 
should  be  made  or  notice  given. 

(2)  Public  and  positive  prohibitions  of  commercial  in- 
tercourse between  the  countries  of  the  holder  and  that  of 
the  party  to  whom  presentment  should  be  made  or  notice 
given. 

(3)  The  occupation  of  the  country  where  the  parties 
live,  or  where  the  bill  or  note  is  payable,  by  a  public  enemy, 
or  by  mihtary  forces,  which  obstructs  or  suspends  commer- 
cial intercourse. 

(4)  Political  disturbances  amounting  to  a  virtual  inter- 
ruption and  obstruction  of  the  ordinary  negotiations  of 
trade. 

(5)  The  prevalence  of  a  malignant  epidemic  disease, 
which  suspends  the  ordinary  operations  of  business. 

(6)  Overwhelming  calamity,  or  unavoidable  accident, 
which  obstructs  the  usual  channels  of  communication. 

These  circumstances  are  of  a  character  not  affecting  the 
individual  peculiarly,  but  having  such  a  general  influence 
upon  the  country  or  the  community  as  to  impede  and  pre- 

(107) 


I08  WANT  OF  PRESENTMENT,  PROTEST,  AND  NOTICE.  §  I060. 

vent  the  ordinary  pursuits  of  business,  or  obstruct  the 
methods  of  communication,  and  they  are  recognized, 
almost,  if  not  quite,  universally,  as  exonerating  those  who 
come  under  their  operation  from  the  performance  of  the 
obligations  in  respect  to  negotiable  instruments  with  which 
they  interfere.  The  classification  of  those  circumstances 
which  we  have  adopted  is,  with  some  alterations  which 
confine  them  strictly  within  the  description  of  "  general 
circumstances,"  substantially  that  which  is  found  in  the 
work  of  Story  on  Promissory  Notes,  and  which  has  been 
sanctioned  by  more  recent  writers,  and  by  a  number  of  ad- 
judicated cases.^ 

SECTION   I. 

WAR,    INTERDICTION    OF    INTERCOURSE,    AND    OCCUPATION     OF 
COUNTRY    BY   PUBLIC   ENEMY. 

§  1060.  In  the  first  place,  as  to  breaking  out  of  war. — A 
declaration  of  war  between  the  country  where  the  holder  is 
domiciled  and  that  where  the  party  to  whom  presentment 
should  be  made  or  notice  given  is  domiciled,  or  the  breaking 
out  of  hostilities  between  such  countries,  operates  as  an  inter- 
diction of  all  commercial  intercourse  ;  and  all  communication 
between  the  subjects  of  the  belligerents,  or  parties  on  oppo- 
site sides  of  the  belligerent  line,  is  prohibited.  This  is  a  gen- 
eral principle  of  the  law  of  nations,  recognized  and  applied 
to  all  kinds  of  transactions  ;^  and  it  constitutes  a  clear  and  ad- 
mitted justification  of  the  omission  to  make  due  presentment 
of  the  bill  or  note  or  to  give  notice,  during  the  continuance  of 
hostilities  or  the  suspension  and  prohibition  of  intercourse.^ 

'  Story  on  Notes,  §§  205,  257,  356  ;  see  also  Story  on  Bills,  §§  234,  327  ;  i 
Parsons  N.  &  B.,  460  ;  Edwards  on  Bills,  492 ;  House  v.  Adams,  48  Penn.  St., 
261  ;  Apperson  v.  Union  Bank,  4  Cold.,  445  (as  to  notice). 

*  U.   S.  V.  Grossmeyer,  9  Wall.,  75  ;    The  William  Bagaley,  5  Wall.,   377  ; 
Alexander's  Cotton,  2  Wall.,  404;    Scholefield  v.  Eichelberger,  7  Pet.,   586 
Woods  V.  Wilder,  43  N.  Y.,  164 ;  Wheaton  Int.  Law,  §  317  ;  i  Kent  Com.,  67, 

^Patience  v.  Townley,  2  J.  P.  Smith,  224  (King's  Bench,  1806);  House  ^ 
Adams,  48  Penn.  St.,   261  ;    Morgan  v.  Bank  of  Louisville,  4  Bush  (Ky.),  82 


^   1 06 1.        INTERDICTION  OF  INTERCOURSE  BY  WAR.  IO9 

Indeed,  war  is  not  only  an  excuse  for  not  givnng  notice,  but 
entirely  precludes  the  reason  and  necessity  of  it ;  and  if  no- 
tice be  put  in  the  post-office,  addressed  to  a  party  on  the 
other  side  of  the  hostile  line,  it  would  be  an  utterly  void 
act,  unless  it  was  proved  that  there  was  a  general  usage  of 
the  postal  department  to  preserve  letters  deposited  and  for- 
ward them  to  their  destination  on  the  reopening  of  inter- 
course.* The  rule  applies  to  protest  and  all  of  the  proceed- 
ings usual  at  maturity  of  the  note.^ 

§  1 06 1.  Confederate  war  cases. — In  respect  to  the  late 
conflict  between  the  United  States  and  the  Confederate 
States,  it  has  been  held  that  although  a  state  of  hostility 
existed  and  the  war  had  become  flagrant ;  nevertheless,  that 
as  commercial  intercourse  was  not  interdicted  until  August 
1 6th,  1 86 1,  by  proclamation  of  President  Lincoln,  contracts 
between  persons  in  the  Union  and  in  the  seceded  States 
were  not  until  that  time  illegal.^  The  fact  that  Congress 
had  authorized  such  proclamation  on  the  13th  of  July, 
1 86 1,  has  not  been  considered  to  alter  the  case  ;  and  where 
a  bill  drawn  in  Missouri  on  New  Orleans  was  protested  on 
July  17th,  1 86 1,  it  was  held  that  the  condition  of  the  coun- 
try was  no  excuse  for  failure  to  give  notice  "*  to  parties  in 

Berry  v.  Southern  Bank,  2  Duv.,  379 ;  Bell  v.  Hall's  Exrs.,  2  Id.,  288 ;  Apper- 
son  V.  Union  Bank,  4  Cold.,  445  ;  Norris  v.  Despard,  38  Md.,  491  ;  James  v. 
Wade,  21  La.  Ann.,  548  (1869),  (there  being-  suspension  of  mail  service  and 
commercial  intercourse)  ;  Durden  v.  Smith,  44  Miss.,  548  ;  Shaw  v.  Neal,  19  La. 
Ann.,  156;  Billgerry  v.  Branch,  19  Grat.,  393;  Farmers'  Bank  v.  Gunnell,  26 
Grat.,  138;  Bynum  v.  Apperson,  9  Heisk.,  632;  Harden  v.  Boyce,  59  Barb., 
427  ;  Story  on  Notes,  §  263  ;  Story  on  Bills,  §  234 ;  Thomson  on  Bills  (Wilson's 
ed.),  280. 

1  Harden  v.  Boyce,  59  Barb.,  427  ;  Shaw  v.  Neal,  19  La.  Ann.,  156  ;  James  v. 
Wade,  21  La.  Ann.,  548  ;  Billgerry  v.  Branch,  19  Grat.,  393;  Farmers'  Bank  v. 
Gunnell,  26  Grat.,  132  ;  McVeigh  v.  Bank  of  Old  Dominion,  26  Grat.,  785.  See 
atite,  chapter  Vlli,  sec.  ii,  §§  216,  222,  vol.  i. 

""  McVeigh  v.  Bank  of  Old  Dominion,  26  Grat.,  838. 

'  Leathers  v.  Commercial  Ins.  Co.,  2  Bush  (Ky.),  296. 

*  Union  National  Bank  v.  Marr's  Adm'r,  6  Bush.,  615,  Hardin,  J.,  saying: 
"  Notwithstanding  the  disturbed  condition  of  the  country  which  we  know  judi- 
cially to  have  existed  when  the  bill  was  protested,  it  does  not  appear  that  at  that 
time  there  was  such  obstruction  of  intercommunication  between  the  southern 
and  border  States  as  to  prevent  the  transmission  and  delivery  of  notice  of  dis- 
honor of  the  bill." 


no    WANT  OF  PRESENTMENT,  PROTEST,   AND  NOTICE.    §   IO62. 

Missouri,  that  State  being  within  the  Federal,  and  New 
Orleans  in  the  Confederate,  lines. 

§  1062.  But  these  decisions  are  utterly  at  variance  with 
the  current  of  authorities  and  with  the  principle  on  which 
they  rest.  War  declared  or  flagrant,  operates,  as  said  by 
Chancellor  Kent,  an  interdiction  "  to  all  communication, 
to  all  locomotive  intercourse,  to  a  state  of  utter  seclusion  to 
any  intercourse  but  one  of  open  hostility,  to  any  meeting 
but  in  actual  combat."  ^  The  policy  of  the  rule  is  to  close 
all  relations  between  the  antagonists  but  those  of  antago- 
nism, and  no  express  prohibition  is  necessary  to  put  it  in 
force.  In  Virginia,  where  it  appeared  that  after  indorsing 
several  negotiable  notes,  the  indorser,  who  resided  in  Alex- 
andria, left  the  city,  which  had  been,  in  the  meantime,  per- 
manently occupied  by  the  U.  S.  forces,  and  went  to  Rich- 
mond, where  he  remained  until  the  end  of  the  Confederate 
war  ;  that  he  left  a  white  servant  at  his  residence  in  Alex- 
andria, and  his  usual  place  of  business  was  the  bank  at 
which  the  notes  were  discounted,  and  of  which  he  was 
president ;  and  that  at  the  maturity  of  the  notes  they  were 
protested  ; — it  was  held  that  notices  of  dishonor  left  at  his 
house  with  the  servant  in  charge,  and  at  his  place  of  business 
at  the  bank  were  insufficient,  and  no  other  notices  having 
been  given,  that  he  was  discharged  from  all  Hability.^ 

§  1063.  hi  the  second  place,  as  to  public  interdiction  of 
co7nmerce  ajtd  intercourse. — The  interdiction  of  intercourse 
between  the  countries  of  the  holder  and  that  of  the  party  to 
whom  presentment  should  be  made,  would  operate  as  a 
direct  prohibition  upon  the  holder,  as  much  so  as  a  declara- 
tion or  open  state  of  war,  and  it  would  violate  every  prin- 
ciple of  comity  and  justice  to  subject  him  to  a  forfeiture  of 
any  right  which  he  could  only  pursue  in  violation  of  law  ; 

'  Griswold  V.  Waddington,  19  Johns,  438.  See  ante,  chapter  VIII,  sec.  ii. 
I  216  et  seq.,  vol.  I  ;  and  also  Billgerry  v.  Branch,  19  Grat.,  393;  McVeigh  v. 
Bank  of  Old  Dominion,  26  Grat.,  785. 

^  McVeigh  v.  Bank  of  Old  Dominion,  26  Grat.,  785. 


§1064.        INTERDICTION  OF  INTERCOURSE  BY  WAR.  Ill 

and  this  is  therefore  a  universally  recognized  excuse  for  not 
making  a  due  presentment.^  The  same  principle  applies 
as  to  notice. 

§  1064.  In  the  third  place,  as  to  occupation  of  co7i?itry  by 
public  e7iemy,  or  military  disturbances. — Where  the  occupa- 
tion of  the  country  by  the  public  enemy  is  of  such  a  charac- 
ter as  to  sever  the  parties  from  each  other  by  a  hostile  line, 
the  same  principle  applies  as  if  they  were  in  fact  domiciled 
in  the  different  countries ;  for  that  portion  of  territory 
which  becomes  in  the  temporary  occupation  of  the  enemy 
is,  during  such  occupation,  deemed  the  enemy's  country. 
But  there  may  be  cases  in  which  both  parties  are  thrown 
within  the  enemy's  lines,  or  left  within  the  lines  of  their 
own  country,  in  which  intercourse  between  them  is  ren- 
dered dangerous  or  impracticable  by  military  movements  ; 
or  by  a  general  disturbance  and  interruption  of  business 
communication  arising  out  of  them.  Under  such  circum- 
stances, the  obstacles  which  will  excuse  the  want  of  due 
presentment  and  notice  need  not  be  of  such  a  degree  or 
extent  as  to  render  travel  and  intercourse  impossible.  It 
is  enough  if  they  be  of  the  degree  and  character  which 
deter  men  of  ordinary  prudence,  energy,  and  courage,  from 
encountering  them  in  the  prosecution  of  business  in  respect 
to  which  they  owe  an  active  and  earnest  duty,  and  feel  an 
active  and  earnest  interest.^  The  circumstance  that  the 
place  was  in  immediate  danger  of  occupation  by  the  enemy, 
or  of  becoming  the  scene  of  a  \:>'diXX\^,  flagrante  bello,  would 
suffice  as  an  excuse.^  In  a  Virginia  case  the  circumstances 
of  a  recent  occupation  of  a  town  by  the  enemy's  forces 
were  thought  insufficient  to  excuse  a  failure  of  protest  and 
notice  four  days  after  their  departure.* 

'  Story  on  Notes,  §§  257,  263  ;  i  Parsons  N.  &  B,,  461. 

'  Polk  V.  Spinks,  5  Cold.,  431. 

'  Story  on  Notes,  §  261.     See  Blair  &  Hoge  v.  Wilson,  28  Grat.,  172. 

*  Tardy  v.  Boyd,  26  Grat.,  632. 


112     WANT  OF  PRESENTMENT,  PROTEST,  AND  NOTICE.    §   I065. 


SECTION   II. 

POLITICAL  DISTURBANCE,   EPIDEMIC  DISEASE,   AND   OVER- 
WPIELMING    CALAMITY   OR  ACCIDENT. 

§  1065.  In  the  fourth  place,  as  to  political  disturbances, 
which  virtually  interrupt  and  obstruct  the  ordinary  negotia- 
tions of  trade,  it  is  recognized  that  such  disturbances  con- 
stitute a  sufficient  excuse  for  want  of  presentment  or  no- 
tice, upon  the  same  principle  that  controls  in  cases  where 
it  is  prevented  by  calamities,  military  operations,  or  inter- 
dictions of  commerce.^  We  should  say  that  the  case  of  a 
riot  or  insurrection  in  which  a  city  was  taken  possession  of 
by  the  outlaws,  or  the  closing  of  houses  and  suspension  of 
business  became  necessary  to  the  protection  of  property  or 
life,  would  present  a  striking  instance  of  such  a  disturbance. 
But  the  mere  condition  of  political  and  military  troubles 
in  a  country,  producing  an  alarming  and  unsettled  state  of 
affairs,  would  be  insufficient.^ 

§  1066.  In  the  fifth  place,  as  to  the  prevale^ice  of  a  malig- 
nant disease. — The  prevalence  of  a  malignant,  contagious, 
or  infectious  disease,  such  as  the  cholera,  yellow  fever,  the 
plague,  or  small-pox,  which  has  become  so  extensive  as  to 
suspend  all  commercial  business  and  intercourse,  or  to 
render  it  very  hazardous  to  enter  into  the  infected  district, 
is  recognized  by  the  text  writers  as  a  sufficient  excuse  for 
not  doing  any  act  which  would  require  an  entry  into  such 
district.^  And  every  consideration  of  public  policy  and  of 
humanity  must  sanction  this  rule.  To  require  communica- 
tion with  the  infected  district  is  to  widen  the  avenue  for 
the  extension  of  the  disease,  and  to  require  the  holder  to 
imperil  his  life  for  such  a  purpose  would  be  a  cruel  imposi- 

^  Story  on  Notes,  §  261.     See  Blair  &  Hoge  v.  Wilson,  28  Grat.,  172. 
-  Apperson  v.  Union  Bank,  4  Cold.,  446. 

'  I  Parsons  N.  &  B.,  460,  531 ;  Edwards  on  Bills,  492  ;  Story  on  Bills,  §  308  ; 
Story  on  Notes,  §  260, 


§   1067.  DISTURBANCE,  DISEASE,   OR  ACCIDENT.  II3 

tion.  In  New  York  it  has  been  accordingly  held  that  the 
prevalence  of  a  contagious  malignant  fever  in  the  place  of 
residence  of  the  parties,  which  occasioned  a  stoppage  of 
business,  was  a  sufficient  excuse  for  not  giving  notice  until 
November  of  a  protest  made  in  September;*  and  the  de- 
cision seems  to  us  entirely  worthy  of  approval.^  In  that 
State  the  subject  is  now  regulated  by  statute. 

§  1067.  In  the  sixth  place,  as  to  overwhelvii7ig  calamity 
a7id  u7iavoidable  accident. — We  have  to  consider  those  cir- 
cumstances of  overwhelming  calamity,  or  inevitable  accident 
which  suddenly  intervene,  and,  without  any  default  on  the 
holder's  part,  render  it  impossible  or  impracticable  for  him 
to  make  due  presentment  or  to  give  due  notice.  The  prin- 
ciple contained  in  the  maxim  of  the  civil  law,  impossibilium 
nulla  obligatio  est,  is  equally  applicable  to  the  law  of  bills 
and  notes,  which  requires  only  reasonable  diligence  on  the 
part  of  the  holder  to  fix  the  liability  of  drawer  and  indors- 
ers  ;  and  it  does  not  countenance  a  forfeiture  of  his  risfhts 
when  overruling  causes  constrain  him.  And,  therefore, 
although  there  is  but  meagre  illustration  of  the  doctrine  in 
the  cases  touching  negotiable  instruments,  we  find  it  uni- 
versally asserted  that  the  holder  is  exonerated  when  a  ca- 
lamity or  accident  of  the  kind  described  prevents  him.^ 

Among  the  circumstances  of  this  class  may  be  enu- 
merated freshets  which  carry  away  bridges  and  destroy  the 
means  of  communication  ;  violent  snow-storms  which  render 
the  roads  impassable  ;  tornadoes  and  earthquakes  which  par- 
alyze all  affairs  for  the  time  being,  or  render  intercourse 
impracticable. 

§  1068.  Accident  or  casualty. — According  to  the  strict 
principles  of  the  common  law,  contracts  to  do  particular 

'  Tunno  v.  Lague,  2  Johns'  Cas.,  i. 

■  But  see  Roosevelt  v.  Woodhull,  2  Anth.  (N.  Y.),  50. 

'  Chitty  on  Bills  (13  Am.  ed.)  [*45i].  509  ;  Edwards  on  Bills,  492  ;  Thomson 
on  Bills  (Wilson's  ed.),  280,  368  ;  Story  on  Notes,  §  258  ;  Story  on  Bills,  §§  283. 
286,  308,  327,  365  ;  Hilton  v.  Shepherd,  6  East.,  16  (respecting  notice)  ;  Wind- 
ham Bank  v.  Norton,  22  Conn.,  213. 

Vol.  II.— 8 


114    WANT  OF  PRESENTMENT,   PROTEST,   AND  NOTICE.    §  lo6Sa. 

things,  and  at  particular  times,  are  absolute  in  their  nature ; 
and  as  a  general  rule  accident  or  casualty  would  not  excuse 
their  non-performance.  But  by  the  law  merchant,  it  must 
be  remembered,  that  although  due  demand  and  notice  are 
conditions  precedent  to  the  liability  of  drawers  and  indors- 
ers,  the  contract  of  the  holder  is  only  that  he  will  exercise 
due  diligence  to  make  such  demand  and  give  such  notice  ; 
and  this  implies  an  exception  in  favor  of  those  unavoidable 
accidents  which  prevent  it.^ 

§  io6Sa.  Miscarriage  or  delay  iit  transmission  by  mail. 
— Upon  this  principle,  if  the  holder  confide  the  bill  or  note 
to  the  public  mail,  as  a  means  of  transmitting  it  for  present- 
ment, and  without  negligence  on  his  part,  he  could  not 
justly  be  liable  for  any  delay  arising  out  of  any  accident, 
miscarriage,  or  default  in  the  postal  service.^  And  as  has 
been  said,  speaking  of  a  bill,  "  such  mode  of  transmission  is 
in  accordance  with  the  general  commercial  usage  and  law  in 
the  case  of  paper  of  this  description.  Indeed,  it  is  recom- 
mended by  the  books  as  the  most  proper  mode  of  transmis- 
sion, as  being  the  least  hazardous,  and  therefore  preferable 
to  a  special  or  private  conveyance."  And  accordingly  it 
was  held  in  the  case  quoted,  where  the  bill  had  been  depos- 
ited in  the  post-office  in  time  for  due  presentment  in  due 
course  of  mail,  and  by  mistake  of  the  postal  clerk  in  misdi- 
recting the  package,  it  did  not  duly  reach  its  destination, 
that  the  delay  did  not  discharge  the  indorser.^  But  if  the 
holder  has  been  himself  in  fault  in  causing  the  delay  in 
transmission  by  the  mail,  or  blame  is  imputable  to  him  in 


^  Lord  Ellenborough,  in  Patience  v.  Townly,  2  J.  P.  Smith,  223  ;  Windham 
Bank  v.  Norton,  22  Conn.,  213. 

"^  Windham  Bank  v.  Norton,  22  Conn.,  213.     See  ante,  §  1021. 

'Windham  Bank  v.  Norton,  22  Conn.,  213,  Storrs,  J.  To  same  effect  see 
Pier  V.  Heinrichshoffen,  67  Mo.,  163,  in  which  case  hokler  of  note  payable  in  a 
distant  city  sent  it  to  a  bank  there  for  collection.  The  letter  was  returned  by 
the  postmaster  marked  "  bank  failed."  Holder  at  once  mailed  it  to  another 
agent  in  the  city,  who  immediately  caused  presentment  and  protest,  but  it  was 
several  days  after  maturity.     Held,  that  indorsers  were  not  discharged. 


^   1069.  DISTURBANCE,   DISEASE,  OR  ACCIDENT.  II 5 

the  misdirection  of  the  bill,  he  will  not  be  excused  for  fail- 
ure in  prompt  presentment.^ 

§  1069.  Accident  or  calamity  7iz7ist  be  preventive  of  dili- 
geiice. — It  should  distinctly  appear  when  an  accident,  or 
calamity,  or  operation  of  superior  force  is  brought  forward 
as  an  excuse  for  non-presentment,  that  it  has  the  effect  to 
prevent  its  being  duly  made.  The  mere  fact  that  a  violent 
storm  occurred  at  the  time,  unless  it  also  appeared  that  it 
obstructed  communication,  would  not  suffice.^  But  if  there 
were  a  general  calamity  involving  a  community,  it  might 
be  different.  Doubtless  the  recent  conflagrations,  suddenly 
laying  large  portions  of  Boston  and  Chicago  in  ruins,  will 
give  rise  to  questions  of  this  kind.  When  communities  are 
visited  by  such  overwhelming  and  appalling  calamities  as 
these,  all  thoughts  of  business  must  give  way  to  considera- 
tions of  self-preservation  and  humanity ;  and  should  cases 
involving  their  effect  be  presented  to  the  courts,  it  would 
be  safe  to  predict  that  this  doctrine  of  excuses  will  find  a 
liberal  application.  The  excuse  of  inevitable  accident  or 
calamity  will  apply  as  well  to  protest  when  it  is  thereby 
'  prevented,  and  if  it  is  made  as  soon  afterward  as  it  reason- 
ably can  be,  that  will  suffice.^ 

§  1070.  When  impediment  ceases,  duty  to  make  dci?ia?id 
or  give  notice  revives. — These  excuses — war,  military  or 
political  disturbance,  interdiction  of  commerce,  prevalence 
of  disease,  overwhelming  accidents,  et  cetera — do  not  justify 

'  Schofield  V.  Bayard,  3  Wend.,  488.  In  this  case  the  holders  of  a  bill  paya- 
ble in  London,  by  mistake  of  their  own,  sent  it  to  Liverpool  for  presentment. 
Their  agents  sent  it  back  by  mail  in  time  to  reach  the  holders,  and  be  by  them 
sent  to  London,  if  it  had  reached  them  in  due  season.  But  by  a  mistake  of  the 
post-office  it  did  not  reach  the  holders  in  time  to  be  reforwarded  by  them  in  due 
season.  The  court  held  that  the  fault  was  in  the  holders,  and  that  failure  of 
due  presentment  could  not  be  excused.  Savage,  C.  J.,  saying  :  "  This  presents 
no  impossibility  if  due  diligence  had  been  used.  The  plaintiffs  should  not  have 
sent  the  bill  to  Liverpool  at  all.  It  is  true  that,  after  thfe  letter  containing  it 
had  been  left  at  Liverpool,  it  could  not  have  reached  London  in  due  season  ; 
but  it  was  the  fault  of  the  plaintiffs  to  have  parted  with  the  bill  in  the  manner 
they  did.  Instead  of  sending  it  to  Liverpool  they  should  have  sent  it  to  London, 
and  then  it  would  have  been  in  season,  and  probably  would  have  been  paid.' 

"  Edwards  on  Bills,  493.  '  Story  on  Bills,  §  283. 


Il6  WANT  OF  PRESENTMENT,  PROTEST,  AND  NOTICE.   §  I07I. 

a  total  dispensation  of  demand  and  notice,  but  only  excuse 
the  delay  which  these  circumstances  may  occasion.  As 
soon  as  the  impediment  ceases,  the  duty  revives ;  and  if 
demand  and  notice  be  not  speedily  made,  the  holder  is  in 
default,  and  drawers  and  indorsers  are  discharged.*  Thus, 
where  the  holder  of  a  bill  in  New  York  delayed,  for  several 
months  after  restoration  of  commercial  intercourse  between 
New  York  and  New  Orleans  (the  former  being  in  the 
United  States,  and  the  latter  in  the  Confederate  States 
during  the  war  of  secession),  to  present  the  bill  to  the  ac- 
ceptor in  New  Orleans  for  payment,  it  was  held  that  the 
drawer  was  discharged.^  In  Maryland,  it  was  said  by 
Stewart,  J.  :  "  There  must  be  the  earliest  possible  present- 
ment when  impediment  ceased."^ 

§  1 07 1.  In  Pennsylvania,*  it  appeared  that  two  bills  which 
were  drawn  (and  indorsed)  in  Pennsylvania  upon  a  house  in 
New  Orleans,  were  duly  protested  on  the  nth  and  29th  of 
July,  1 86 1,  respectively,  in  that  city.  Communication  was 
suspended  between  New  Orleans  and  Pittsburg,  where  the 
parties  entitled  to  notice  resided,  until  July  ist,  1862,  when 
the  first  mail  was  received  at  the  latter  place.  Under  these 
circumstances,  and  there  being  considerable  intervals  be- 
tween the  mails,  notice  received  at  Pittsburg  July  nth, 
1862,  was  considered  within  reasonable  time,  and  held  suf- 
ficient. But  in  Kentucky,**  where  there  was  a  delay  of  over 
five  months  in  forwarding  notice  after  the  reopening  of 
communication,  which  had  been  suspended,  it  was  said  it 
could  not  be  "deemed  reasonable  nor  accounted  for  by  the 
then  political  condition  of  the  country." 

■  Farmers'  Bank  v.  Gunnell,  26  Grat.,  132 ;  Tarby  v.  Boyd,  26  Grat.,  631  ;  Mc- 
Veigh V.  Bank  of  Old  Dominion,  26  Grat.,  785  ;  Bynum  v.  Apperson,  9  Heiskell, 
632  ;  Lane  v.  Bank  of  W.  T.,  9  Heiskell,  419  ;  Billgerry  v.  Branch,  19  Grat.,  393 
Apperson  v.  Union  Bank,  4  Cold.,  445  ;  Morgan  v.  Bank  of  Louisville,  4  Bush 
(Ky.),  82;  House  v.  Adams,  48  Penn.  St.,  266;  James  v.  Wade,  21  La.  Ann., 
548  ;  Peters  v.  Hobbs,  25  Ark.,  67  ;  Durden  v.  Smith,  44  Miss.,  552 ;  Dunbar  v. 
Tyler,  44  Miss.,  10 ;  Shaw  v.  Neal,  19  La.  Ann.,  156. 

'  Durden  v.  Smith,  44  Miss.,  552  ;  see  Dunbar  v.  Tyler,  44  Miss.,  10. 

'  Norris  v.  Despard,  38  Md.,  491.  '  House  v.  Adams,  48  Penn.  St.,  266 

'  Morgan  v.  JBank  of  Louisville,  4  Bush,  82. 


CHAPTER  XXXI. 

SPECIAL  CIRCUMSTANCES  OF  EXCUSE  WHICH  SHOW  AN  ORI& 
INAL  ABSENCE  OF  RIGHT  TO  REQUIRE  PRESENTMENT, 
PROTEST,    OR    NOTICE. 

§  1072.  Besides  the  circumstances  of  a  general  nature 
wliich  excuse  delay  or  absence  of  presentment,  protest,  or 
notice,  there  are  some  of  a  special  nature  which  have  the 
like  effect.  These  special  circumstances  may  be  classified 
as  follows  :  I.  Circumstances  showing  an  original  absence 
of  right  to  require  these  steps  to  be  taken.  II,  Circum- 
stances arising  from  special  acts  of  waiver.  III.  Circum- 
stances which  show  an  inability  on  the  part  of  the  holder 
to  make  due  presentment  or  protest,  or  give  notice.  IV. 
Special  circumstances  arising  from  the  conduct  of  the 
party.  V.  Special  waivers  by  promises  to  pay  and  part 
payments  after  maturity.  These  circumstances,  thus  classi- 
fied, and  ramifying  into  many  details,  will  be  now  separately 
considered. 

SECTION  I. 

DRAWING  WITHOUT  RIGHT  TO   DO  SO,  OR   REASONABLE  GROUND 
TO   EXPECT  THAT   BILL  WILL   BE   HONORED. 

§  1073.  In  the  yfr^/  place,  when  the  drawer  has  drawn 
the  bill  without  the  right  to  do  so,  or  without  any  reasona- 
ble ground  to  expect  that  the  drawee  would  honor  it,  the 
omission  of  the  holder  to  make  a  due  presentment  of  it  for 
acceptance  or  payment  (no  acceptance  intervening),  or  to 
give  the  drawer  due  notice  of  its  dishonor  by  the  drawee, 

(117) 


Il8  SPECIAL    CIRCUMSTANCES    OF    EXCUSE.  §   IO74. 

will  be  excused.^  This  doctrine  rests  upon  the  ground  that 
the  drawer  has  committed  fraud  or  folly  in  undertaking  that 
the  drawee  would  honor  his  bill,  when  he  had  no  right  or 
reasonable  ground  to  expect  it ;  and  that  he  can  suffer  no 
loss  or  injury  from  the  failure  of  the  holder  to  make  a  pre- 
sentment to  the  drawee,  which  would  naturally  be  fruitless, 
or  to  give  him,  the  drawer,  notice  of  a  dishonor  which  he 
must  have  known  by  anticipation. 

This  excuse  applies  alike  to  presentment,  protest,  and 
notice,  for  the  reason  that  all  the  steps  ordinarily  taken  to 
fix  the  drawer's  liability  are  predicated  upon  the  assumption 
that  he  has  drawn  the  bill  in  good  faith,  and  after  proper 
provision  for  its  payment,  and  when  such  is  not  the  case  he 
is  absolutely  liable.  The  authorities  to  this  effect  are  over- 
whelming in  number  as  they  are  clear  in  principle;^  but 
there  are  a  few  cases  which  hold  that  it  does  not  apply  to 
presentment,  for  the  reason  that  the  drawee  might  have 
accepted  or  paid  for  the  honor  of  the  drawer.* 

So  any  fraud  relating  to  the  instrument  committed  by 
the  drawer  will  excuse  want  of  due  diligence,  presentment, 
or  notice.  Thus,  if  having  obtained  a  draft  or  check,  he 
should  sell,  it  for  value,  and  before  its  presentment  should 
obtain  a  duplicate  and  sell  it  for  an  additional  sum,  or  draw 
out  the  money  upon  it,  he  would  be  absolutely  liable  on  the 
first  draft  or  check.^ 

§  1074.  As  to  lack  of  funds. — It  was  held  in  an  early 
English  case,  which  has  been  much  quoted,  that  when  the 
drawer  had  no  funds  in  the  hands  of  the  drawee,  no  notice 
would  be  necessary  to  charge  him,  for  the  reason,  as  assigned 
by  one  judge,  that  drawing  a  bill  in  such  a  case  is  a  fraud, 
and,  as  assigned  by  another,  that  no  injury  could  result  to  the 

•  Chitty  on  Bills  (13  Am.  ed.)  [*436],  490;  Story  on  Bills,  §§  280,  375. 
""  I  Parsons  N.  &  B.,  530,  note  m  ;  Story  on  Bills,  §  280. 

'Cruger  v.  Armstrong,  3  Johns'  Cas.,  5,  Radcliff,  J.;  English  v.  Wall,  12  Rob. 
(La.),  132. 

*  Moody  V.  Mack,  43  Mo.,  212. 


^   1074.  DRAWING   WITHOUT  RIGHT  TO  DO  SO.  I  I9 

drawer.^  And  the  rule  is  often  laid  down  in  the  language  that 
the  want  of  funds  excuses  the  holder  from  giving  notice  ; " 
the  statement  of  it  in  this  form  arising  from  the  fact  that, 
when  the  bill  has  been  improvidently  drawn,  it  turns  out 
that  there  were  no  funds  to  meet  it.  But  the  converse 
proposition  is  not  true,  that,  whenever  there  are  no  funds 
provided  to  meet  the  bill,  the  drawer  was  improvident  in 
drawing  it.  The  drawee  may  have  promised  to  accept  or 
pay  for  the  drawer's  accommodation,  or  have  come  under 
an  obligation,  founded  on  legal  consideration,  to  do  so. 
And  the  true  criterion  of  the  right  to  require  due  demand 
and  notice  is,  not  whether  the  drawer  had  funds  in  the 
drawee's  hands,  but  whether  or  not  the  drawer  had  a  risrht 
to  expect  or  require  that  the  drawee  would  honor  his  bill.'^ 
Whenever  such  right  exists,  the  drawer  is  discharged  if 
there  be  not  due  demand  and  notice,  and  not  otherwise. 
In  Maryland,  the  defendant  drew  a  bill  of  exchange  against 
a  cargo  of  wheat,  and  indorsed  and  delivered  to  plaintiffs 
the  bill  of  exchange,  and  also  the  bill  of  lading  of  the  car- 
go, as  collateral  security  for  the  acceptance  and  payment  of 
the  bill  of  exchange,  authorizing  them,  in  case  they  thought 
it  necessary,  to  sell  the  cargo  and  apply  the  proceeds  to 
payment  of  the  bill.  The  drawees  declined  to  accept,  on 
the  ground  that  they  were  not  bound  to  do  so  under  the 
agreement  with  the  drawers,  unless  they  were  put  in  posses- 
sion of  the  bill  of  lading.  The  court  held  that  present- 
ment and  notice  of  non-acceptance  were  excused,  as  the 
drawers  had  not    complied  with    their   contract  with  the 

*  Beckerdike  v.  Bollman,  i  T.  R.,  405  (1786).  -  Edwards  on  Bills,  640. 

'  French  v.  Bank  of  Columbia,  10  Pet.,  572  ;  French  v.  Bank  of  Columbia,  4 
Cranch,  141  ;  Hopkirk  v.  Page,  2  Brork,  20 ;  Mistr  v.  Trovinger,  7  Ohio  St., 
281  ;  McRae  v.  Rliodes,  22  Ark.,  315  ;  Schuchardt  v.  Hall,  36  Md.,  600;  Louisi- 
ana State  Bank  v.  Buhler,  22  La.  Ann.,  83;  Farmers'  Bank  v.  Van  meter,  4 
Rand.,  553  ;  Claridge  v.  Dalton,  4  Maule  &  S.,  226  ;  Golladay  v.  Bank  of  Union, 
2  Head,  557;  Oliver  v.  Bank  of  Tennessee.  11  Humph.,  74;  Edwards  on  Bills, 
640  ;  Welch  v.  B.  C.  Taylor  Mfg.  Co.,  82  111.,  581,  Dickey,  J. :  "  It  is  sufficient  that 
the  drawers  in  good  faith  supposed  the  drawee  was  their  debtor  to  that 
amount."  But  see  Foard  v.  Womack,  2  Ala.,  368 ;  and  Tarver  v.  Nance,  5 
Ala.,  712. 


I20  SPECIAL    CIRCUMSTANCES    OF    EXCUSE.  §   IO75. 

drawees,  had  intercepted  the  means  of  payment,  and  had 
no  reasonable  ground  to  expect  acceptance  of  the  bill.^ 

§  1075.  Drawer  with  funds  strictly  entitled  to  present- 
ment and  notice. — If  the  drawer  have  funds  in  the  drawee's 
hands  he  will  be  entitled  to  strict  presentment  and  notice,  ev^en 
though  the  drawee  represent,  when  the  bill  is  drawn,  that  he 
will  not  be  able  to  provide  for  it,  and  that  the  drawer  must 
make  provision  to  meet  it,^  or  although  requested  not  to 
draw  on  him,  and  believing  him  insolvent  as  stated.^  And 
it  will  be  no  excuse  for  want  of  presentment  or  notice  that 
the  drawee  is  his  creditor  for  a  larger  amount  than  he  is  his 
debtor.^  The  want  of  injury  to  the  drawer  is  never  now 
admitted  as  an  excuse  for  want  of  demand  or  notice.^ 

If  the  funds  of  the  drawer  be  attached  or  otherwise  in- 
tercepted in  the  drawee's  hands,  after  the  bill  is  drawn,  it 
would  not  affect  the  drawer's  right  to  demand  and  notice.* 

§  1076.  Want  of  funds  no  excuse  when  drawer  has 
right  to  draw. — Among  the  circumstances  under  which 
the  drawer  has  a  right  to  expect  that  his  bill  will  be  hon- 
ored, and  consequently  to  require  strict  presentment  and 
notice,  may  be  named  :  When  he  draws  before  a  consign- 
ment which  he  has  made  comes  to  hand,  and  in  anticipation 
of  it ; '''  or  upon   a  consignment  insufficient   by  reason  of 


'  Schuchardt  v.  Hall,  36  Md.,  590. 

°  Prideaux  v.  Collier,  2  Stark.,  57  ;  Clegg  v.  Cotton,  3  Bos.  &  P.,  239 ;  Staples 
V.  Okines,  i  Esp.,  332.  In  this  case  the  acceptor  was  indebted  to  the  drawer  at 
the  time  the  bill  was  drawn,  but  then  informed  the  latter  that  he  would  not  be 
able  to  provide  for  the  bill.  It  was  understood  between  them  that  the  drawer 
was  to  provide  for  the  bill  when  due.  Notice  to  the  drawer  was  held  necessary. 
Lord  Kenyon  said  :  "  The  law  was  general,  only  exempting  the  party  from  the 
necessity  of  giving  notice  where  the  drawee  had  no  effects  ;  and  as  here  the 
drawee  was  indebted  to  the  defendant,  on  whom  the  bill  was  drawn,  and  so,  in 
fact,  had  effects  in  hand,  and  if  he  had  had  effects  in  hand  when  the  bill  became 
due,  would  have  taken  it  up,  he  was  of  opinion  that  notice  was  necessary." 
Story  on  Bills,  §  375. 

Cedar  Falls  Co.  v.  Wallace,  83  N.  C,  229. 

*Blackham  v.  Doren,  2  Camp.  N.  P.  C,  503  ;  Bayley  on  Bills,  195. 
''Set post,  chapter  xxxvi,  sec.  i,  §  11 70. 
'Stanton  v.  Blossom,  14  Mass.,  116. 

'  Dickens  v.  Beal,  10  Pet,,  572  ;  Grosvenor  v.  Stone,  8  Pick.,  79  ;  Orear  v.  Mc- 
Donald, 9  Gill,  350. 


§   1077-  DRAWING  WITHOUT  RIGHT  TO  DO  SO.  121 

depreciation  in  value,  or  other  loss ;  *  or  when  there  is  a 
fluctuating  balance  or  running  account  between  him  and 
the  drawee  ;  ^  or  when  the  drawee  is  accustomed,  in  the 
course  of  trade,  to  honor  the  drawer's  bills  under  similar 
circumstances,  or  without  regard  to  the  state  of  their  ac- 
counts ;  ^  or  where  a  third  party  has  promised  to  provide 
the  drawee  with  funds  ;*  or  the  drawee  has  authorized  the 
drawing  of  the  bill,°  though  not  so  if  the  terms  of  the  bill 
exceeded  the  authority.'* 

§  1077.  Want  of  funds  no  excuse  when  party  woitld  be 
entitled  to  sue  another. — And  it  may  be  stated  that  want  of 
funds  is  no  excuse  for  want  of  demand  or  notice,  whenever 
the  drawer  or  indorser,  as  the  case  might  be,  would  be  en- 
titled, upon  taking  up  the  bill,  to  sue  either  the  acceptor 
or  any  other  party  for  the  amount  due.'^  Thus,  if  the  bill 
were  drawn  for  the  acceptor's  accommodation,^  or  for  the 
accommodation  of  the  payee,  or  of  a  subsequent  indorsee,' 
the  drawer  is  entitled  to  strict  presentment  and  notice. 

So  the  drawer  is  entitled  to  notice  when  he  has  placed 
securities  in  the  hands  of  the  drawee,  with  the  reasonable 
expectation  that  the  drawee  would  accept,  or  pay  on  the 
credit  thereof,  or  provide  funds  out  of  them  for  payment.*** 

'  Robinson  v.  Ames,  20  Johns,  146  ;  Williams  v.  Brashear,  19  La.,  370 ;  Ruckcr 
V.  Hiller,  16  East.,  53  ;  Robins  v.  Gibson,  3  Camp.,  384. 

'Blackham  v.  Doren,  2  Camp..  503;  Hammond  v.  Dufrene,  3  Camp.,  145. 

^  Adams  V.  Darby,  28  Mo.,  162;  Dickens  v.  Beal,  10  Pet.,  572;  Dunbar  v. 
Tyler,  44  Miss.,  i. 

*■  Dickens  v.  Beal,  10  Pet.,  572  ;  French  v.  Bank  of  Columbia,  4  Cranch,  141  ; 
Lafitte  V.  Slatter,  6  Bing.,  623 ;  4  Moore  &  P.,  457. 

'  Walvvyn  v.  St.  Quintin,  i  Bos.  &  P.,  652  ;  Austin  v.  Rodman,  i  Hawks,  194  ; 
Orear  v.  McDonald^  9  Gill,  350;  Dickens  v.  Beal,  10  Pet.,  572  ;  Hopkirk  v.  Page, 
2  Brock.,  20;  Oliver  v.  Bank  of  Tennessee,  11  Humph.,  74. 

°  Claridge  v.  Dalton,  4  Maule  &  S.,  226. 

'  Chitty  on  Bills  (13  Am.  ed.)  [*438].  493.  494 ;  Edwards  on  Bills,  644. 

*  Ex  parte  Heath,  2  Ves.  &  B.,  240  ;  see  Shirley  v.  Fellows,  9  Port.  (Ala.),  300, 

»  Cory  V.  Scott,  3  B.  &  Aid.,  619  ;  Whitfield  v.  Savage,  2  Bos.  &  Pul.,  277  ; 
Norton  v.  Pickering,  8  B.  &  C,  610  ;  Brown  v.  Maffey,  15  East.,  216.  It  was 
held  at  one  time  (in  Walvvyn  v.  St.  Quintin,  i  Bos.  &  P.,  652),  that  if  the  drawer 
had  no  effects  in  the  drawee's  hands  he  would  not  be  entitled  to  notice  although 
the  payee  had  ;  but  in  Norton  v.  Pickering  the  decision  was  overruled. 

'°  Spooner  v.  Gardiner,  Ry.  &  Mood.,  84  ;  ex  parte  Heath,  2  Ves.  &  B.,  240 ; 
Chitty  [*446-7] ;  Campbell  v.  Pettingill,  7  Green!.,  126. 


122  SPECIAL    CIRCUMSTANCES    OF    EXCUSE.  §    IO78. 

But  not  where  he  has  supplied  the  drawee  with  property  on 
a  credit,  and  the  credit  would  not  expire  until  after  maturity 
of  the  bill.i 

§  1078.  As  to  the  time  at  which  the  reasonable  expectation 
that  the  bill  will  be  honored  must  exist,  the  rule  on  the  sub- 
ject is  differently  stated  by  different  authorities.  Mr.  Chitty 
considers  that  if  there  were  effects  in  the  drawee's  hands  at 
any  time  between  the  drawing  of  the  bill  and  its  present- 
ment and  dishonor,  the  drawer  should  have  notice  ;^  while, 
on  the  other  hand,  it  is  said  that  notice  is  unnecessary  when 
at  the  time  of  the  drawing  there  were  no  effects  to  meet  the 
bill.3 

But  the  bona  fide  expectation  of  the  drawer  based  upon 
his  relations  with  the  drawee,  and  the  provision  he  has 
made,  or  intends  to  make,  and  does  make,  are,  it  seems  to 
us,  the  circumstances  to  be  regarded.  If  he  has  no  funds 
in  the  drawee's  hands  when  he  drav>^s,  and  yet  provides  them 
before  presentment,  he  should  have  notice.*  If  he  had 
funds  when  he  drew,  but  withdrew  them  before  presentment, 
he  forfeits  the  right  to  it.^  If  the  drawer  has  any  arrange- 
ment, by  which,  at  the  time  the  bill  is  presented,  he  has  a 
right  to  expect  it  to  be  honored,  we  should  say  he  should 
have  demand  and  notice.^  For  it  would  be  presumed  that 
such  arrangement  was  contemplated  when  he  drew. 

§  1079.  Where  there  is  a  running  ope7i  accotint  between 
the  parties,  the  drawer  is  entitled  to  require  presentment  and 
notice,  although  the  balance  due  him  may  be  less  than  the 

'  Claridge  v.  Dalton,  4  Made  &  S.,  226.         '  Chitty  (13  Am.  ed.)  [*444].  5oo- 

'  French  v.  Bank  of  Columbia,  10  Pet.,  572. 

*  Where  the  proceeds  of  a  cargo  were  in  the  broker's  hands,  and  he  was  to  put 
the  drawee  in  funds,  the  drawer  was  held  entitled  to  notice.  Robins  v.  Gibson, 
3  Camp.,  334.  So  where  the  drawer  after  acceptance  and  before  maturity  sent 
funds  to  the  acceptor,  having  none  when  he  drew  in  his  hands.  Hammond  v. 
Dufresne,  3  Camp.,  145,  Lord  EUenborough,  C.  J.,  saying:  "I  think  the.  drawer 
has  a  right  to  notice  of  the  dishonor  of  a  bill,  if  he  has  effects  in  the  hands  of 
the  acceptor  at  any  time  before  it  comes  due."  Orear  v.  McDonald,  9  Gill,  350 
Eichelberger  v.  Finley,  7  Har.  &  J.,  381. 

'  S&eposi,  §  1081.  »  See  I  Parsons  N.  &  B.,  548. 


§   I080.  DRAWING  WITHOUT  RIGHT  TO  DO  SO.  1 23 

amount  of  the  bill;^  and  it  is  very  frequently  said  that 
where  there  are  any  funds,  however  insufficient,  in  the 
drawee's  hands,  failure  of  the  holder  in  either  particular  is 
not  excused.^  But  here  the  true  criterion,  as  in  all  other 
cases,  is,  had  the  holder  a  right  to  expect  that  his  bill  would 
be  honored  ?  And  this  is  to  be  ascertained  by  regard  to  all 
the  circumstances  of  the  case.  Where  transactions  have 
ceased,  and  the  drawer  knows  that  he  has  but  a  small  bal- 
ance to  his  credit,  he  would  not  be  justified  in  expecting 
payment  of  a  bill  of  a  large  amount ;  and  if,  under  such 
circumstances,  he  were  to  draw  a  bill  for  a  large  amount, 
he  would  be  chargeable  without  presentment,  protest,  or 
notice. 

§  1080.  Thus,  where  the  drawee  had  a  balance  of  i6s. 
lid.  in  his  hands  in  favor  of  the  drawer,  and  the  latter 
drew  upon  him  for  ;^246  3^.  yd.,  without  having  any  pros- 
pect of  more  funds  in  his  hands  than  the  balance  mention- 
ed, or  right  to  expect  that  the  bill  would  be  honored,  he 
was  held  bound  without  notice.  And  Chief-Justice  Mar- 
shall said  :^  "  The  sound  sense  and  justice  of  the  exception 
is,  that  where  a  drawer  knows  he  has  no  right  to  draw,  and 
has  the  strongest  reasons  to  believe  his  bill  will  not  be  paid, 
the  motives  for  requiring  notice  of  its  dishonor  do  not 
exist,  and  his  case  comes  within  the  reason  of  the  excep- 

*  Thackray  V.  Blackett,  3  Camp.,  164  ;  Legge  v.  Thorpe,  12  East.,  171  ;  Chitty 
(13  Am.  ed.)  1*444]- 

"  Lacoste  v.  Harper,  3  La.  Ann.,  385.  The  bill  was  for  82,777,  and  the 
amount  of  funds  $883.  Slidell,  J.,  said:  "We  are  not  aware  of  any  authority 
extending  the  exemption  of  the  necessity  of  notice  where  the  drawee  had  funds 
in  his  hands  at  the  maturity  of  the  bill.  Even  if  the  funds  be  insufficient  to  cover 
the  bill,  the  drawer  is  entitled  to  notice."  See  also  Sutcliffe  v.  McDowell,  2 
Nott  &  M'C,  251  ;  Wollenleber  v.  Ketterlinus,  17  Penn.  St.,  389.  In  Hill  v. 
Norris,  2  Stew.  Sc  P.,  1 14,  Lipscomb,  J.,  said  :  "  I  admit,  that  if  there  were  cir- 
cumstances to  satisfy  the  jury  that  the  drawer  committed  a  fraud  in  drawing 
on  the  drawee,  and  that  he  knew  his  bill  would  be  dishonored,  there  would  be 
much  force  in  the  argument  that  he  ought  not  to  be  permitted  to  take  shelter 
from  the  consequences  of  his  fraud  by  intrenching  behind  a  very  small  amount 
of  assets  that  might  be  in  the  hands  of  the  drawee.  But  I  must  again  repeat, 
that  I  have  not  known  a  case,  where  there  was  any  amount  of  funds  in  the 
hands  of  the  drawee,  that  it  has  been  ruled  that  the  drawer  was  not  entitled  to 
notice." 

'  Hopkirk  v.  Page,  2  Brock.  C.  C,  20,  34. 


124  SPECIAL    CIRCUMSTANCES    OF    EXCUSE.  §   I081. 

tion.  Where  all  transactions  between  the  parties  have 
ceased,  and  there  is  nothing  to  justify  a  draft  but  a  balance 
of  one  penny,  it  would  be  sporting  with  our  understanding 
to  tell  us,  that  a  creditor  for  this  balance,  who  should  draw 
for  a  thousand  pounds,  would  be  in  a  situation  substantially 
different  from  what  he  would  be,  were  he  debtor  in  the 
same  sum."  In  another  case  where  the  draft  was  for  $96, 
and  only  $38  balance  was  in  the  drawee's  hands,  no  notice 
was  held  necessary.^  And  the  doctrines  here  stated  have 
the  authority  of  Story*  as  well  as  Marshall.  There  is  more 
difficulty  in  determining  its  application  to  the  facts,  than 
in  discerning  the  true  principle. 

§  1 08 1 .  If  the  drawer  withdraws  the  funds  which  he  had 
in  the  drawee's  hands  when  he  drew  the  bill,  or  intercepts 
funds  which  he  had  provided  to  meet  the  bill ;  ^  or  if  he 
privately  directs  the  drawer  not  to  honor  it ;  *  or  otherwise 
prevents  the  due  acceptance  or  payment  of  his  draft,  he 
commits  a  fraud  upon  the  holder  of  the  bill,  and  forfeits 
his  right  to  require  demand  and  notice.  But  the  with- 
drawal of  funds  will  not  operate  as  a  forfeiture  of  the  right 
to  require  demand  and  notice,  if  other  arrangements  be 
made  between  the  drawer  and  drawee,  by  which  the  latter 
is  justly  expected  to  honor  the  bill.^  So  if  the  drawer  fail 
to  comply  with  conditions  precedent  to  his  right  to  draw, 
he  can  not  insist  on  demand  and  notice,  for  he  himself  is 
in  fault.^  And  although  there  may  be  open  accounts  be- 
tween the  drawer  and  drawee,  yet  if  they  are  in  litigation, 

'  Blankenship  v.  Rogers,  10  Ind.,  33  ;  see  also v.  Stanton,  i  Hayw., 

271. 

"  Matter  of  Brown,  2  Story,  502,  520. 

°  Dickens  v.  Real,  10  Pet.,  572  ;  Rhett  v.  Poe,  2  How.,  457  ;  "^''alk  v.  SimmonSj 
4  Mason,  113;  Conroy  v.  Warren,  3  Johns'  Cas.,  259 ;  Murray  v.  Judah,  6  Cow. 
484;  Rucker  v.  Hiller,  3  Camp.,  217  ,  Chitty  (13  Am.  ed.)  [*44i],  496. 

*  Sutcliffe  V.  McDowell,  2  Nott  &  M'C,  251  ;  Mr.  Chitty  puts  a  query  (Chitty, 
484),  and  Story  says  :  "  Perhaps  (Story  on  Bills,  §  375)  this  is  the  rule.  We  think 
there  can  be  no  doubt  about  it." 

'  Orr  V.  McGinniss,  7  East.,  359. 

*  Wollenleber  v.  Ketterlinus,  17  Penn.  St.,  389. 


§   I0S2.  DRAWING  WITHOUT  RIGHT  TO  DO  SO.  I  25 

and  the  drawer  knows  it,  he  would  not  be  justified  in  draw- 
ino-  and  could  not  be  entitled  to  demand  and  notice.^  It 
the  drawer  of  a  bill  is  discharged  by  laches,  in  failure  to 
give  him  notice  of  dishonor,  no  subsequent  appropriation 
of  his  funds  in  the  drawee's  hands  to  its  payment  is  au- 
thorized, and  the  drawee  so  appropriating  them  will  not  be 
exonerated  from  liability  to  the  drawer.^ 

§  1082.  Effect  of  acceptance  on  the  qtiestion. — When  the 
bill  has  been  accepted,  the  acceptance  is,  printa  facie,  an  ad- 
mission of  funds  by  the  acceptor,  and  renders  him  absolute- 
ly liable  to  a  third  party.  It  is  also  to  some  extent  evidence 
that  the  drawer  had  a  right  to  expect  that  the  acceptor 
would  pay  the  bill,  even  when  it  is  shown  that  he  had  not 
been  provided  with  funds  ;  ^  and  it  seems  to  have  been  held 
conclusive  in  favor  of  the  drawer's  right  to  require  present- 
ment for  payment  and  notice,  although  without  funds.* 
But  acceptance  does  not  alter  the  general  rule  on  the  sub- 
ject, and  when  it  is  shown  that  the  drawer  had  no  right  to 
expect  payment  of  the  bill  by  the  acceptor,  the  holder  is 
excused  for  not  making  presentment,^  or  giving  notice." 
And  proof  that  the  acceptor  was  not  in  funds  is  prima 
facie  evidence  that  there  was  no  right  to  expect  payment."^ 
The  fact  that  the  acceptor  has  told  the  drawer  before  the 
maturity  of  the  bill  that  he  could  not  provide  for  it,  and 
the  drawer  must,  and  that  the  acceptor  has  given  the  drawer 
money  for  that  purpose,  will  not  excuse  w^ant  of  due  pre- 
sentment and  notice  ;  ^  nor  will  the  fact  that  the  drawer,  in 
apprehension  of  the  dishonor  of  the  bill,  has  lodged  other 
money  of  the  acceptor  in  the  hands  of  the  indorser,  upon 

'  Dollfus  V.  Frosch,  i  Denio,  367.  '  Smith  v.  Rowland,  18  Ala.,  367. 

'  Orear  v.  McDonald,  9  Gill,  350 ;  Hill  v.  Norris,  2  Stew.  &  P.,  1 14  ;  Camp, 
bell  V.  Pettengill,  7  Greenl.,  126. 

*  Pons  V.  Kelly,  2  Hayw.,  45  ;  Richie  v.  McCoy,  13  Sm.  &  M.,  541. 

'  Kinsley  v.  Robinson,  21  Pick.,  327  ;  Mobley  v.  Clark,  28  Barb.,  390. 

*  Hoffman  v.  Smith,  I  Caines,  157  ;  Allen  v.  King,  4  McLean,  128. 

'  Seeposf,  §  1084.  *  Baker  v.  Birch,  3  Camp.,  107. 


126  SPECIAL    CIRCUMSTANCES    OF    EXCUSE.  §  IO83. 

an  undertaking  by  the  indorser  to  return  it  if  he  should  be 
exonerated  from  payment  of  the  bill.^ 

§  1083,  The  rule  as  to  indorser s  of  bills  drawn  without 
fu7ids. — Ordinarily  the  indorser  of  a  bill  drawn  without 
funds  does  not  stand  upon  the  same  footing  as  the  drawer, 
and  although  the  drawer  is  not,  he  is,  entitled  to  insist  on 
strict  demand  and  notice.^  He  is  presumed  to  know  nothing 
of  the  accounts  or  arrangements  existing  between  the  drawer 
and  drawee  ;  and  if  he  has  indorsed  the  bill  for  the  accom- 
modation of  the  drawer,  or  for  another  indorser,  or  a  third 
person,^  his  liability  is  not  fixed  save  by  regular  demand 
and  notice.  But  there  may  be  circumstances  under  which 
the  indorser  is  no  more  entitled  to  insist  upon  diligence 
than  the  drawer.  Thus  where  he  indorses  for  accommoda- 
tion of  the  drawer,  knowing  the  character  of  the  bill,  and 
neither  of  them  expects  that  it  will  be  honored,  he  comes 
within  the  reason  of  the  principle  which  excuses  the  holder 
from  giving  the  drawer  notice,  and  it  is  equally  unnecessary 
to  charge  him.*  And  in  any  case  where  the  indorser  partic- 
ipates in  the  fraud  the  rule  applies. 

'  Clegg  V.  Cotton,  3  Bos.  &  Pull.,  239 ;  Story  on  Bills,  §  376. 

"^  Wilkes  V.  Jacks,  Peake,  202  ;  Ramdullolday  v.  Darieux,  4  Wash,  C.  C,  61  ; 
Ralston  v.  Bullitts,  3  Bibb,  261  ;  Scarborough  v.  Harris,  i  Bay,  177  ;  Byles  on 
Bills  [*288].  443. 

'  Warder  v.  Tucker,  7  Mass.,  449  ;  Rea  v.  Dorrance,  18  Me.,  137  (presentment 
too  late)  ;  Carter  v.  Flower,  16  M.  &  W.,  743  ;  Brown  v.  Maffy,  15  East.,  216. 

*  French  v.  Bank  of  Columbia,  4  Cranch  (S.  C),  141.  In  Farmers'  Bank  v. 
Vanmeter,  4  Rand.,  553,  Green,  J.,  said  :  "The  modern  doctrine  is  perfectly 
well  settled  that  the  law  implies  an  injury  from  a  want  of  due  notice  ;  and  this 
presumption  is  so  strong  that  in  order  to  repel  it  proof  is  required  to  show  that 
it  was  impossible  for  the  party  to  suffer  any  damage  or  inconvenience.  Thus  in 
the  case  of  a  drawer,  if  the  bill  be  drawn  without  funds  in  the  hands  of  the 
drawee,  and  the  drawer  had  no  reason  to  expect  that  the  bill  would  be  accepted, 
this  is  considered  as  a  case  in  which  it  is  shown  that  no  possible  prejudice  can 
result  to  the  drawer  from  want  of  notice,  since  he  knew  when  he  drew  the  bill 
that  it  would  devolve  upon  him  to  take  it  up,  as  well  without  as  with  notice  of 
its  dishonor  ;  and  having  no  reason  to  expect  the  bill  to  be  accepted,  it  can  not 
be  supposed  that  he  would  make  any  arrangements  for  putting  funds  in  the 
hands  of  the  drawee  to  take  it  up.  But  if  the  drawer  without  funds  in  the  hands 
of  the  drawee  has  any  just  ground  to  believe  that  the  bill  will  be  accepted,  he 
ought  to  have  notice  ;  for  in  that  case  it  is  to  be  presumed  that  he  will  so  ar- 
range his  funds  as  to  place  the  means  of  paying  the  bill  at  maturity  in  the  hands 
of  the  drawee.  Such  arrangements,  if  unnecessar}'  and  fruitless,  would  be  prej- 
udicial to  the  party ;  and  to  enable  him  to  avoid  this  mischief,  immediate  notice 


^   I0S3.  DRAWING  WITHOUT  iaCIIT  TO  DO  SO.  llj 

The  indorser  of  a  note  for  accommodation  of  the  maker 
or  other  party,  is  in  general  entitled  to  require  strict  de- 
mand and  notice.^ 

In  Virginia  it  has  been  said  :  "  With  the  exception  of  the 
cases  in  which,  it  can  be  shown  that  they  could  not  by  pos- 
sibility suffer  an  injury  by  the  failure  to  give  them  notice,  the 
drawer  and  indorser  have  in  all  cases  a  right  to  strict  notice, 
unless  they  waive  that  right  or  forfeit  it  by  their  own  fraud. 
I  do  not  find  this  ground  of  fraud  very  distinctly  laid  down 
as  a  reason  for  dispensing  with  the  necessity  of  notice.  But 
there  are  many  cases  in  which  it  appears  to  have  been  the 
sole  ground  of  the  judgment,  and  in  which  the  principle  is 
distinctly  alluded  to.^  ....  Every  drawer  of  a  bill  virtu- 
ally represents  to  all  dealing  for  it,  that  it  is  drawn  upon 
sufficient  funds.  The  holder  deals  upon  the  faith  that  he 
shall  have  the  additional  security  of  the  drawer  ;  and  if  he 
fails  in  this  he  is  disappointed  by  the  fraud  of  the  drawer  ; 
and  if  the  indorser,  with  a  knowledge  of  the  facts,  indorsed 

should  be  given.  The  case  of  an  indorser  is  still  stronger  than  that  of  a  drawer  ; 
for  he  has  in  general  a  right  to  resort  to  the  drawer  for  indemnity,  and  to  enable 
him  to  assert  this  right  with  the  greatest  possible  effect,  he  ought  to  have  imme- 
diate notice.  But  even  as  to  an  indorser  a  case  may  occur  in  which  it  may  be 
shown  to  be  impossible  for  him  to  suffer  any  inconvenience  from  the  want  of 
notice.  As  in  the  case  of  a  note  indorsed  by  the  payee  for  the  accommodation 
of  the  drawer,  who  should  place  in  the  hands  of  the  indorser  sufficient  funds  to 
discharge  it.  The  latter  would  not  be  entitled  to  notice  of  the  non-payment, 
because  he  could  not  possibly  suffer  any  damage  by  the  failure  to  give  him  no- 
tice (Cornay  v.  De  Costa,  i  Esp.  Rep.,  303),  since  the  only  purpose  of  a  notice 
would  be  to  inform  him  of  the  necessity  of  resorting  to  the  drawer  for  indemnity, 
which,  in  this  case,  is  unnecessar}',  as  he  already  has  that  indemnity  in  his 
hands."  But  in  England  it  was  recently  held  that  the  reply  of  the  plaintiff  to 
the  indorser,  who  set  up  absence  of  notice,  that  neither  at  the  time  when  the  bill 
was  drawn  nor  afterward,  nor  when  it  became  due,  and  in  presentment  thereof, 
had  the  acceptor,  or  the  drawer,  or  any  indorser  prior  to  the  defendant,  any 
funds  of  defendant  in  his  hands,  and  that  the  bill  was  drawn  for  the  purpose  of 
raising  money  for  the  defendant,  the  drawer,  the  acceptor,  and  the  prior  indorser, 
jointly,  and  the  defendant  was  in  no  way  damnified — was  a  bad  reply,  and  that 
the  indorser  was  discharged  by  want  of  notice.  Foster  v.  Parker,  2  Law,  R.  C. 
P.  Div.  18  (1876). 

'  French  v.  Bank  of  Columbia,  4  Cranch,  141  ;  Bogy  v.  Keil,  i  Mo.,  743; 
Croton  v.  Dalheim,  6  Greenl.,  476  ;  Jackson  v.  Richards,  3  Caines,  343  ;  Carter 
V.  Flower,  16  M.  &.  W.,  743  ;  Sisson  v.  Tomlinson,  Selw.  N.  P.,  335  ;  Brown  v. 
Maffcy,  15  East.,  222. 

^  Farmers'  Bank  v.  Vanmeter,  4  Rand.,  553,  Green,  J.,  citing  Sisson  v.  Tom- 
linson, Selwyn  N.  P.,  324  ;  Brown  v.  Maffey,  15  East.,  216  ;  Leach  v.  Hewitt,  4 
Taunt.,  731. 


128  SPECIAL   CIRCUMSTANCES    OF    EXCUSE.  §   I084. 

for  the  purpose  of  promoting  the  object  of  the  drawer,  he 

would  be  a  participator  in  the  fraud These  cases 

are  referred  to  for  the  purpose  of  showing  that  an  indorser 
who  unites  with  the  drawer  to  deceive  the  holder  by  repre- 
senting a  bill  as  one  that  will  probably  be  accepted,  with  a 
knowledge  that  it  will  not,  is  guilty  of  a  fraud,  which  de- 
prives him  of  the  right  to  insist  on  notice." 

§  1084.  The  burden  of  proof  as  to  waiit  of  funds. — Wher 
the  holder  seeks  to  rely  on  this  excuse  for  want  of  present- 
ment or  notice,  the  burden  of  proof  rests  upon  him  to  show 
that  there  were  no  funds  in  the  hands  of  the  drawee  to 
meet  the  bill ;  ^  and  this  he  must  do  by  affirmative  proof,  as 
it  will  be  presumed  that  there  were  funds,  although  the 
bill  were  dishonored.^  Having  shown  that  there  were  no 
funds,  "dc  prima  facie  excuse  is  made  out ;  and  if  there  were 
such  qualifying  circumstances  as  would  entitle  the  drawer 
to  require  strict  presentment  and  notice — such  as  his  being 
an  accommodation  drawer,  or  keeping  an  open  account, 
and  the  like — he  must  show  them,  for  they  lie  peculiarly 
within  his  own  knowledge.* 


SECTION  II. 

WHEN  THE  PARTY   IS   UNDER  AN   OBLIGATION  TO  PROVIDE   FOR 

PAYMENT. 

§  1085.  In  the  second  place,  when  the  bill  has  been  ac- 
cepted for  the  mere  accommodation  of  the  drawer,  and  he 
has  undertaken  to  supply  funds  to  meet  it,  a  failure  to  pre- 
sent it  to  the  acceptor  will  be  excused  as  against  the  drawer, 

'  Baxter  v.  Graves,  2  A.  K.  Marsh,  152  ;  Golladay  v.  Bank  of  Union,  2  Head.,^ 
57  ;  Ford  v.  McClung,  5  West  Va.  (Hagans),  1 56. 

^  Ibid. 

'  Merchants'  Bank  v.  Easley,  44  Mo.,  288  ;  Sullivan  v.  Deadman,  23  Ark.,  14 ; 
Cook  V.  Martin,  5  Sm.  &  M.,  379 ;  Durrum  v.  Hendrick,  4  Tex.,  495  ;  Wood  v. 
McMeans,  23  Texas,  122;  Carter  v.  Flower,  16  M.  &  W.,  743;  Fitzgerald  v. 
Williams,  6  Bing.  N.  C,  68 ;  Kemble  v.  Mills,  i  Man.  &  G.,  771  ;  Edwards  on 
Bills,  645  ;  ante,  §  1082. 


'§    1085.  OJSLIGATION  TO  TROVIDE  FOR  I'AVMENT.  1 29 

who  could  not  suffer  save  from  his  own  laches.^  "And  if  the 
bill  be  drawn  payable  at  his  own  house,  it  will  be  presumed 
to  be  for  his  (the  drawer's)  accommodation.^  And  so,  while 
the  indorser  of  a  bill  drawn  for  the  accommodation  of  tht^ 
drawer  or  acceptor,  and  the  indorser  of  a  note  made  for  the 
accommodation  of  the  maker,  is  entitled  to  insist  upon  its 
due  presentment  at  maturity,  yet  if  the  bill  is  drawn  and 
accepted,  or  the  note  made  for  the  accommodation  of  a  par- 
ticular indorser,  that  indorser  is  the  real  party  who  should 
make  provision  to  pay  the  bill  at  maturity,  and  the  failure 
to  make  a  due  presentment  or  give  due  notice  will  be  ex- 
cused as  to  him,  though  not  as  to  the  other  indorsers,  or  to 
the  drawer  if  it  be  a  bill.^  This  rule  rests  upon  the  princi- 
ple that  the  accommodated  indorser  can  by  no  possibility 
(as  a  rule)  suffer  loss  by  reason  of  a  failure  to  make  due 
presentment ;  since  if  the  bill  or  note  were  dishonored, 
there  would  be  no  party  against  whom  he  would  have  re- 
course upon  paying  it.  Still,  however,  if  there  were  cir- 
cumstances in  the  transaction  which  subjected  the  party  ac- 
commodated to  loss  by  failure  to  make  a  due  presentment,  it 
would  be  open  for  him  to  show  them,  and  to  the  extent  of 
such  loss  he  would  be  exonerated.'*  If  the  bill  be  drawn  for 
the  accommodation  of  the  acceptor,  both  drawer  and  in- 
dorsers are  entitled  to  notice,  for  they  have  a  right  to  ex- 
pect him  to  pay  it.^     Upon  the  same  principle,  a  drawer, 

'  French  v.  Bank  of  Columbia,  4  Cranch  (S.  C),  141  ;  Barbaroux  v.  Waters,  3 
Mete.  (Ky.),  304  ;  Holman  v.  Whiting,  19  Ala.,  703  ;  Torrey  v.  Foss,  40  Me.,  74 
(case  ot  notice) ;  Ross  v.  Bedell,  5  Duer,  462  ;  Story  on  Bills,  §  370 ;  Sharp  v. 
Bailey,  9  B.  &  C,  44  ;  ex  parte  Heath,  2  Ves.  &  B.,  240. 

^  Sharp  V.  Bailey,  9  B.  &  C,  44. 

Mbid. ;  Story  on  Notes,  §  268  ;  Edwards  on  Bills,  638  ;  Keyes  v.  Winter,  54 
Me.,  400  ;  French  v.  Bank  of  Columbia,  4  Cranch,  141  ;  McVeigh  v.  Bank  of 
Old  Dominion,  26  Grat.,  785.  Turner  v.  Samson,  2  Q.  B.  Diw,  23  ;  igMoak's 
E.  R.,  195. 

*  Story  on  Notes,  §  269.  But  see  McMean  v.  Little,  59  Tenn.,  330,  where  one 
of  two  drawers  was  the  acceptor  for  accommodation  of  the  other,  and  it  was  held 
that  the  latter  was  discharged  by  failure  in  respect  to  demand  and  notice, 

^French  v.  Bank  of  Columbia,  4  Cranch  (S.  C),  141,  Marshall,  C.  J.,  saying" 
"Where  he  (the  drawer)  draws  solely  for  the  purpose  of  raising  money  by  dis- 
count for  himself,  he  expects  to  pay  the  bill,  and  there  is  no  person  to  whom  he 
can  resort  for  repayment.     There  is  no  person  on  whom  he  can  have  a  legal  or 

Vol.  II.— 9 


130  SPECIAL    CIRCUMSTANCES    OF    EXCUSE.  §  I086. 

although  drawing  upon  funds,  is  not  entitled  to  require 
notice  from  an  indorser  who  indorsed  for  his  accommoda- 
tion, to  enable  him  to  get  his  bill  discounted,  or  add  strength 
to  its  credit  ;  for  although  as  against  other  parties  entitled 
to  require  strict  diligence  in  respect  to  presentment  and 
notice,  as  to  such  indorser  the  debt  is  his  own.^  But  it 
does  not  seem  that  an  agreement  by  an  indorser  of  a  note, 
made  at  the  time  of  indorsement,  to  pay  the  note  at  matu- 
rity would  bind  him  absolutely  without  presentment  or 
notice  ;  it  would  be  understood  to  have  been  made  with 
the  implied  reservation  that  if  the  maker  paid  he  was  not 
liable,  and  he  would  be  discharged  by  failure  to  demand 
payment  of  him.^  If  the  maker  and  the  payee,  who  is  also 
indorser,  jointly  borrows  the  money,  a  promise  of  the  payee 
to  pay  it,  dispenses  with  the  necessity  of  presentment  and 
notice.^ 

§  1086.  What  relations  between  the  parties  excuse 
want  of  notice. — Where  one  of  several  partners  draws 
upon  a  firm  of  which  he  is  a  member,  it  has  been  held 
that  he  is  not  entitled  to  notice,  both  in  the  case  of  an  ac- 


an  equitable  demand  in  consequence  of  the  non-payment  of  the  bill.  But  how  can 
the  same  reasoning  be  said  to  apply  a  fortiori  \.o  the  case  of  the  bill  being  drawn 
for  the  use  of  the  acceptor  ?  In  such  case  the  relative  situation  of  the  parties 
must  be  substantially  the  same  as  if  the  money  raised  on  the  bill  for  the  acceptor 
were  funds  of  the  drawee  in  his  hands  on  which  the  bill  was  drawn.  Every 
motive  for  requiring  notice  of  non-payment,  in  the  case  of  a  bill  drawn  upon 
funds,  except  that  which  results  from  a  right  to  claim  those  funds  by  a  suit, 
would  apply  to  a  bill  drawn  to  raise  money  tor  the  acceptor,  unless  it  was  under- 
stood at  the  time  that  the  acceptor  was  not  to  pay  the  bill."  ....  And  then, 
after  stating  the  principle  set  forth  in  this  section,  that  where  the  money  is  re- 
ceived by  the  indorser  he  is  not  entitled  to  notice,  he  added  :  "  But  the  same  rea- 
sons do  not  appear  to  exist  where  the  note  has  been  discounted  for  the  maker. 
In  that  case  the  funds  which  represent  the  note  are  in  the  hands  of  the  maker, 
or,  to  use  the  language  applicable  to  bills,  in  the  hands  of  the  acceptor  before  the 
draft  becomes  payable,  the  drawer  had  a  right  to  draw,  and  had  a  right  to  expect 
that  his  bill  would  be  paid.  Upon  principles  of  reason  and  of  justice,  then,  it 
would  seem  that  notice  of  non-payment  could  as  little  be  dispensed  with  in  this 
case,  as  if  he  had  himself  paid  the  money  to  the  maker  of  the  note,  and  then  re- 
ceived it  from  the  bank,  or  as  if  the  note  had  been  given  him  for  a  previous  debt, 
and  had  been  discounted  for  his  own  use." 

^  Ex  pxrfe  Heath,  2  Ves.  &  B.,  240;  Story  on  Bills,  §  310. 

^  Davis  V.  Gowen,  19  Me.,  447. 

^Bank  of  Seaford  v.  Conneway,  4  Houston,  206. 


§   1087.  OBLIGATION  TO  PROVIDE  FOR  PAYMENT.  I3I 

cepted  ^  and  of  an  unaccepted  bill.^  The  drawer  will,  how 
ever  (where  a  bill  is  drawn  on  a  firm  of  which  he  is  a  mem 
ber),  be  entitled  to  notice  if  the  copartnership  had  dissolved 
before  the  bill  was  drawn. ^  The  question  of  notice  of  the 
dissolution  of  the  firm,  it  is  said,  might  be  important.*  In 
like  manner,  where  the  drawer  and  drawee  are  partners  in 
the  particular  transaction  in  which  the  bill  was  drawn,  no 
notice,  it  has  been  held,  is  necessary,  for  the  reason  assigned 
that  knowledge  of  one  partner  is  the  knowledge  of  the 
other,  and  notice  to  one  partner  is  notice  to  the  other.^ 
But  it  has  been  held  that  notice  must  be  given  to  the  in- 
dorser,  when  one  member  of  a  firm  makes  a  note  and 
another  indorses  it,  both  parties  signing  in  their  own  name, 
although  the  note  was  given  for  partnership  purposes,  and 
was  to  be  paid  out  of  the  partnership  funds.^  Where  one 
firm  draws  on  another,  and  they  have  a  common  member,' 
or  a  firm  draws  on  a  member,^  the  drawer  firm  is  not  en- 
titled to  notice. 

§  1087.  What  relations  between  parties  excuse  want  of 
demand. — Where  the  makers  of  a  note  constitute  one  firm, 
and  it  is  indorsed  by  another  firm,  in  each  of  which  firms 

'  Rhett  V.  Poe,  2  How.,  457 ;  Story  on  Bills,  §  392  ;  i  Parsons  N.  &  B.,  524 
In  Porthouse  v.  Parker,  i  Camp.,  82  (1807),  the  bill  was  drawn  by  the  agent  ol 
George,  James,  and  John  Parker,  who  were  partners,  upon  John  Parker,  and  ac- 
cepted by  the  latter's  agent.  Lord  Ellenborough  held,  that  the  bill  having  been 
accepted  by  order  of  one  of  the  defendants,  this  was  sufficient  evidence  of  its 
having  been  regularly  drawn  ;  and,  further,  that  the  acceptor  being  likewise  a 
drawer,  there  would  be  no  occasion  for  the  plaintiff  to  prove  that  the  defendants 
had  received  express  notice  of  the  dishonor  of  the  bill,  as  this  must  necessarily 
have  been  known  to  one  of  them,  and  the  knowledge  of  one  was  the  knowledge 
of  all.     See  also  New  York,  etc.,  Co.  v.  Meyer,  51  Ala.,  325, 

^  Fuller  v.  Hooper,  3  Gray,  334.  In  New  York,  etc.,  Co.  v.  Selma  Sanngs 
Bank,  51  Ala.,  305,  a  bill  was  drawn  by  one  firm  on  another,  and  was  accepted 
by  the  latter.  The  two  firms  had  a  common  member.  Held,  notice  not  neces- 
sary to  charge  the  drawers.  Taylor  v.  Young,  3  Watts,  339 ;  Gowan  v.  Jackson, 
20  Johns,  176;  Story  on  Bills,  §  392. 

'Taylor v.  Young,  3  Watts,  339.  *  i  Parsons  N.  &  B.,  525. 

"  Harvvood  v.  Jarvis,  5  Sneed,  375;  Storj'  on  Bills  (Bennett's  ed.),  3i3«/ 
Rhett  V.  Poe,  2  Howard,  457. 

"  Foland  v  Boyd,  23  Penn.  St.,  476,  Lowrie,  J. 

'  New  York,  etc.,  Co.  v.  Selma  Savings  Bank,  51  Ala.,  305  ;  see  Porthouse  v. 
Parker,  i  Camp.,  82,  supra. 

°  New  York,  etc.,  Co.  v.  Meyer,  51  Ala.,  325. 


132  SPECIAL    CIRCUMSTANCES    OF    EXCUSE.  §  I088. 

the  same  person  is  one  of  the  partners,  the  indorsing  firm 
is  entitled  to  require  strict  presentment  to  the  firm  making 
the  note,  for  the  two  firms  stand  in  their  business  relations 
as  distinct  persons,  with  separate  accounts,  funds,  and  liabili- 
ties, although  having  a  common  member.^  And,  as  has 
been  said,  to  hold  otherwise  would  subject  the  firm  indors- 
ing to  payment  of  the  note,  because  one  of  the  partners  be- 
longed to  both  firms,  when  the  firm  primarily  liable  is  sol- 
vent, and  would  pay  at  once  if  the  note  were  presented.* 
The  same  rule  applies  when  the  drawer  or  indorser  of  a  bill 
belongs  to  two  firms.^  For  though  each  partner  is  presumed 
to  have  knowledge  of  all  the  facts  known  to  another,  yet 
knowledge  of  non-presentment  is  no  equivalent  to  it,  nor 
is  it  a  waiver  of  the  holder's  obligation  to  make  it.  Where 
the  two  firms  reside  in  different  and  distant  places,  the  ne- 
cessity and  reason  of  the  rule  is  peculiarly  obvious.^ 

§  1088.  It  is  intimated  by  Professor  Parsons  that  notice 
to  the  drawing  or  indorsing  firm  would  be  likewise  neces- 
sary.^ But  this  does  not  seem  to  be  a  necessary  implication 
from  the  foregoing.  A  formal  demand  upon  the  firm  pri- 
marily liable  is  necessary  in  order  to  ascertain  whether  or 
not  it  will  pay  the  bill  or  note  ;  and  until  such  demand  is 
made  at  its  place  of  business  or  otherwise,  according  to  law, 
the  drawing  or  indorsing  firm  has  not  broken  its  contract 
that  upon  such  demand  the  bill  or  note  will  be  paid.  But 
if  it  is  not  paid  on  demand,  it  might  be  urged  that  the  firm 
drawing  or  indorsing  must  be  chargeable  with  the  default, 
as  it  should  know  of  the  dishonor  through  its  common  co- 
partner, who  was  as  much  bound  to  see  the  bill  or  note  paid 
as  his  associate  in  the  other  firm.     This  view  has  been  taken, 


'  Dwight  V.  Scovil,  2  Conn.,  654  ;  Gaunt  v.  Thompson,  7  Man.  G.  &  S.,  400 
Foland  v.  Boyd,  23  Penn.  St.,  476;  i  Parsons  N.  &  B.,  523;  Story  on  Notes, 
§294. 

^  Swift,  G.  J.,  in  Dwight  v.  Scovil,  2  Conn.,  654.  ^  Storj'  on  Bills,  §  376 

*  Dwight  V.  Scovil,  2  Gonn.,  654.  '  i  Parsons  N.  &  B.,  523. 


§   1089.  OBLIGATION  TO  PROVIDE  FOR  PAYMENT.  1 33 

or  at  least  very  distinctly  intimated,  in  a  case  where  a  ques- 
tion nearly  identical  was  presented.^ 

§  1088^.  Where  the  drawer  and  the  drawee  of  the  bill 
are  the  same  person  it  is  in  effect  a  promissory  note,  and 
no  notice  of  dishonoi  to  the  drawer  is  necessary,^  and  upon 
the  doctrine  that  the  maker  of  a  note,  like  an  ordinary 
debtor,  must  seek  his  creditor,  the  drawer  of  a  bill  upon 
himself  has  been  held  chargeable  without  presentment.^ 
But  as  to  presentment  this  doctrine  is  doubtful.* 

§  1089.  Joint  makers  at  distance  from  each  other. — 
When  there  are  joint  makers  of  a  note,  and  they  live  so  far 
apart  that  it  is  impossible  to  make  demand  of  both  on  the 
same  day,  it  would  seem  that  a  delay  for  the  necessary  time 
,0  present  to  both  would  excuse  for  such  time  the  want  of 
demand  on  both,  and  the  want  of  notice.^ 

>  West  Bank  Branch  v.  Fulmer,  3  Penn.  St.,  399.  The  note  in  this  case  was 
made  by  one  firm  and  indorsed  by  another.  All  the  indorsers  were  partners  in 
the  firm  which  made  the  note,  which  firm  had  two  additional  members.  No 
notice  was  given  to  Cochran  &  Perry,  the  indorsing  firm,  but  they  were  held 
liable,  and  Gibson,  C.  J.,  said  :  "  It  would  be  absurd  in  an  indorser  to  complain 
that  he  had  not  been  served  with  formal  notice  of  what  was  known  to  him,  or 
that  he  was  prejudiced  for  want  of  it.  As,  then,  it  was  as  much  the  business  of 
Cochran,  Perry  &  Co.  as  it  was  the  business  of  the  other  members  ol  Beers, 
Cochran  &  Co.  (the  makers)  to  provide  for  the  payment  of  their  joint  note  at  its 
maturity,  and  as  they  all  knew  that  provision  had  not  been  made  for  it,  proof  of 
notice  to  Cochran  &  Perry  would  have  been  superfluous  in  an  action  against  them 
as  indorsers." 

^  Vol.  I,  §§  128,  129,  and  cases  cited. 

'  Bailey  v.  Southwestern  Bank,  11  Fla.,  266  ;  Maux  Ferry  Co.  v.  Branegan,  40 
Ind.,  361  ;  Fairchild  v.  Ogdensburg  R.R.,  15  N.  Y.,  337 ;  2  Ames  B.  &  N.,  462  ; 
Benjamin's  Chalmers'  Digest,  3. 

*  See  2  Ames  B.  &  N.,  462.     Ante,  %  1088. 

^  I  Parsons  N.  &  B.,  531.  See  chapter  XX,  on  Presentment  for  Payment,  §  595, 
vol.  I. 


CHAPTER    XXXII. 

SPECIAL  CIRCUMSTANCES  OF  EXCUSE  FOR  WANT  OF  PRE- 
SENTMENT, PROTEST,  AND  NOTICE,  ARISING  FROM  SPE- 
CIAL   ACTS    OF    WAIVER. 


SECTION  I. 

SPECIAL  WRITTEN  AND  VERBAL  WAIVERS  OF  PRESENTMENT, 
PROTEST,  AND  NOTICE — GENERAL  PRINCIPLES  RESPECTING 
NOTICE. 

§  1090.  When  presentment  of  the  bill  or  note  at  maturity 
has  been  dispensed  with  by  prior  agreement  between  the 
parties,  or,  in  other  words,  has  been  waived  by  the  party 
entitled  to  require  it,  the  holder  is  excused  for  his  failure 
to  make  it.  It  would  be  a  fraud  upon  the  holder  to  permit 
him  to  suffer  by  acting  upon  the  assurance  of  the  party  to 
whom  he  looks  as  security  upon  the  paper ;  and  as  prompt 
presentment  is  a  requirement  solely  for  the  benefit  of  the 
drawer  and  indorsers,  they  are  themselves  the  sole  judges 
to  determine  whether  or  not  they  will  enforce  it.  The 
waiver  may  be  either  verbally  or  in  writing ;  it  may  be  ex- 
pressed in  totidem  verbis,  or  inferred  from  the  words  or 
acts  of  the  party  ;  and  it  matters  not  what  particular  lan- 
guage may  be  used,  so  that  it  conveys  the  idea  that  the  pre- 
sentment at  maturity  is  dispensed  with.  The  like  observa- 
tions apply  to  the  protest  and  notice.  Where  the  indorser 
of  a  check  wrote  over  his  name,  "  waiving  demand  and  no- 
tice," it  was  held  that  he  was  not  entitled  to  require  any 
demand  of  the  maker,  or  notice  to  himself  of  non-pay- 
(134)  , 


§§  lOQI,  1092.  SPECIAL    WAIVERS.  I35 

ment,  as  conditions  precedent  to  his  liability.^  Such  words 
have  the  effect  to  dispense  with  the  necessity  for  those 
formahties.  If  a  higher  security  for  the  debt  be  given  by 
the  drawer  or  the  indorser — as,  for  instance,  a  mortgage  or 
deed  of  trust,  and  nothing  is  said  therein  respecting  de- 
mand and  notice,  the  failure  in  respect  to  them  will  not 
impair  the  security  given,  which  may  be  enforced  upon  de- 
fault being  made.^ 

§  1 09 1.  It  is  not  necessary  that  the  waiver  should  be 
direct  and  positive.  It  may  result  from  implication  and 
usage,  or  from  any  understanding  between  the  parties 
which  is  of  a  character  to  satisfy  the  mind  that  a  waiver  is 
intended  ; '  but  there  is  authority  to  the  effect  that  such 
waivers  as  we  are  now  treating  of  should  receive  a  strict 
construction.*  And  it  has  been  said  that  to  show  a  waiver 
of  demand  and  notice  there  must  be  clear  and  unequivocal 
evidence,^  and  that  equivocal  circumstances  or  agreements 
will  not  suffice.^ 

Mr.  Chitty  intimates  that  an  indorser's  waiver  must  be 
express,  while  he  admits  that  the  drawer's  may  be  implied.' 
But  no  distinction  in  this  regard  is  recognized.' 

§  1092.  Sometimes  the  waiver  is  embodied  in  the  instru- 
ment itself,  and  in  such  cases  the  waiver  enters  into  the 
contract  of  every  party  who  signs  it,  whether  as  drawer, 
maker,  acceptor,  or  indorser.  Thus,  where  the  words  "  pres- 
entation and  protest  waived,"  or  "  notices  and  protests  of 
non-acceptance  and  non-payment  waived,"  are  written  in 
the  bill,  they  are  binding,  not  only  upon  the  drawer,  but 

*  Emery  v.  Hobsen,  62  Me.,  578.     See  also  Woodman  v.  Thurston,  8  Cush., 
157;  16  American  Rep.,  514. 

"  Cardwelf.  v.  Allen,  33Grat.,  164. 

*  Fuller  V.  McDonald,  8  Greenl.,  213  ;  i  Parsons  N.  &  B.,  594. 

*  Bird  V.  Le  Blanc,  6  La.  Ann.,  470;  Wall  v.  Bry,  i  La.  Ann.,  312. 

'  Gregory  v.  Allen,  Mart.  &  Y.,  74.  *  Story  on  Bills,  §  371. 

^  Chitty  on  Bills  (13  Am.  ed.)  [*5o61,  573,  on  authority  of  dictum  of  Sir  James 
Mansfield,  in  Borradaile  \'.  Lowe,  4  Taunt.,  93. 

*  Thornton  v.  Wynn,  12  Wheat.,  183  ;  Story  on  Bills,  §  321. 


136        EXCUSE  FOR  WANT  OF  PRESENTMENT.    §  lOgia. 

also  upon  the  iiidorsers,  who  are  in  effect  new  drawers,  and 
who  become  parties  to  the  waiver  in  becoming  parties  to 
the  bill.^  Clearly  this  is  the  case  where  such  a  waiver  ex- 
pressly includes  the  drawer  and  indorsers.^ 

§  1092^.  Whether  waiver  over  one  indorsement  applies  to 
others. — Sometimes  the  waiver  is  not  embodied  in  the  in- 
strument itself,  but  is  made  by  one  of  the  indorsers  by 
writing  over  his  signature,  "  I  waive  demand,"  or  "I  waive 
presentment,"  or  "waiving  demand  and  notice,"  or  "  I  hold 
myself  accountable  without  protest  or  notice,"  ^  or  some 
such  expression  ;  and  in  such  cases  the  better  opinion  is 
that  the  waiver  is  simply  the  individual  waiver  of  the  in- 
dorser  over  whose  signature  it  is  written,  and  not  binding 
upon  others  who  do  not  make  themselves  parties  to  it.* 
For  indorsement  is  a  separate  and  independent  contract, 
embodying,  it  is  true,  the  terms  of  the  bill,  or  note  ;  but 
not  by  implication  embodying  the  terms  of  any  other  in- 
dorsement, each  indorsement  speaking  independently  of 
others,  and  introducing  such  terms  as  may  be  consistent 
with  the  nature  of  the  act.  But  a  contrary  view  has  been 
taken  in  Maine ;  and  where  the  first  indorser  wrote  over 
his  signature,  "  waiving  demand  and  notice,"  it  was  held 
that  subsequent  indorsers  who  merely  appended  their  naked 
signatures  were  bound  by  the  waiver,  and  that  if  a  subse- 
quent indorser  intended  to  exclude  himself  from  its  opera- 
tion he  should  use  the  words,  "requiring  demand  and  no- 
tice."« 

§  \OQ)2b.    Waiver  on  separate  paper. — The  waiver  may 


'  Bryant  V.  Merchants' Bank,  8  Bush  (Ky.),  43;  Smith  v.  Lockridge,  8  Bush 
(Ky.),  423 ;  Lowry  v.  Steele,  27  Ind.,  170;  Farmers'  Bank  v.  Ewing,  78  Ky.  (l 
Rodman),  266. 

""  Bryant  v.  Lord,  19  Minn.,  397.  '  Halley  v.  Jackson,  48  Md.,  254. 

*  Duffy  V.  O'Connor,  7  Baxter,  498;  Woodman  v.  Thurston,  8  Cush.,  157. 
But  if  such  waiver  were  orig-inally  indorsed  on  the  back  of  the  instrument  it 
would  seem  that  each  indorser  would  be  bound  by  it  as  a  part  of  the  instrument. 
Farmers'  Bank  v.  Ewing,  78  Ky.  (i  Rodman).  266 

'  Parshley  v.  Heath,  69  Me..  00 


§§  I093.  I094-  SPECIAL    WAIVERS.  137 

also  be  upon  a  separate  paper,  written  prior  to,^  contempora- 
neously with,^  or  subsequent  to,  the  indorsement,'^ 

§  1093.  Whether  verbal  zuaiver  at  time  of  indorsement 
may  be  shown. — It  is  conceded  on  all  sides  that  a  verbal 
waiver  is  as  effectual  as  a  written  one  ;  and  the  weight  of  au- 
thority sustains  the  proposition  that  a  parol  promise  to  pay 
the  note  absolutely,  made  by  the  indorser  at  the  time  he 
indorses  it,  or  a  promise  to  pay  it  if  the  maker  docs  not, 
or  a  verbal  agreement  between  the  parties  that  payment 
should  not  be  demanded  until  after  maturity,  is  admissible 
to  prove  a  waiver  of  demand  and  notice.  Such  evidence 
is  not  offered  for  the  purpose  of  varying  the  written  con- 
tract of  indorsement,  which  is  simply  to  pay  the  note  after 
exercise  of  due  diligence  against  the  maker,  but  to  show 
that  the  parties  have  between  themselves  settled  the  amount 
of  diligence  to  be  required.^  It  has  been  held  differently,^ 
but  the  doctrine  of  the  text  seems  to  us  more  consistent 
with  the  principles  upon  which  waivers  are  sustained. 

§  1094.  Exteiit  of  waiver. — The  terms  of  the  waiver  are 
often  broad  enough  to  include  all  the  steps  usually  neces- 
sary to  fix  the  liability  of  the  indorser.  Thus  where  the 
words,  "I  waive  demand  and  notice," "^  are  written  over  the 
indorser's  signature,  or  "presentation  and  protest  waived,"'' 
are  embodied  in  the  instrument,  they  import  an  express 
waiver  of  demand,  protest,  and   notice.     So,  "waiving  de- 

'  Duvall  V.  Farmers'  Bank,  7  Gill  &  J.,  44-  "  Po^i^  §  io93- 

'  Spencer  v.  Harvey,  17  Wend.,  489. 

*Dye  V.  Scott,  35  Ohio  St.,  194  (approving  the  text)  ;  Taylor  v.  French,  2  Lea 
Tenn.,  260;  Boyd  v.  Cleveland,  4  Pick.,  525;  Barclay  v.  Weaver,  19  Penn.  St., 
396;  Hazard  v.  White,  26  Ark.,  174;  Lane  v.  Steward,  20  Me.,  98;  Fuller  v. 
McDonald,  8  Greenl.,  213  ;  see  also  Wall  v.  Bry,  i  La.  Ann.,  312  ;  see  i  Parsons 
N.  &  B.,  584;  Story  on  Bills,  §  317,  note  i  ;  aiite,  §  719. 

'Beeler  v.  Frost,  70  Mo.,  186;  Rodney  v.  Wilson,  67  Mo.,  123.  Hough,  J., 
saying:  "  We  think  the  policy  of  the  law  requires  that  the  paper  '  shall  tell  its 
own  story.'  "  See  2  Ames  B.  &  N.,  133  ;  Hightower  v.  Ivy,  2  Port.  (.Ala.),  308 ; 
Barry  v.  Morse,  3  N.  H.,  132  ;  Kern  v.  Van  Phul,  7  Minn.,  74  ;  Davis  v.  Gowen, 
19  Me.,  447,  held  demand  not  waived,  as  the  promise  could  not  be  construed  to 
discharge  that  obligation.     See  §  719. 

'  Woodman  v.  Thurston,  8  Gush.,  1 57  ;  Jaccard  v.  Anderson,  37  Mo.,  91. 

'  Bryant  v.  Merchants'  Bank,  8  Bush  (Ky.),  43. 


138  EXCUSE    FOR    WANT    OF    PRESENTMENT.  §   IO95. 

mand  and  notice,"^  or  "I  waive  protest  and  notice,"^  or  "  I 
waive  demand  of  protest,"^  though  somewhat  variant  in 
expression,  have  the  same  significance — a  waiver  of  all 
steps  usually  taken  to  bind  the  indorser. 

Sometimes  notice  alone  is  waived,  as,  for  instance,  where 
the  drawer  refused  to  give  his  address,  saying  that  the  ac- 
ceptor would  not  pay,  and  that  he  would  call  in  a  few  days, 
and  inquire  whether  the  bill  had  been  paid  or  not* 

§  1095.  Effect  of  waiver  of  protest  of  foreign  bill. — ^The 
words,  "  I  waive  protest,"  or  "  waiving  protest,"  or  any 
similar  phrase,  importing  that  the  protest  is  waived,  are, 
when  applied  to  a  foreign  bill,  universally  regarded  as  ex- 
pressly waiving  presentment  and  notice,  the  protest  being 
according  to  the  law  merchant  the  formal  and  necessary 
evidence  of  the  dishonor  of  such  an  instrument.  In  waiv- 
ing "  protest,"  the  party  is  considered  not  only  as  dispens- 
ing with  a  formality,  but  as  dispensing  with  the  necessity 
of  the  steps  which  must  precede  it,  and  of  which  it  is 
merely  the  formal  though  necessary  proof  which  the  law 
requires.^ 

§  1095^.  Effect  of  waiver  of  protest  of  inlafid  bill  or  7iote. 
— But  when  a  waiver  of  protest  is  applied  to  an  inland  bill, 
or  to  a  promissory  note,  it  has  not  in  all  cases  been  consid- 
ered clear  that  it  was  intended  to  dispense  with  notice  ;  the 
protest  of  such  instruments  not  being  necessary  in  order  to 
charge  the  drawer  or  indorsers.  But  the  word  "protest-" 
has,  by  general  usage,  acquired  a  more  extensive  significa- 
tion than  the  mere  formal  declaration  of  a  notary.  Inland 
bills  and  promissory  notes  may  be  protested  by  statutory 
enactment  in  many  States,  and  the  protest  is  accorded  the 
same  effect  as  to  them  when  it   is  made,  though  it  is  not 

'Johnston  v.  Searcy,  4  Yerg.,  182.  "  Gordon  v.  Montgomery,  19  Ind.,  no. 

'Porter  v.  Kemball,  53  Barb.*  467. 

*  Phipson  V.  Kneller,  i  Stark.,  116;  4  Camp.,  285  ;  Edwards  on  Bills,  633. 

"  Union  Bank  v.  Hyde,  6  Wheat.,  572 ;  Brown  v.  Hull,  33  Grat.,  31 ;  Edwards 
on  Bills,  634. 


I095-  SPECIAL    WAIVERS.  139 

necessary  to  make  it.  And  the  weight  as  well  as  the 
number  of  authorities  predominate  in  favor  of  constru- 
ing a  waiver  of  protest  to  signify  as  much  when  applied 
to  inland  bills  and  notes  as  when  used  in  respect  to 
a  foreign  bill.*  And  such  seems  to  us  clearly  the 
correct  conclusion.^  In  the  Supreme  Court  of  the 
United  States  a  waiver  of  protest  of  an  inland  bill  was 
considered  under  the  circumstances  ambiguous  as  to 
the  intent  of  the  party,  and  parol  evidence  was  admitted  to 
show  that  it  had  the  full  signification  of  a  waiver  of  demand 
and  notice  ;  but  the  reasoning  of  the  opinion  seems  to  us 
to  bear  out  the  doctrine  of  the  text  that,  ex  vi  termini,  it 
imports,  according  to  the  understanding  of  mercantile 
men,  that  all  the  steps  to  be  ordinarily  taken  are  dispensed 
with.^     The   contrary  view   obtained   in    Louisiana.'*      In 

'Coddington  v.  Davis,  l  Comst.,  i86;  3  Denio,  16.  In  this  case  the  waiver 
was  as  follows:  "Please  not  protest  T.  B.  Codding-ton's  note  due,  and  I  will 
waive  the  necessity  of  the  protest  thereof."  Porter  v.  Kemball,  53  Barb.,  467  ; 
Fisher  v.  Price,  37  Ala.,  407  ;  Jaccard  v.  Anderson,  37  Mo.,  91 ;  Carpenter  v. 
Reynolds,  42  Miss.,  807,  note ;  Hood  v.  Hallenbeck,  14  N.  Y.  S.  C.  (7  Hun),  364, 
note.     See  Brown  v.  Hull,  33  Grat.,  31 ;  Sprague  v.  Fletcher,  8  Oregon,  367. 

""  Harvey  v.  Nelson,  31  La.  An.,  434.  In  this  case  the  text  is  quoted  and  ap- 
proved. The  indorsers  had  written  on  the  note  in  suit :  "  We  hereby  waive 
the  necessity  of  either  protest  or  notice."  White,  J. :  "  The  protest  necessarily 
includes  a  due  demand,  and  if  such  be  the  case  the  waiver  of  protest  necessarily 
waived  that  which  was  an  integral  or  essential  part  of  the  protest." 

•  Union  Bank  v.  Hyde,  6  Wheat,  572.  The  following  undertaking  of  the  in- 
dorser  of  a  promissory  note  :  "  I  do  request  that  hereafter  any  notes  that  may 
fall  due  in  the  Union  Bank,  in  which  I  am,  or  may  be,  indorser,  shall  not  be 
protested,  as  I  will  consider  myself  bound  in  the  same  manner  as  if  the  said 
notes  had  been,  or  should  be,  legally  protested,"  was  held  by  the  United  States 
Supreme  Court  to  be  ambiguous  as  to  whether  it  amounted  to  a  waiver  ot  de- 
mand and  notice,  and  parol  proof  was  admitted  to  show  that  it  was  the  under- 
standing of  the  parties  that  the  demand  and  notice  necessary  by  law  to  charge 
the  indorser  should  be  dispensed  with.  And  it  was  said  by  Johnson,  J. :  "  Had 
the  defendant  omitted  one  word  from  his  undertaking,  it  would  have  been  diffi- 
cult to  maintain  the  affirmative  of  this  proposition.  But  what  are  we  to  under- 
stand him  to  intend  when  he  says  :  '  I  will  consider  myself  bound  in  the  same 
manner  as  if  said  notes  had  been,  or  should  be,,  legally  protested  ? '  Except  as 
to  foreign  bills,  a  protest  has  no  legal  binding  effect,  and  as  to  them  it  is  evi- 
dence of  demand,  and  incident  to  legal  notice.  It  either,  then,  had  this  mean- 
ing, or  it  had  none.  This  reasoning,  it  may  be  said,  goes  no  further  than  to  a 
waiver  of  the  demand  ;  but  what  effect  is  to  be  given  to  the  word  '  bound  '  ?  It 
must  be  to  pay  the  debt,  or  it  means  nothing."  It  was  held  by.  the  court  that,  if 
this  reasoning  were  inconclusive,  the  evidence  admitted  proved  that  it  was  the 
real  intention  of  the  parties  to  give  this  etfcct  to  the  agreement. 

*  Ball  V.  Greaud,  14  La.  Ann.,  305  ;  Bird  v,  Le  Blanc,  6  La.  Ann.,  470 ;  Wall  v. 
Bry.  I  La.  Ann.,  312. 


140       EXCUSE  FOR  WANT  OF  PRESENTMENT.     §  IO96. 

Maine,  by  statute,  waiver  of  demand  and  notice  must  be  in 
writing.^ 

§  1096.  Construction  of  waivers. — A  waiver  is  not  to  be 
construed  to  extend  beyond  the  fair  and  reasonable  import 
of  its  terms.  Therefore,  a  waiver  of  notice,  which  is  a  sep- 
arate and  distinct  step  from  the  presentment,  is  not  re- 
garded as  waiving  the  presentment  or  demand  upon  the 
drawee  or  maker.^  The  drawer  or  indorser  may  have  had 
confidence  that  the  drawee,  acceptor,  or  maker  would 
honor  the  bill  or  note  upon  its  presentment ;  or  the  holder 
may  have  insisted  on  not  incurring  the  risk  of  diligence  re- 
quired in  giving  prompt  notice.  Whatever  motive  may 
have  actuated  the  waiver  of  notice,  it  does  not  expressly  or 
inferentially  extend  to  a  waiver  of  the  demand,  and  that 
must  be  duly  made  in  order  to  charge  the  drawer  or  m- 
dorser.  The  words,  "  I  hold  myself  accountable,  and  waive 
all  notice,"  do  not  imply  an  extension  of  the  waiver  to  the 
demand  ;  but  merely  an  accountability  without  notice,  leav- 
ing the  demand  still  as  a  condition  precedent.^  When 
time  is  extended  by  the  waiver,  as,  for  instance,  where  it  is 
said,  "  We  waive  protest  and  notice,  and  hold  ourselves 
responsible  for  payment  on  a  certain  future  day,  to  which 
this  note  is  extended  by  consent,"  the  waiver  applies  to  all 
steps  of  demand,  protest,  and  notice  at  maturity,  and  also 
as  to  such  steps  at  the  prolonged  or  extended  maturity  of 
the  paper.'* 

§  1097.  State7nent  of  grounds  of  waiver. — The  fact  that 
the  waiver  of  protest,  demand,  or  notice  states  the  reasons 
or  grounds  of  such  waiver  does  not  affect  it,  and  where  the 

*  Thomas  v.  Mayo,  56  Me.,  40. 

"^  Sprague  v.  P'letcher,  8  Oregon,  367  ;  Voorhees  v.  Atlee,  29  Iowa,  49 ;  Scull 
V.  Mason,  7  Wright,  99  ;  Buchanan  v.  Marshall,  22  Vt.,  561  ;  Lane  v.  Steward, 
20  Me.,  98  ;  Drinkwater  v.  Tebbets,  17  Me.,  16;  Berkshire  Bank  v.  Jones,  6 
Mass.,  524;  Backus  v.  Shipherd,  11  Wend.,  629;  Story  on  Bills,  §§  371,  375  ; 
Story  on  Notes,  §  272  ;  contra,  Matthey  v.  Gaily,  4  Cal.,  62. 

'  Burnham  v.  Webster,  17  Me.,  50. 

*  Blanc  V.  Mutual  N.  B.,  28  La.  An.,  921.  To  same  effect  see  Forster  v.  Jur- 
dlson,  16  East.,  105;  Ridgeway  v.  Day,  13  Penn.  St.,  288. 


5§  1098,  1099.  SPECIAL    WAIVERS.  I4I 

waiver  ran  :  "  Notice,  demand,  protest,  and  due  diligence 
waived  on  account  of  the  war  and  insurrection,"  during  the 
late  civil  war  in  the  United  States,  it  was  held  absolute 
upon  Its  face,  and  that  the  liability  of  the  indorsers  were 
absolutely  fixed  by  dishonor.* 

§  1098.  Parol  testimo7iy  as  to  waiver. — Where  there  is 
a  written  waiver  of  demand  upon  the  face  of  the  bill  or 
note,  but  not  of  notice,  it  may  be  shown  by  parol  testimony 
that  there  was  also  a  verbal  waiver  of  notice,  and  so  where 
there  is  a  written  waiver  of  notice  a  verbal  waiver  of  de- 
mand may  be  proved.  If  a  waiver  of  both  the  conditions 
(of  demand  and  notice)  may  be  proved  by  parol,  we  are 
aware  of  no  good  reason  why  that  kind  of  proof  should  be 
excluded  to  show  a  waiver  of  one  condition  where  a  waiver 
of  the  other  is  made  a  part  of  the  indorsement  itself."^ 

§  1099.  Whether  guaranty  is  waiver. — Any  language 
which  implies  a  guaranty  renders  the  party  using  it  a  guar- 
antor, and  consequently  such  party  is  not  entitled  to  de- 
mand and  notice  as  such  guarantor.  But  it  has  been  held 
that  the  words  "surety"  or  "security,"^  or  "backer"^ 
placed  after  an  indorser's  name,  is  no  waiver  of  demand  and 
notice,  on  the  ground  that  they  were  intended  to  secure  to 
the  parties  the  privileges  of  sureties  as  well  as  of  indors- 
ers.    The  authority  of  these  cases,  however,  is  doubted.^ 

The  expressions  "  accountable,"  "  eventually  account- 
able,"^ and  "hold  ourselves  responsible  for  payment," "^ 
imply  a  waiver  of  demand  and  notice,  and  so  does  the  word 
"holden."^     And  where  an  indorser  wrote,  "I  assign  the 

'  Neal  V.  Wood,  23  Ind.,  524  (1864). 

"  Drinkwater  v.  Tebbets,  16  Me.,  17  ;  Mills  v.  Beard,  19  Cal.,  161  ;  Edwards 
on  Bills,  635.     See  atite,  §  1093. 

^  Bradford  v.  Corey,  5  Barb.,  461,  Paige,  J. 

*  Seabury  v.  Hungerford,  2  Hill,  80.  *  i  Parsons  N.  &  B.,  579. 

'  Turber  v.  Caverly,  42  N.  H.,  74 ;  McDonald  v,  Bailey,  14  Me.,  loi  ;  Burn- 
ham  V.  Webster,  17  Id.,  50. 

'  Blanc  V.  Mutual  National  Bank,  28  La.,  922  ;  see  Small  v.  Clarke,  51  Cal., 
227. 

*  Bean  v.  Arnold,  16  Me.,  251  ;  Blanchard  v.  Wood,  26  Id.,  358. 


142       EXCUSE  FOR  WANT  OF  PRESENTMENT.     §  IIOO. 

within  note  to  J.  T.,  and  hold  myself  responsible  for  the 
payment  of  the  same,  the  maker  to  have  two  years  to  pay 
the  same,  unless  he  prefers  to  pay  sooner — interest  on  the 
same  to  be  paid  annually,"  it  was  held  a  waiver  of  demand 
and  notice.^ 

§  IIOO.  Whether  questions  of  waiver  are  of  law  or  of 
fact. — Whether  particular  conversations  amount  to  a  waiver 
or  not  has  been  held  by  the  United  States  Supreme  Court 
to  be  a  question  of  fact  for  the  jury,  and  not  one  of  law  for 
the  court.^  But  whether  or  not  distinct  words  used  amount 
to  a  wa-iver  or  not,  would  be,  we  should  think,  a  question 
of  law ;  although,  if  intermixed  with  others  about  which 
the  testimony  is  not  clear  and  concurrent,  it  would  be  a 
question  of  fact  for  the  jury  to  determine  whether  or  not 
there  was  a  waiver.  In  Massachusetts,  it  has  been  said  by 
Shaw,  C.  J. :  "  Though  questions  of  due  diligence  and  waiver 
were  originally  questions  of  fact,  yet  having  been  reduced 
to  a  good  degree  of  certainty  by  mercantile  usage,  and  a 
long  course  of  judicial  decision,  they  assume  the  character 
of  questions  of  law  ;  and  it  is  highly  important  that  they 
should  be  so  deemed  and  applied,  in  order  that  rules  affect- 
ing so  extensive  and  important  a  department  in  the  trans- 
actions of  a  mercantile  community  may  be  certain,  practical, 
and  uniform,  as  well  as  reasonable,  equitable,  and  intelli- 
gible.^ 

§  1 10 1.  Laches  of  a  holder  by  delay  may  be  waived,  but 
the  waiver  should  be  distinctly  proved.  Where  a  draft  was 
drawn  in  Ohio  on  New  York,  on  July  loth,  1857,  and 
before  presentment  was  lost ;  and  on  August  loth  the 
drawer  gave  the  holder  another  precisely  similar,  post-dated 
July  loth,  1857,  and  wrote  across  it  "duplicate,"  and  the 
latter  presented  it  on  August  14th,  and  was  refused  pay- 

"  Airey  v.  Pearson,  37  Mo.,  424. 

"^  Union  Bank  v.  Magruder,  7  Pet.,  287  ;  see  Carmichael  v.  Bank  of  Pennsyl- 
vania, 4  How.  (Miss.),  567. 

^  Creamer  v.  Perry,  17  Pick.,  332. 


§§1102,1103.      SPECIAL  WAIVERS  AFTER  EXECUTION.  I43 

ment,  the  drawees  having  failed  the  day  before — it  was  held 
that  the  second  draft  was  given  as  a  substitute  for  the  first, 
and  to  take  its  place,  and  that  the  plaintiff's  delay  was  fatal  ^ 


SECTION  11. 

SPECIAL  WAIVERS  AFTER  THE  EXECUTION  OF  THE  BILL  OR  NOTE. 

§  1 102.  The  waiver  may  not  only  be  written  upon  the 
bill  or  note  by  the  party  at  the  time  he  signs  it,  but  as  well 
at  any  time  before  maturity  ;  and  when  made  after  the  exe- 
cution of  the  instrument,  no  new  consideration  is  necessary 
to  support  it.^  All  that  the  holder  contracts  to  do  in  order 
to  bind  the  indorser  is  to  use  due  diligence  in  making  pre- 
sentment and  demand  of  payment  of  the  acceptor  or  maker, 
and  in  giving  the  indorser  notice  in  the  event  of  his  default. 
Due  diligence,  in  the  absence  of  any  agreement  or  under- 
standing betv/een  the  parties,  fixes  the  time  within  which 
such  presentment  must  be  made  and  notice  given  ;  but 
when  the  indorser  himself  relaxes  the  rule,  due  diligence 
requires  no  more  than  that  his  own  terms  be  complied  with. 

,  §  II 03.  As  to  waiver  before  mattirity  by  condiccl,  act,  or 
agreement. — Any  act,  course  of  conduct,  or  language  of  the 
drawer  or  indorser  calculated  to  induce  the  holder  not  to 
make  demand  or  protest  or  give  notice,  or  to  put  him  off 
his  guard,  or  any  agreement  by  the  parties  to  that  effect, 
will  dispense   with   the   necessity   of   taking  these  steps.^ 

'  Benton  v.  Martin,  40  N.  Y.,  345. 

-  Wall  V.  I3ry,  i  La.  Ann.,  312,  Slidell,  J.,  saying  :  "  The  indorsement  of  the 
defendant  was  made  some  months  antenor  to  the  indorsement  and  signature  of 

the  waivers The  defendant  urges  that  it  was  not  binding,  because  made 

without  consideration.  The  plea  that  the  waiver  was  without  consideration  can 
not  avail  the  defendant.  It  was  made  before  the  maturity  of  the  note  ;  the 
holder  may  have  regulated  his  conduct,  in  not  protesting  the  note,  by  the  de- 
fendant's waiver,  confiding  in  it ;  and  to  relieve  him  from  it  now  would  be  sanc- 
tioning a  breach  of  good  faith,  and  permitting  that  party  to  gain  by  his  own 
disingcnuousness."     Story  on  Notes,  §  271. 

'  Boyd  V.  Bank  of  Toledo,  32  Ohio  St.,  526,  approving  text.  See  also  Moyer's 
A.ppeal,  87  Penn.  St.,  129. 


144       EXCUSE  FOR  WANT  OF  PRESENTMENT.     ^   I IO4. 

Where  the  party  told  the  holder  eighteen  months  before 
maturity  not  to  protest  it,  as  it  should  be  paid  at  maturity, 
it  was  held  a  waiver  of  demand  and  notice.^  So  where  the  in 
dorser  informed  the  holder  that  the  maker  had  absconded, 
and  requested  forbearance.^  So  where,  on  the  first  day  of 
grace,  the  indorser  requests  time,  and  says  that  an  arrange- 
ment will  be  made,  notice  is  waived  ;  ^  so  where  the  drawer,* 
or  the  indorser,^  informs  the  holder  that  the  bill  will  not  be 
paid,  or  that  he  can  not  pay  it  when  due,  it  is  a  waiver  of 
demand,  protest,  and  notice.  So  where  the  drawer  of  a 
bill  tells  the  holder  to  hold  it  without  presentment  an  in- 
definite time,  he  takes  the  risk  of  the  drawee's  solvency ; 
and  if  he  fails  in  the  meantime  the  want  of  presentment  is 
excused.^  So  where  the  indorser  of  a  note  tells  the  holder 
to  let  it  run  and  he  will  pay  it  when  called  for.'^  So  where 
the  drawer  told  the  holder  that  his  residence  was  immaterial, 
and  that  he  would  inquire  whether  the  bill  was  paid.^ 

§  1 104.  Where  the  indorser,  before  the  note  fell  due 
wrote  to  the  holder  stating  that  the  maker  had  failed, 
acknowledging  his  liability,  and  asking  indulgence  until 
funds  could  be  realized,  it  was  held  a  waiver  of  demand  and 
notice.^  So  where  the  indorser,  before  the  note  fell  due, 
was  informed  that  the  maker  wished  it  to  remain  another 
year,  and  replied  that  he  was  willing.^"  So  where  the  in- 
dorser, being  informed  that  the  maker  had  failed,  told  the 
holder  that  there  would  be  no  trouble  about  it,  and  that  he 
would  pay  it."  So  where  the  indorser  before  maturity 
says  that  he  will  pay  it,  or  arrange  it,  or  uses  any  equivalent 

*  Sigerson  v.  Mathews,  20  How.,  496. 

=  Leffingwell  v.  White,  i  Johns'  Cas.,  99.         '  Gove  v.  Vining,  7  Mete,  212. 

*  Minturn  v.  Fisher,  7  Cal.,  573.  '  Hunter  v.  Hook,  64  Barb.,  468. 
« Sheldon  v.  Chapman,  31  N.  Y.,  644.  '  Hale  v.  Danforth,  46  Wis.,  555. 
^Phipson  V.  Kneller,  i  Starkie,  116,  Lord  Ellenborough  saying:  "He  thereby 

takes  upon  himself  the  onus  of  making  inquiry  and  dispenses  with  notice."    See 
znfe,  §  1094;  2  Ames  B.  &  N.,  469.     Benjamin's  Chalmers'  Digest,  199. 

'  Spencer  v.  Harvey,  17  Wend.,  489.  "  Sheldon  v.  Horton,  53  Barb.,  23. 

"  Whitney  v.  Abbot,  5  N.  H.,  378. 


§II06.  SPECIAL  WAIVERS    AFTER    EXECUTION.  1 45 

expression.^  So  where  the  indorser  tells  the  holder  to  give 
himself  no  uneasiness,  that  the  note  will  be  paid  at  matu- 
rity, that  he  is  collecting  money  for  the  maker,  and  will  see 
it  paid.^  So  an  agreement  by  the  indorser  to  pay,  if  the 
note  can  not  be  collected  of  the  maker  by  due  course  of 
law,  binds  him  without  demand  or  notice.^  So  where  the 
indorser  after  maturity  agreed  with  the  maker  to  take  up 
the  note,  to  give  back  to  him  the  property  for  which  the 
note  was  given,  and  to  return  the  note  without  further  con- 
sideration, it  was  held  that  he  was  liable  without  demand  or 
notice/ 

§  1 105,  Putting  impedi7nent  iii  way  of  de^nand  and 
notice. — So  where  the  party  puts  any  obstacle  in  the  way 
of,  or  prevents  demand  and  notice,  or  makes  an  arrange- 
ment which  will  render  demand  unavailing,  it  operates  as  a 
waiver  of  demand  and  notice  ;  as  where  the  indorser  ob- 
tained possession  of  the  note  before  maturity  and  withheld 
it  until  after  that  tirne.^  So  where  the  drawer  of  a  check  ^ 
or  bill  "^  stops  its  payment ;  where  the  indorser  had  agreed 
with  the  maker  for  value  to  extend  the  time  for  a  year,  and 
had  transferred  the  note  to  the  holder  without  informing 
him  of  it ;  *  and  where  the  indorser  failed  to  apply  funds 
deposited  with  him  by  the  drawer  to  meet  the  bill.^ 

§  1106.  Agreements  for  extension  of  time. — Where  the 
indorser  agrees  to  an  extension  of  time  of  payment  it  waives 
demand,  protest,  and  notice  j^*'   so  an  agreement  to  attend 

'  Lary  v.  Young,  8  Eng.  (Ark.),  401  ;  Bruce  v.  Lytle,  13  Barb.,  163  ;  Marshall 
V.  Mitchell,  35  Me.,  221  ;  Leonard  v.  Gary,  10  Wend.,  504;  Boyd  v.  Bank  of 
Toledo,  32  Ohio  St.,  526  ;  Edwards  on  Bills,  633, 

^  Bryan  v.  Wilcox,  49  Cal.,  47.  =  Backers  v.  Shepherd,  11  Wend.,  629. 

*  Andrews  v,  Boyd,  3  Mete,  434.  '  Havens  v.  Talbott,  11  Ind.,   323. 
"Purchase  v.  Mattison,  6  Duer,  587;  Jacks  v.  Darrin,  3  E.  D.  Smith,  557. 

'  Lilley  v.  Miller,  2  Nott  &  McCord,  257.  But  it  has  been  held  to  apply  only 
to  notice.     Hill  v.  Heap,  Dow.  &  R.  N.  P.,  57. 

*  Williams  v.  Brobst,  10  Watts,  in.  "  Curtis  v.  Martin,  20  111.,  557. 
'"  Ridgeway  v.  Day,  13  Penn.  St.,  208  ;  Barclay  v.  Weaver,  19  Penn.  St.,  396  ; 

Farmers'  Bank  v.  Wakles,  4  Harr.  (Del.),  429  ;  Amoskeag  Bank  v.  Moore,  37  N, 
H.,  539- 

Vol.  II.— 10 


146       EXCUSE  FOR  WANT  OF  PRESENTMENT.     §  IIO7. 

and  take  care  of  the  note  ;  *  or  an  agreement  for  a  renewal. 
But  a  mere  request  for  a  renewal  has  been  held  no  waiver 
of  notice.^  And  where  notes  indorsed  for  accommodation 
are  not  protested,  and  no  notice  is  given,  the  signing  of 
new  notes  for  accommodation,  which  are  given  in  renewal, 
is  no  waiver  of  notice.^ 

Where  the  drawer  of  a  dishonored  bill  gave  the  holdei 
his  own  note  for  the  amount,  proof  of  notice  was  held  to 
be  dispensed  with,  and  laches  unavailable  as  a  defence.^ 
This  seems  to  us  clearly  right,  but  the  giving  of  a  bond  has 
been  held  to  be  only  prima  facie  evidence  of  a  waiver.' 
The  fact  that  an  indorser  appeared  at  a  meeting  of  credi- 
tors, and  assumed  the  character  of  a  creditor  for  a  large  sum, 
including  the  note  sued  on,  has  been  held  no  waiver  of  de- 
mand and  notice  ;  '^  but  it  has  been  well  observed  that  it 
mieht  be  regarded  as  evidence  of  such  waiver.^ 

A  declaration  by  the  drawer  of  a  check,  who  is  paying 
teller  of  the  bank  on  which  it  is  drawn,  three  days  before 
maturity,  that  it  w^ould  not  be  paid  ;  ^  and  a  declaration  by 
the  indorser  of  a  check  that  the  maker  could  not  pay  it, 
and  had  made  an  assignment  preferring  him,^°  have  been 
considered  as  waivers  of  demand  and  notice. 

Inquiries  and  attempts  by  an  indorser  to  get  the  maker 
to  pay  have  been  held  no  waiver,"  but  the  contrary  has  been 
held  where  the  indorser  himself  undertook  to  present  a  bill 
after  maturity.^^ 

§  1 107.  As  to  zvaivers  on  the  day  of  maturity. — The 
waiver  may  be  made  on  the  day  of  maturity  as  well  as  at 

'Taunton  Bank  v.  Richardson,  5  Pick.,  436. 
^  First  National  Bank  v.  Ryerson,  23  Iowa,  508. 

'  Sussex  Bank  v.  Baldwin,  2  Harr.,  487 ;  Cayuga  County  Bank  v.  Dill,  5  Hill, 
404. 
■*  Oswego  Bank  v.  Knower,  Hill  &  D.,  122. 

*  Leonard  v,  Hastings,  9  Cal.,  236, 

"  Ralston  v.  Bullitts,  3  Bibb,  261  ;  Mills  v.  Rense,  2  Litt.,  203. 

'  Miranda  v.  City  Bank,  6  La.,  740.  *  i  Parsons  N.  &  B.,  591. 

•  Minturn  v.  Fisher,  7  Cal.,  573.  '"  Taylor  v.  French,  4  E.  D.  Smith,  458. 
''  Cram  v.  Sherburne,  14  Me.,  48.  '^  Hussey  v.  Freeman,  10  Mass.,  84, 


§   II08.  SPECIAL   WAIVERS    AFTER    EXECUTION.  1 47 

any  other  time  ;  and  where  on  that  day  the  indorser  requests 
the  holder  not  to  protest  the  note/  or  admits  liabiHty  and 
offers  to  arrange  the  matter,  asking  indulgence,'  it  has  been 
held  a  waiver  of  demand.  So  where,  in  response  to  inquiry 
by  the  holder,  the  indorser  tells  him  that  it  will  be  of  no 
use  to  call  upon  the  maker,  demand  and  notice  are  waived.' 
And  where  the  indorser  of  two  bills,  falling  due  the  4th  and 
5th  of  April  respectively,  called  on  the  holder  on  the  4th, 
and  told  him  that  the  bills  would  not  be  paid,  but  it  was  not 
worth  while  to  trouble  him  with  a  twopenny  post  letter  to 
give  notice,  as  it  was  not  worth  the  money,  and  he  would 
bring  the  plaintiff  some  money  next  week  in  part  payment 
of  the  bills,  it  was  thought  that  it  would  have  dispensed 
with  notice,  but  would  not  support  an  allegation  of  due 
notice.^  In  New  York  an  accepted  offer  by  the  indorser 
to  the  holder  to  renew  the  note  on  terms  which  the  former 
proposed,  was  held  no  waiver  of  notice  ;  ^  but  the  court  was 
divided,  and  the  decision  has  been  justly  criticised  and  con- 
demned.^ In  a  subsequent  case  in  that  State,  where,  upon 
the  maturity  of  a  valid  note,  a  renewal  was  given  under  an 
usurious  agreement,  an  indorser  of  both  notes  was  held  not 
discharged  from  liability  on  the  first  because  of  failure  to 
give  notice  of  presentment,  and  non-payment  of  the  second.'' 

§  1 108.  And  when  the  indorsers,  on  the  last  day  of  grace, 
wrote  to  the  holder  in  Boston,  where  the  note  was  payable 
at  a  bank,  from  St.  Louis,  where  the  indorsers  resided, 
knowing  that  the  maker  had  failed  to  provide  for  payment, 
expressing  annoyance  at  the  fact,  and  saying,  "  We  hold 
ourselves  responsible  for  the  payment  of  this  note,  and  shall 
see  that  it  is  done  at  an  early  day,"  the  United  States  Su- 

'  Scott  V.  Greer,  10  Pehn.  St.,  103.  But  see  Prideaux  v.  Collier,  2  Stark.,  57. 
This  latter  case  has  not  escaped  the  criticism  of  Professor  Parsons  (see  i  N.  & 
B.,  592,  note_^). 

^  Moyer's  Appeal,  87  Penn.  St.,  129.  ^  Barker  v.  Barker,  6  Pick.,  8a 

*  Burgh  V.  Legge,  5  M.  &  W.,  418.         '  Cayuga  Co.  Bank  v.  Dill.  5  Hill,  404, 

*  I  Parsons  N.  &  B.,  593  ;  Boyd  v.  Bank  of  Toledo,  32  Ohio  St.,  526. 
'  Leary  v.  Miller,  61  N.  Y.,  489. 


148  EXCUSE    FOR    WANT    OF    PRESENTMENT.  §  IIO9. 

preme  Court  held  that  they  were  liable,  although  no  de^ 
mand  of  payment  was  made  and  no  notice  was  given  ;  and 
although,  from  the  relative  location  of  the  indorsers  and  the 
holder,  the  latter  could  not  receive  the  letter  for  several 
days.  Of  course  this  waiver  was  not  after  maturity,  with 
knowledge  of  the  holder's  laches,  as  the  indorsers,  at  what- 
ever  hour  they  wrote  the  letter,  had  no  knowledge  that 
there  had  been  a  failure  to  present  and  send  notice  of  dis- 
honor. But  their  promise  to  pay  with  knowledge  of  the 
maker's  laches  in  not  providing  for  its  payment,  was  con- 
sidered sufficient.^  Clearly,  the  mere  presence  of  an  in- 
dorser  at  the  time  of  presentment  and  refusal  of  payment 
is  no  waiver  of  notice.*  Where  on  the  day  of  maturity  the 
indorsers  wrote  on  the  note,  "  We  hereby  waive  protest  on 
this  note,  and  hold  ourselves  responsible  for  the  payment 
of  the  same,  which  is  hereby  extended  thirty  days,"  it  was 
held  that  neither  protest  nor  notice  at  the  end  of  thirty 
days  was  requisite.^ 


SECTION   III. 

BY  WHOM  AND   TO   WHOM   WAIVER   OF  DEMAND,   PROTEST,  AND 
NOTICE   MUST   BE   MADE. 

§  1 109.  The  words  or  acts  constituting  a  waiver  must,  of 
course,  be  those  of  the  person  entitled  to  require  that  'the 
regular  steps  of  demand,  protest,  and  notice  shall  be  taken  ; 
for  it  would  be  a  solecism  to  permit  one  person  to  waive 
away  the  rights  of  another.^ 

Therefore,  if  one  indorser  write  a  waiver  over  his  name, 
it  does  not  affect  another  ;^  and  the  acts  and  declarations  of 

*  Yeager  v.  Farwell,  13  Wall.,  12,  Davis,  J. 
"  Grant  v.  Spencer,  i  Montana,  136. 

'  Blanc  V.  Mutual  Bank,  28  La.  Ann.,  921. 

*  May  V.  Boisseau,  8  Leigh,  164,  Tucker,  P. 
'Central  Bank  v.  Davis,  19  Pick.,  373.     See  §  1092a. 


§  mo.  BY  AND  TO  WHOM  WAIVER  MUST  BE  MADE.  I49 

the  maker*  or  acceptor ^  can  not  affect  the  drawer  or  in- 
dorsers,  as  the  case  may  be,  unless  they  adopt  them  as  theirs 
also. 

§  1 109^.  Waiver  by  a  partjicr. — One  partner  may  gen- 
erally waive  demand,  protest,  and  notice  for  the  firm,  even 
after  dissolution  of  the  firm ;  ^  but  if  the  firm  were  already 
discharged,  the  promise  by  one  partner  to  pay,  made  after 
dissolution,  would  bind  him  only,''  and  after  the  dissolution 
of  the  firm  there  w^ould  be  no  authority  in  one  partner  to 
bind  a  dormant  partner  by  such  waiver.^  And  it  has  been 
held  that  if  a  firm  indorse  a  note  for  accommodation,  one 
partner  can  not  bind  the  others  by  any  promise  he  might 
make  for  payment,  since  as  to  that  they  are  not  partners.^ 

§  ii09<5.  Waiver  by  agent. — The  acknowledgment  by 
the  party's  agent,  attorney,  or  clerk  having  the  management 
of  his  case,  is  the  same  as  his  own.''^ 

§  1 1 10.  Promise  to  stranger  does  not  operate  as  waiver. 
— The  promise  to  pay,  in  order  to  constitute  a  waiver, 
should  be  made  to  the  party  entitled  to  demand  pay- 
ment, and  if  made  to  an  entire  stranger,  it  is  not  evi- 
dence of  a  waiver  of  laches  f  but  it  might  be  evidence  that 
due  presentment  was  made  and  notice  given.^  And  so  it 
seems  a  direct  waiver  of  protest  or  notice  will  not  bind  if 
made  to  a  stranger. ^°    But  when  the  promise  is  made  to  the 

>  Lee  Bank  v.  Spencer,  6  Mete,  308  ;  Pierce  v.  Whitney,  29  Me.,  188. 

*  Ex  parte  Bignold,  2  Mont.  &  A.,  633. 

'Darling  v.  March,  22  Me.,  184;  Star  Wagon  Co.  v.  Swezey,  52  Iowa,  394. 
*Hart  V.  Long,  i  Rob.  (La.),  83.  '  Manney  v.  Colt,  80  N.  C,  300. 

•Baer  v.  Leppert,  19  N.  Y.  S.  C.  (12  Hun),  516. 
'  Standage  v.  Creighton,  5  Car.  &  P.,  406. 

*  Miller  v.  Hackley,  5  Johns,  375  ;  Olendorf  v.  Swartz,  5  Cal.,  580.  National 
Bank  v.  Lewis,  50  Vt.,  622  ;  28  Am.  Rep.,  514,  517,  and  note  ;  Devendorf  v.  West 
Va.  O.  &  O.  L.  Co.,  17  W.  Va.,  175.  But  in  Byles  on  Bills  [*292],  it  is  said  the 
promise  may  be  made  to  a  stranger. 

°  Potter  V.  Rayworth,  13  East.,  417,  Lord  Ellenborough  saying:  "Whether  the 
promise  to  pay  was  made  to  the  plaintiff,  or  to  any  other  party  who  held  the 
note  at  the  time,  it  was  equally  evidence  that  the  defendant  was  conscious  of  his 
liabilitv  to  pay  the  note,  which  must  be  because  he  had  due  notice  of  its  dis- 
honor.'"    Devendorf  V.  West  Va.  O.  &  O.  L.  Co.,  17  W.  Va.,  175. 

"  National  Bank  v.  Lewis,  50  Vt.,  622. 


150       EXCUSE  FOR  WANT  OF  PRESENTMENT.     §  I  HO. 

holder,  it  inures  to  the  benefit  of  all  who  acquire  the  bill  of 
note  through  him  ; '  and  so  will  any  agreement  or  under- 
standing or  arrangement  between  an  indorser  and  the 
maker  inure  to  the  benefit  of  an  indorsee  in  a  suit  against 
the  indorser.^ 


^Kennon  v.  McRea,  7  Port.  (Ala.),  I75;  Rogers  v.  Hackett,  i  Post.,  100; 
Potter  V.  Rayworth,  13  East.,  417  ;  Gunson  v.  Metz,  i  B.  &  C,  193  ;  2  Dow.  & 

R.,  334- 

^^  Williams  v.  Brobst,  10  Watts,  in  ;  Marshall  v.  Mitchell,  35  Me.,  221  ;  Cur 
tiss  V.  Martin,  20  111.,  557  ;  i  Parsons  N.  &  B.,  611  ;  Devendorf  v.  West  Va.  O 
&  O.  L.  Co.,  17  W.  Va.,  175. 


CHAPTER  XXXIII. 

SPECIAL  CIRCUMSTANCES  OF  EXCUSE  WHICH  SHOW  AN  IN- 
ABILITY ON  THE  PART  OF  THE  HOLDER  TO  M.\KE 
DUE  DEMAND,  PRESENTMENT,  OR  PROTEST,  OR  GIVE 
DUE    NOTICE. 


SECTION  I. 

WHEN  THERE   IS   NO   PERSON  IN     EXISTENCE    UPON  WHOM    DE- 
MAND  CAN   BE   MADE,   OR  WHO   IS   LEGALLY   BOUND. 

§1111.  In  tht  Jirst  place,  where  there  is  no  person  in 
existence  upon  whom  demand  can  be  made,  or  none  who 
is  legally  liable,  the  presentment  is  excused,  for  the  reason 
that  it  is  either  an  impossibility,  or  that  it  would  be  a  fraud 
upon  the  holder  to  require  it.  And  firstly,  when  there  is 
no  person  in  existence  upon  whom  demand  can  be  made. 
Thus  where  the  maker  has  died  before  maturity,  and  there 
is  no  personal  representative  of  whom  payment  could  be 
demanded,  it  can  not  of  course  be  made  ;  but  it  would  be 
otherwise  if  a  personal  representative  had  been  appointed.^ 
Where  the  maker  and  his  whole  family  had  been  drowned 
two  days  before  the  maturity  of  the  note,  and  there  was 
no  will,  and  no  letters  of  administration  taken  out,  the 
want  of  demand  was  excused,^  And  so  in  all  cases,  where 
there  is  an  actual  party  bound  as  promisor,  but  no  one  then 
existing  who  represents  him,  the  delay  in  making  demand 
is  excused.  But  it  is  no  excuse  for  want  of  notice  to  the 
drawer  or  indorser.^ 


'  Chitty  on  Bills  (13  Am.  ed.)  [*436-7]  :  i  Pars.  N.  &  B.,  444.  445- 

'  Haslett  V.  Kunhardt,  Rice,  189. 

•  Price  V.  Young,  i  McCord,  339.  This  was  a  suit  against  an  indorser  of  a 
note,  the  maker  of  which  had  died  before  maturity.  The  excuse  alleged  for 
want  of  demand  was  that  there  was  no  legal  representative  on  whom  it  could  be 

(151) 


152  INABILITY  TO  MAKE  DUE  DEMAND.       §§1112,1113. 

§  1 1 1 2.  But  where  there  is  no  principal  party  then  or  at 
any  time  existing,  who  is  legally  bound  upon  the  bill  or 
note,  it  would  seem  that  both  presentment  and  notice  are 
excused. 

Thus  when  an  agent  signed  his  principal's  name  after  his 
death,  there  could  be  no  demand,  and,  therefore,  the  in- 
dorser  would  be  bound  without  it.^ 

§  1 1 1 3.  When  note  is  void,  and  indorser  knows  it,  de- 
mand and  notice  excused. — So  where  the  note  is  void  as 
between  the  maker  and  payee,  on  account  of  an  illegal 
consideration,  the  indorser  may  be  held  without  any  proof 
of  demand  or  notice  ;  ^  and  the  general  principle  is,  that 
whenever  the  principal  party  is  not  bound,  the  indorser  is 
bound  without  demand  or  notice.^  The  payee,  when  he 
indorses  the  note,  warrants,  by  the  very  act  of  indorsement, 
that  the  maker  is  legally  liable  to  pay  it,  knowing,  as  he 
necessarily  must,  that  such  is  not  the  case.  The  holder,  in 
the  belief  of  its  truth,  might  look  only  to  the  maker,  and 
fail  to  take  the  usual  steps  to  charge  the  indorser  ;  and  if, 
when  he  became  aware  that  the  maker  was  not  legally 
bound,  he  could  not  recover  against  the  indorser,  the 
latter  would  be  protected  by  his  own  fraud,  and  the  holder 
suffer  by  the  confidence  placed  in  him.  Thus,  in  Massa- 
chusetts,^ where  a  note  was  void  for  usury  between  maker 


made.  The  court  said  :  "  Where  a  demand  can  not  be  made,  the  law  does  not 
dispense  with  notice.  The  circumstances  which  prevented  it,  and  the  notice,  are 
still  required.  It  was  the  duty  of  the  holder  in  this  case,  admitting  that  a  de- 
mand could  not  have  been  made,  to  have  given  the  defendant  notice  in  as  short 
a  period,  after  having  ascertained  that  the  demand  could  not  be  made,  as  she 
could  have  been  required  to  do  so,  if  a  demand  had  been  made.  Suppose  the 
demand  had  been  made  on  the  26th  of  October,  and  no  notice  to  the  defendant 
had  been  given  until  the- loth  or  15th  of  November,  could  this  have  been  con- 
sidered a  reasonable  time  when  the  parties  were  so  contiguous  to  each  other  as 
to  have  enabled  the  plaintiff  to  have  given  the  notice  in  five  hours,  or  at  most  in 
one  day  ?  I  presume  not.  The  law  is  express,  that  the  notice  shall  be  given  as 
soon  as  shall  be  conveniently  practicable." 

'  Burrill  v.  Smith,  7  Pick.,  291. 

"^  Bayley  on  Bills,  ch.  vn,  sec.  2,  p.  205 ;  i  Parsons  N.  &  B.,  444,  445. 

'  Perkins  v.  White,  Ohio  S.  C,  January,  1881  ;  Central  L.  J.,  vol.  12,  p.  263. 

*  Copp  v.  M'Dugall,  9  Mass.,  i  ;  see  also  Chandler  v.  Mason,  2  Vt.,  193. 


$   lll^a.  PERSON  UPON  WHOM  DEMAND  MADE.  I53 

and  payee,  and  the  holder  failed  in  suit  against  the  maker 
on  that  account,  it  was  held  that  he  could  hold  the  in- 
dorse!" without  any  proof  of  demand  or  notice.  Sewall,  J., 
compared  it  to  the  case  of  a  bill  drawn  without  funds,  the 
indorser  of  the  note  standing  in  the  relation  of  drawer,  and 
the  maker  or  acceptor,  and  said  :  "  When  the  promise  or 
acceptance  is  void,  as  it  is  in  case  of  usury  between  the 
drawer  and  acceptor,  if  he  will  resort  to  that  defence  against 
his  promisee,  the  contract  becomes,  as  it  respects  the  indorser, 
a  draft  accepted  without  funds — that  is,  in  the  case  of  a 
promissory  note."  The  like  doctrine  has  obtained  m  New 
York,  where  it  is  held  that  the  indorser  of  a  forged  check 
is  liable  without  demand  or  notice  ;  ^  and  in  England,  where 
it  is  held  that  the  indorser  of  a  bill  drawn  on  an  improper 
demand  is  not  entitled  to  notice  ;  ^  and  it  would  extend  to 
any  case  in  which  there  was  no  legal  principal  bound,  as 
where  the  maker  or  acceptor  was  an  infant,  married  woman, 
or  lunatic,'  or  was  a  fictitious  person,  the  indorser  knowing 
it.* 

§  1113^.  Whether  indorser  is  bound  as  such  without  de- 
maud  or  notice  when  he  has  7io  knowledge  of  infirmity  in 
the  bill  or  note. — Knowledge  of  the  infirmity  rendering  the 
note  void,  on  the  part  of  the  drawer  or  indorser,  is  consid- 
ered by  high  authorities  essential  to  charge  them  without 
demand  or  notice — the  transaction  amounting  in  such  case 
to  a  fraud.^  And  an  accommodation  indorser  of  a  fictitious 
bill  purporting  to  be  drawn  by  an  agent  on  his  principal,  it 
has  been  held  is  entitled  to  notice  if  he  possessed  no  knowl- 
edge of  the  fraud,  Mansfield,  C.  J.,  saying :  "  He  has  only 
placed  himself  in  the  common  situation  of  an  indorser";  and 

'  Turnbull  v.  Bovvyer,  40  N.  Y.,  456. 

""  Cundy  v.  Marriott,  i  B.  &  Ad.,  696. 

'  Burrill  v.  Smith,  7  Picl<.,  291  ;  i  Parsons  N.  &  B.,  445. 

*  Farmers'  Banl<  v.  Vanmeter,  4  Rand.,  553  ;  i  Parsons  N.  &  B.,  460. 

'  "  The  infancy  of  the  maker  or  acceptor,"  says  the  learned  editor  of  Ames  on 
Bills  and  Notes,  vol.  I,  469,  "  of  course  forms  no  excuse  for  non-presentment  of 
a  bill  or  note,"  citing  Wyman  v.  Adams,  12  Cush.,  210.  See  the  remarks  of 
Pi  of.  Parsons  on  this  question,  i  Parsons  N.  &  B.,  444,  note. 


154  INABILITY  TO  MAKE  DUE  DEMAND.      §§  I  I  13(5,  1 1 14. 

Gibbs,  J.  :  **  He  is  entitled  to  notice  that  he  may  have  his 
remedy  against  them,"  i.e,  "  those  who  ought  to  pay."  ^  But 
every  indorser  warrants  the  instrument  to  be  vaUd,  and  ex- 
actly what  it  seems  to  be ;  and  whether  he  knows  the  con- 
trary or  not,  it  seems  to  us  that  he  is  absolutely  bound,  if 
his  warranty  fails,  without  demand  or  notice,^  at  least  to 
the  extent  of  refunding  the  consideration  paid  on  the  ground 
that  he  has  passed  a  thing  which  does  not  answer  to  its 
description.^ 

§  1113^.  The  doctrine  that  the  indorser  warrants  the  in- 
strument to  be  valid,  and  must  therefore  be  held  as  indorser 
if  it  turns  out  otherwise,  without  his  knowledge,  has  recently 
received  critical  examination  in  New  York,  where  it  was 
held  by  the  Court  of  Appeals  that  it  would  not  apply  to 
an  accommodation  indorser  who  received  no  part  of  the 
proceeds,  and  therefore  was  under  no  obligation  to  refund 
on  the  ground  of  failure  of  consideration.  The  court,  in 
its  instructive  opinion,  deprecated  the  nice  distinctions  dis- 
pensing with  notice.* 


SECTION  II. 

THE  IMPRACTICABILITY  OF  FINDING  THE  PARTY  TO  WHOM 
PRESENTMENT  SHOULD  BE  MADE,  OR  NOTICE  GIVEN,  OR 
ASCERTAINING   HIS   RESIDENCE   OR  PLACE   OF  BUSINESS. 

§  1 1 14.  In  the  second  place,  the  want  of  due  presentment, 
or  due  notice,  will  be  excused  when  the  holder,  after  exer- 
cising due  diligence,  can  not  find  the  party  to  whom  present- 
ment should  be  made  or  notice  given,  or  ascertain  his  place 
of  residence  or  business.     When  this  excuse  is  relied  upon, 

'  Leach  v.  Hewitt,  4  Taunt.,  731.  See  Carter  v.  Flower,  16  M.  &  W.,  747,  and 
Farmers'  Bank  v,  Vanmeter,  4  Rand.,  561. 

"  I  Parsons  N.  &  B.,  560.     See  vol.  I,  §§  669,  669a. 

'  See  vol.  I,  §§  730  et  seq.,  740a. 

*  Susquehanna  Valley  Bank  v.  Loomis,  85  N.  Y.,  207  (1881).  See  vol.  I,  §§  669 
669a. 


^1115.       IMPRACTICABILITY  OF  FINDING  THE  PARTY.  1 55 

It  becomes  often  a  question  of  nicety  to  determine  whethei 
or  not  tlie  steps  taken  by  the  holder  to  fmd  the  party  to 
whom  presentment  should  be  made  or  notice  given,  or  to 
ascertain  his  place  of  residence  or  business,  amounted  to 
the  due  diligence  which  the  law  exacts,  and  it  is  therefore 
important  to  define  in  what  such  diligence  consists.^  "  It 
would  be  very  hard,  when  the  holder  of  a  bill  does  not 
know  where  the  indorser  is  to  be  found,  if  he  lost  his  remedy 
by  not  communicating  immediate  notice  of  dishonor  of  the 
bill,  and  I  think  the  law  lays  down  no  such  rigid  rules. 
The  holder  must  not  allow  himself  to  remain  in  a*  state  of 
passive  and  contented  ignorance  ;  but  if  he  uses  due  dili- 
gence to  discover  the  residence  of  the  indorser,  I  conceive 
that  notice  given  as  soon  as  this  is  discovered  is  due  notice 
of  the  dishonor  of  the  bill,  within  the  usage  and  custom  of 
merchants."" 

§  1 1 15.  What  constitutes  diligence. — Due  diligence  in 
making  presentment  for  payment,  and  in  communicating 
notice,  consists,  as  a  general  rule,  in  making  inquiries  of 
such  accessible  persons,  as  from  their  connection  with  the 
transaction,  or  place,  or  parties,  are  likely  to  be  informed, 
and  in  acting  in  accordance  with  the  information  derived 
from  them.^  The  holder  is  not  bound  to  inquire  further 
than  a  reasonable  and  prudent  man  should,  and  every  pos- 

*  See  on  this  subject,  Story  on  Bills,  §  351. 

«  Bateman  v.  Joseph,  2  Camp.,  463  ;  12  East.,  433.  Lord  EUenborough  ;  Gar- 
vier  V.  Downie,  33  Cal.,  176. 

'  Lambert  v.  Ghiselin,  9  How.,  452.  In  this  case  inquiry  was  made  of  a  per- 
son trading-  at  a  particular  place,  who  said  that  the  indorser  lived  in  the  same 
place  with  him.  Held  sufficient.  It  was  held,  also,  that  if  due  diligence  were 
used  in  sending  notice,  and  it  turned  out  to  have  been  sent  to  the  wrong  place, 
it  was  not  necessar)'  for  the  holder  on  ascertaining  the  fact  to  send  another  to 
the  right  place.  In  Bank  of  Utica  v.  Bender,  21  Wend..  643,  inquiry  of  the 
drawer  as  to  residence  of  his  accommodation  indorser,  and  acting  on  the  infor- 
mation given,  was  held  sufficient,  although  the  notice  went  to  the  wrong  place. 
So  where  inquiries  were  made  at  the  banks  of  the  place  where  the  bill  was  dated, 
and  the  information  received  acted  on,  it  was  likewise  held  sufficient,  though  no- 
tice went  amiss.  Chapman  v.  Lipscombe,  i  Johns.  294.  So  where  inquiry  was 
made  of  the  second  indorser  (Ransom  v.  Mack,  2  Hill.  587)  ;  and  of  the  maker's 
son  (Sturgis  v.  Derrick,  Wight,  76)  ;  it  sufficed  in  each  case.  Greenwich  Bank 
V.  De  Groot,  14  N.  Y.  S.  C.  (7  Hun),  212  ;  Harris  v.  Robinson,  4  Howard. 


156  INABILITY   TO    MAKE    DUE    DEMAND.  §   III5. 

sible  exertion  is  not  exacted  of  him.  "  It  is  enough  to  send 
the  notice  to  the  place  where  the  information  received  rea- 
sonably requires  him  to  send  it.  If  the  place  it  reaches 
is  the  wrong  one,  it  is  not  his  (the  holder's)  fault,"  is  the 
language  of  the  U.  S.  Supreme  Court.^  An  inquiry  of  the 
officers  of  the  bank  where  the  note  was  discounted  is  suf- 
ficient, if  there  be  no  others  near  likely  to  know  the  indors- 
er's  residence,  when  seeking  to  send  him  notice.^  And  so 
inquiry  of  a  person  who  was  well  acquainted  with  the  resi- 
dence of  the  defendant,  who  hunted  in  the  neighborhood, 
and  frorti  whom  the  notary  usually  obtained  information, 
and  notice  sent  accordingly,  was  deemed  sufficient  to  charge 
the  indorser,  although  there  was  in  fact  no  post-office  at 
the  place  of  the  address  given,  but  one  near  to  which  it 
was  the  duty  of  the  postal  agents  to  send  letters  so  ad- 
dressed.^ But  an  inquiry  at  the  bank  where  the  paper  was 
deposited  for  collection,  and  consulting  a  directory,  would 
not  alone  be  sufficient.* 

In  a  New  York  case,  Daniels,  J.,  said  :^  "  Both  the  rule 
of  the  commercial  law  and  of  the  statute,  requires  that  the 
holder  shall  obtain  the  information  which  diligent  inquiry 
can  secure,  concerning  the  residence  of  the  party  to  be 
charged  by  the  service  of  notice.  And  that  is  not  shown 
by  merely  consulting  the  directory,  when  other  sources  of 
accurate  information  may  be  within  the  convenient  reach 
of  the  person  whose  duty  it  may  be  to  secure  it,  through 
which  it  can  be  obtained."     Acting  on  information  received 

'  Harris  v.  Robinson,  4  Howard,  336.  See  also  Central  N.  B.  v.  Adams,  1 1 
S.  C,  452. 

"  Harris  v.  Robinson,  4  How.,  336.  McLean,  J.,  dissenting,  on  the  ground 
that  notary  should  have  inquired  of  the  holder,  and  saying:  "  It  is  a  new  princi- 
ple in  the  law  of  agency,  that  the  knowledge  of  the  principal  shall  not  affect  him, 
provided  he  can  employ  an  agent  who  has  no  knowledge  on  the  subject."  The 
particular  point  decided  in  this  case  has  been  dissented  from.  See  Fitler  v.  Mor- 
ris, 6  Whart.,  406. 

'  Central  N.  B.  v.  Adams,  11  S.  C,  452. 

*  Packard  v.  Lyon,  5  Duer,  82;  see  Gilchrist  v.  Downell,  53  Mo.,  691. 

"  Greenwich  Bank  v.  DeGroot,  14  N.  Y.  S.  C.  (7  Hun),  213  (1876).  To  same 
effect  see  Baer  v.  Leppert,  19  N.  Y.  S.  C.  (12  Hun),  516. 


§   IIl6.         IMPRACTICABILITY  OF  FINDING  THE  PARTY.  1 57 

from  the  maker  of  a  note,  after  consulting  the  directory, 
would  be  sufficient,  although  a  wrong  address  were  given.' 

§  I II 6.  Inquiry  sJiould  be  made  of  parties  to  the  instrti- 
ment. — In  seeking  the  acceptor  or  maker  to  make  pre- 
sentment of  the  bill  or  note,  due  diligence  would  necessitate 
an  inquiry  of  the  indorser  or  other  party  to  the  instrument, 
when  such  party  can  be  conveniently  found,  before  dishon- 
oring it  by  protest  for  non-payment,  it  being  presumed 
from  the  relations  of  the  parties  that  they  would  be  likely 
to  know  the  whereabouts  of  each  other.^  And  for  the  same 
reasons,  in  seeking  to  ascertain  the  whereabouts  of  the  in- 
dorser or  drawer  in  order  to  communicate  notice,  inquiries 
should  be  made  of  the  maker  or  acceptor.^ 

It  is  desirable  that  this  rule  should  be  strictly  observed, 
as  well  for  the  sake  of  uniformity  as  for  the  reason  that  it 
secures  diligence.  There  may  be  exceptions  to  its  applica- 
tion, but  as  a  rule  it  is  worthy  of  application.  The  holder 
should  not  fail  to  communicate  any  knowledge  he  may 
have  as  to  the  residence  or  place  of  business  of  the  party  to 
whom  the  notary  is  to  make  presentment  or  give  notice, 
and  if  he  does  not  do  so  he  will  be  bound  by  any  conse- 
quent mistake  made  by  the  notary,  and  the  drawer  or  in- 
dorser will  be  discharged.'*  And  the  holder  will  always  be 
presumed  to  know  the  residence  or  place  of  business  of  his 
immediate  indorser.^ 

§  II 1 7.  When  there  is  more  than  one  indorser,  and  he 
can  not  eive  the  desired  information  as  to  the  whereabouts  of 
maker  or  acceptor,  the  inquiry  should  be  continued  to  the 
other  indorsers.^     There  may  be  exceptions  to  the  rule,  how- 

'Gawtry  v.  Doane,  51  N.  Y.,  92. 

"Wheeler  v.  Field,  6  Mete,  290;  Grafton  Bank  v.  Cox,  13  Gray,  505  ;  Porter 
V.  Judson,  I  Gray,  175.  ^ 

'  Whitrldge  v.  Rider,  22  Md.,  558  ;  Weakly  v.  Bell,  9  Watts,  273  ;  Waters  v. 
Brown,  15  Md.,  285  ;  Earnest  v.  Taylor,  25  Tex.  (supp.),  37  ;  Harrison  v.  IJobin- 
son,  4  How.,  336. 

^  Smith  V.  Fisher,  24  Penn.  St.,  222;  Haly  v.  Brown,  5  Penn.  St.,  178  ;  Fitler 
V.  Morris,  6  Whart.,  406 ;  Lawrence  v.  Miller,  16  N.  Y.,  235. 

^  Lawrence  v.  Miller,  supra. 

*Hill  V.  Varrell,  2  Green!.,  233;  Gilchrist  v.  Donnell,  53  Mo.,  591.     In  this 


158  INABILITY   TO    MAKE    DUE    DEMAND.  §   I II 8. 

ever.  As,  for  instance,  when  the  maker  or  acceptor  has 
left  the  State  ;  ^  and  it  would  not,  we  think,  be  necessary 
to  pursue  the  inquiry  of  the  maker,  indorser,  or  other  party, 
if,  from  previous  answers  of  parties  likely  to  know,  the 
holder  had  received  any  information  sufficiently  reliable. 
Where  the  notary,  desiring  to  give  notice,  finding  the  in- 
dorser's  house  closed,  inquired  of  the  nearest  resident,  and 
was  told  that  he  was  out  of  town  on  a  visit,  for  how  long 
informant  did  not  know,  it  was  held  that  further  inquiry 
was  unnecessary.^  But  it  would  be  advisable  in  all  cases 
not  to  leave  room  for  such  questions  to  be  raised. 

§  I II 8.  When  place  of  hisiness  of  acceptor  or  'niaker  is 
closed. — If  the  doors  of  the  business  office  of  the  acceptor 

case  a  notary  public  not  knowing  the  residence  of  an  indorser,  on  the  day  of  pro- 
test made  inquiry  at  the  bank  of  St.  Louis,  where  the  note  was  payable,  and  at 
the  place  of  business  of  another  indorser,  and  examined  the  city  directory  to 
ascertain  the  residence,  but  without  success.  He  thereupon  placed  the  notice  in 
the  city  post-office.  The  evidence  showed  that  other  indorsers  could  have  given 
the  desired  information,  and  that  one  of  them  lived  in  East  St.  Louis,  immediately 
across  the  river.  Held,  that  it  was  the  duty  of  the  notary  to  inquire  at"  least  of 
all  the  parties  to  the  note,  if  accessible  ;  and  that  he  might  have  prosecuted  his 
inquiries  for  that  purpose  for  several  days  ;  and  there  was  no  search  made, 
such  as  the  law  requires,  and  that  putting  the  notice  in  the  post-office  under  the 
circumstances  amounted  to  nothing.  Wheeler  v.  Field,  6  Mete,  290.  In  this 
case  the  notary  inquired  at  the  office  of  the  third  indorser  the  whereabouts  of  the 
maker  and  the  other  indorsers,  and  was  told  that  the  third  'indorser  was  out,  but 
that  a  person  living  near  by  could  give  the  desired  information.  This  person  on 
being  asked  did  not  know  where  the  parties  lived.  The  notary  then  protested 
the  note  ;  and  it  was  held  that  the  third  indorser  was  discharged,  Wilde,  J.,  say- 
ing: "  It  can  not  be  doubted  that  if  inquiries  had  been  made  of  the  payee  or  the 
other  indorsers,  the  maker's  place  of  residence  might  have  been  ascertained." 
[But  in  England  inquiry  of  the  last  and  next  to  last  indorser,  as  to  the  where- 
abouts of  the  first  indorser,  was  held  sufficient.  Browning  v,  Kinnear,  Gow., 
81  ;  Chitty  on  Bills,  *453.] 

'Grafton  Bank  v.  Cox,  13  Gray,  505,  Merrick,  J.,  saying:  "  If  the  maker  had 
at  the  maturity  of  the  note  resided  in  Boston,  or  in  the  State,  or  at  any  place  to 
which  the  holder  would  have  been  bound  to  resort  to  demand  payment  of  him, 
and  there  was  reason  to  suppose  that  the  indorser  had  knowledge  ol  such  resi- 
dence, the  omission  to  inquire  of  him  concerning  it  would  have  been  a  failure  to 
use  diligence,  and  would  have  had  the  effect  to  discharge  the  indorser  from  his 
liability." 

HVilliams  v.  Bank  U.  S.,  2  Pet.,  100.  In  i  Am.  Lead.  Gas.,  405,  it  is  said  : 
"  The  holder  may  rely  upon  information  derived  from  the  agent  of  the  indorser 
to  be  ag'ected,  or  from  the  drawer  of  an  accommodation  bill  or  maker  of  an  ac- 
commodation note,  indorsed  and  discounted  for  his  benefit,  or  from  his  agent,  or 
from  a  subsequent  indorser  who  professes  to  know  and  is  interested  to  speak 
truly ;  but  not  on  the  statements  of  mere  strangers  having  no  connection  with 
the  parties,  and  no  probable  knowledge  of  them,  unless  it  appear  that  no  bettei 
information  can  be  had." 


§   IIlS.         IMPRACTICABILITY  OF  FINDING  THE  PARTY.  1 59 

or  maker  are  closed,  and  there  be  no  one  there  to  answer 
the  demand  after  repeated  calls,  it  has  been  held  by  high 
authority  that  the  bill  or  note  may  be  protested  without 
making  further  inquiries  ;  for  he  is  bound  to  have  a  suita- 
ble person  there  to  answer  inquiries  and  pay  his  bills  and 
notes,  if  there  demanded.*  And  in  the  case  of  a  bill  ac- 
cepted by  a  firm,  in  such  a  case  it  would  not  be  necessary 
to  call  individually  upon  one  of  the  partners  who  has  a 
residence  in  the  city,  or  make  any  further  inquiries  for  the 
acceptors  than  the  repeated  calls  at  their  office.^  It 
would  be  safer,  however,  to  make  some  further  effort  to 
find  the  payor  when  the  doors  are  found  closed,  as  the 
authorities  are  not  uniform  on  this  question.^     If  the  ac- 

•Baumgarden  v.  Reeves,  35  Penn.,  250,  Thompson,  J.,  saying:  "Wliere  the 
presentation  and  demand  has  been  attempted  to  be  made  at  the  maker's  place  ot 
business,  and  there  is  no  e  to  answer,  and  there  is  no  proof  that  the  party  had 
any  other  place  of  business,  or  had   removed,  the  authorities  estimate  this  as 

equivalent  to  actual  presentation  and  demand A  different  case  might  be 

presented  if  the  proof  was  that  the  call  was  at  the  residence  of  the  maker  and  his 
house  was  shut  up."  See  also  Berge  v.  Abbott,  83  Penn.  St.,  159:1  Parsons 
N.  &  B.,  457  ;  Story  on  Bills,  §  352 ;  Story  on  Notes,  §  235  ;  Bynum  v.  Apperson, 
9  Heisk.,  625.  Placing  notice  in  post-office  addressed  to  indorser  is  sufficient 
after  inquiry  at  place  of  business,  during  business  hours,  and  finding  it  closed. 
John  v.  City  N.  B.,  62  Ala.,  529.  * 

^  Watson  V.  Templeton,  11  La.  Ann.,  137  ;  Wiseman  v.  Chiapella,  23  How., 
368,  Wayne,  J.,  saying:  "  All  merchants  register  their  acceptances  in  a  bill  book. 
It  can  not  be  presumed  that  they  will  be  unmindful  of  the  days  when  they  are 
matured.  Should  their  counting-rooms  be  closed  on  such  days,  the  law  will  pre- 
sume that  it  has  been  done  intentionally  to  avoid  payment,  and,  on  that  account, 
that  further  inquiries  need  not  be  made  for  them  before  a  protest  can  be  made 
for  non-payment.  Cases  can  be  found,  and  many  of  them,  in  which  further  in- 
quiries than  a  call  at  the  place  of  business  of  a  merchant  acceptor  has  been 
deemed  proper,  and  in  which  such  inquiries,  not  having  been  made,  has  been  de- 
clared to  be  a  want  of  due  diligence  in  making  a  demand  for  payment ;  but  the 
rulings  in  such  cases  will  be  found  to  have  been  made  on  account  of  some 
peculiar  facts  in  them  which  do  not  exist  in  this  case.  And  in  the  same  class  ot 
cases  it  has  been  ruled  that  the  protest  should  contain  a  declaration  by  the 
notary  that  his  call  to  present  a  bill  for  payment  had  been  made  in  the  business 
hours  of  the  day ;  but  in  no  case  has  the  latter  ever  been  presumed  in  favor  ot 
an  acceptor  whose  place  of  business  has  been  so  closed  that  a  demand  for  pay- 
ment could  not  be  made  there  upon  himself,  or  upon  some  one  left  there  to  at- 
tend to  his  business."  Shed  v.  Brett,  i  Pick.,  413,  the  case  of  a  note  in  which 
no  place  of  payment  was  specified.  But  see  Granite  Bank  v.  Ayres,  16  Pick., 
394- 

^Collins  V.  Butler,  2  Stra.,  1087  ;  i  Parsons  N.  &  B.,  457,  note/;  Story  on 
Bills,  §  352;  Ellis  v.  Commercial  Bank,  7  How.  (Miss.),  294.  In  Otto  v.  Bel'den, 
28  La.,  302,  suit  was  brought  against  the  indorser  of  a  note  who  resided  in  the 
city.  The  court  said  :  "  The  certificate  of  the  notary  is,  that  he  went  several 
times  to  the  office  of  the  drawer  (maker)  to  demand  payment  thereof,  and  that 


l6o  INABILITY    TO    MAKE    DUE    DEMAND.  §    II  1 9. 

ceptor's  or  maker's  place  of  business  has  been  permanently 
dosed,  and  he  has  a  domicile  in  the  city  or  town,  present- 
ment should  be  made  there/  This  ruling  intimates,  as  we 
think,  the  true  distinction  to  be  taken.  If  the  place  of  busi- 
ness be  permanently  closed,  it  would  be  right  to  seek  the 
payor  at  his  domicile  in  the  same  place,  if  he  have  one,  as 
that  would  be  the  place  where  he  would  be  most  likely 
found.  But  as  long  as  he  has  a  place  of  business,  it  is  his 
duty  to  keep  some  one  there  to  respond  to  business  de- 
mands. That  remains  the  place  where  he  would  be  naturally 
and  properly  sought,  and  when  he  closes  his  doors,  it  is 
presumable  that  he  declines  to  meet  the  usual  business 
engagements. 

§  I II 9.  When  place  of  payment  is  closed. — If  the  holder, 
on  the  day  of  maturity,  finds  the  bank  or  other  place  of 
payment  closed,  he  is  not  bound  to  make  any  further  de- 
mand to  charge  either  drawer^  or  indorser.^  If  the  paper 
is  payable  at  a  certain  bank  that  has  ceased  to  exist,  or  at 
the  counting-room  of  a  firm  which  has  dissolved  before  its 
maturity,  it  will  certainly  be  sufficient  to  make  presentment 
to  the  bank  which  has  succeeded  the  former  institution,  if 
such  there  be,''  or  at  the  counting-room  of  the  succeeding 
firm,  if  such  there  be.^  Where  a  note  was  payable  at  "  the 
Bank  of  the  U.  S.  at  Mobile,"  and  before  its  maturity  that 
bank  had  been  sold  out  to  the   "  Bank  of  Mobile,"  and 


he  found  the  doors  closed,  and  no  one  in  or  about  the  premises  of  whom  the 
demand  could  be  made.  No  demand  was  made  of  the  maker.  Therefore  the 
indorser  is  discharged."     See  also  Story  on  Notes,  §  238. 

'Granite  Bank  v.  Ayres,  16  Pick.,  392  ;  Talbot  v.  Nat.  Bank,  129  Mass.,  67 
See  ante,  §  637. 

'  Hine  v.  AUely,  4  B.  &  Ad.,  624;  Central  Bank  v.  Allen,  16  Me.,  41  ;  Apper- 
son  V.  Bynum,  5  Cold.,  349 ;  Rogers  v.  Langford,  i  C.  &  M.,  637  ;  Sands  v. 
Clarke,  19  L.  J.  C.  P.,  84;  Edwards  on  Bills,  498  ;  see  Howe  v.  Bowes,  :6  East., 
112;  5  Taunt.,  30;  Lane  v.  Bank  of  West  Tenn.,  9  Heisk.,  419;  Erwm  v. 
Adams,  2  La.,  318. 

=  De  Wolf  V.  Murray,  2  Sand.,  166;  Derg  v.  Abbott,  83  Penn.  St.,  158. 

*  Central  Bank  v.  Allen,  16  Me.,  41  ;  Roberts  v.  Mason,  i  Ala.,  373 ;  Bynum 
V.  Apperson,  9  Heisk.,  637. 

'  Sanderson  v.  Oakey,  14  La.,  373. 


«5lI2I.         IMPRACTICABILITY  OF  FINDING  THE  PARTY.  l6l 

ceased  to  have  a  place  of  business  in  Mobile,  it  was  held 
that  presentment  at  the  Bank  of  Mobile  was  sufficient.' 
The  like  rule  prevails  as  to  notice.  Where  the  holder,  on 
the  day  of  maturity,  found  the  indorser's  dwelling-house 
shut  up,  the  doors  locked,  and  the  family  out  of  town,  as 
he  learned  from  the  next  neighbor,  on  a  visit  of  unknown 
duration,  it  was  held  that  due  diligence  had  been  exercised 
to  give  notice,  and  the  indorser  was  liable.^  So  where  the 
cashier  found  the  drawer's  counting-room  closed,  and  no 
one  there  to  answer,  it  was  held  sufficient.^ 

§  1 1 20.  Inability  to  find  the  maker  or  acceptor  does  not 
excuse  want  of  notice  to  drawer  or  indorser  ;*  but  inability 
to  find  the  drawer  or  indorser,  or  ascertain  his  whereabouts, 
after  exercising  due  diligence,  does  excuse  want  of  no- 
tice, because  it  is  then  impossible.^  But  the  holder  must 
continue  his  inquiries  from  day  to  day,  and  give  notice  as 
soon  as  he  does  ascertain  the  party's  whereabouts — the  ex- 
cuse being  co-extensive  only  with  the  necessary  delay  ;  and 
the  impediment  being  only  temporary,  the  duty  revives 
with  its  cessation.^ 

Delays  of  one  day,^  of  three  days,®  of  nine  days,^  of  over 
two  months,^^  of  four  months,"  have,  under  the  particular 
circumstances,  been  excused. 

The  imprisonment  of  the  party  is  no  excuse  for  want  of 
demand,  protest,  or  notice.^*^ 

§  1 121.  Extent  of  inquiry  needful. — When  inquiry  is 
among  the  public  generally,  it  should  not  be  abandoned 
until  all  prospect  of  results  disappears.     Where  inquiry  was 

*  Roberts  v.  Mason,  i  Ala.,  373.  "  Williams  v.  Bank"  U.  S.,  2  Pet.,  96. 
'  Crosse  v.  Smith,  i  M.  &  S.,  545.     See  ante,  §  1016. 

*  I  Parsons  N.  &  B.,  527.  ''  Ibid.  ®  See  ante,  chapter  xxx. 

'  Browning-  v.  Kinnear,  Gow,,  81.  *  Bateman  v.  Joseph,  2  Camp.,  461 

*  Baldwin  v.  Richardson,  i  B.  &  C,  245. 
'^  Firth  V.  Thrush,  8  B.  &  C,  387. 

"  Stiirgis  V.  Derrick,  Wight,  76 ;  see  i  Parsons  N.  &  B.,  527,  note  k, 
'■Story  on  Bills,  §318. 

Vol.  II.— II 


l62  INABILITY    TO    MAKE    DUE    DEMAND.  §    IT  22. 

made  by  the  notary  in  a  place  of  persons  at  the  hotel  bar- 
room, on  the  street,  and  at  the  post-office,  it  was  held  not 
sufficient,  and  the  court  said  :  "  If  he  had  been  told  by 
some  credible  person,  who  would  be  likely  to  know  the 
fact,  he  might  have  acted  upon  that  information  without 
pushing  his  inquiries  further.  But  until  some  one  is  found 
who  professes  to  be  able  to  give  the  required  information, 
it  will  not  do  to  stop  short  of  a  thorough  inquiry  at  places 
of  public  resort,  and  among  such  persons  as  would  be  most 
likely  to  know  the  residence  of  the  indorser."  ^  If  the  busi- 
ness men  of  a  place  give  distinct  information  that  the  party 
sought  resides  at  a  certain  other  place,  such  information 
may  be  acted  upon  with  safety,  though  erroneous.^  "  Or- 
dinary diligence  in  a  case  like  this  can  mean  no  more  than 
that  the  inquiry  shall  be  pursued  until  it  is  satisfactorily 
answered."^ 

§  1 122.  If  the  party  to  be  notified  is  travelling,  or  is  ab- 
sent from  home  for  any  reason,  and  his  present  address  is 
known  to  the  holder,  or  if  his  absence  from  home  is  known, 
and  the  holder  has  any  means  of  learning  his  address,  or  of 
ascertaining  whom  he  has  left  behind  to  attend  to  his  busi- 
ness, it  would  probably  be  his  duty  to  send  notice  accord- 
ingly.^ But  if  a  party  leaves  home  without  taking  the 
usual  and  proper  precautions  to  facilitate  sending  business 
communications  to  him,  undoubtedly  this  is  his  fault,  and 
he  can  relieve  himself  from  no  responsibility  by  such  fault, 
and  will  be  held  to  all  parties  as  if  duly  notified,  provided 
due  diligence  be  used.*^ 

§  112-^.  If  after  due  diligence  neither  the  maker  nor  his 
usual  place  of  residence  or  business  can  be  found,  present- 
ment to  him  will  of  necessity  be  excused,  and  the  indorser 

'Spencer  V.  Bank  of  Salina,  3  Hill,  520.  See  Peet  v.  Zanders,  6  La.  Ann., 
364. 

-  Brighton  Market  Bank  v.  Philbrick,  40  N.  H.,  506. 

'  Bank  of  Utica  v.  Bender,  21  Wend.,  643,  Bronson,  J.;  ante,  §1117. 

*  I  Parsons  N.  &  B ;  493.  "  Ibid. 


§   1 1  24-  RECEIVING  THE  BILL  OR  NOTE  TOO  LATE.  1 63 

held  liable  without  it.  Thus,  where  the  maker  of  a  note  is 
a  sailor  who  has  no  established  place  of  abode,  and  is  at  sea 
when  the  note  matures,  proof  of  these  facts  will  constitute 
excuse  for  non-presentment.^  But  if  he  has  a  place  of  resi- 
dence where  his  family  are  living  when  the  note  matures, 
it  will  be  necessary  to  present  it  there.^ 


SECTION    III. 

RECEIVING  THE  BILL  OR  NOTE  TOO  LATE  AS  EXCUSE  FOR  WANT 
OF  PRESENTMENT  AND  NOTICE. 

§  1 1 24.  In  the  third  place,  where  the  payee,  or  subse- 
quent indorsee,  does  not  transfer  and  indorse  the  bill  or 
note  until  so  near  its  maturity  that  it  is  then  impracticable 
on  account  of  the  distance  from,  or  inaccessibility  to,  the 
place  where  the  maker  or  acceptor  has  his  place  of  business, 
or  residence,  or  where  the  bill  or  note  is  payable,  the  payee, 
or  other  indorser  so  transferring  it,  will  be  presumed  to 
have  waived  the  taking  of  these  steps  which  they  must  have 
known  were  impossible.^  This  excuse,  however,  will  only 
avail  as  between  the  immediate  parties  who  have  transferred 
and  received  the  instrument  at  so  late  a  period  ;  for  as  to 
the  previous  parties  who  transferred  it  long  enough  before 
maturity  to  leave  adequate  time  for  its  due  presentment, 
they  have  a  right  to  insist  on  the  strict  performance  of 
their  obligations  by  those  who  are  subsequent  holders,  and 
it  is  the  folly  of  such  holders  to  take  the  instrument  so  late 
that  they  can  not  hold  all  the  parties  liable  upon  it.^     This 

'  Moore  v.  Coffield,  i  Dev.,  247  ;  Taylor  v.  Snyder,  2  Den.,  145. 

^  Whittier  v.  Graffam,  3  Greenl.,  82  ;  Dennie  v.  Walker,  7  N.  H.,  199. 

'  I  Parsons  N.  &  B.,  456  ;  Story  on  Bills,  §  326  ;  Story  on  Notes,  §§  203,  265. 
(But  all  of  the  American  cases  cited  by  Story  in  his  note  do  not  enunciate  the 
doctrine).  The  broad  doctrine  is  stated  in  Freeman  v.  Boynton,  7  Mass.,  483, 
and  some  early  cases,  that  distance  is  in  itself  an  excuse  for  delay,  and  that  the 
holder  may  wait  for  the  maker  to  come  and  pay.  See  Haddock  v.  Murray,  i  N. 
H.,  140  ;  Barker  v.  Barker,  6  Pick.,  80.  But  they  find  no  favor  in  the  latter  au- 
thorities. 

*  Ibid.  ;  Bayley  on  Bills,  chapter  vil,  sec.  i,  p.  149 ;  Story  on  Notes,  §  265 ;. 
Mason  v.  Pritchard,  9  Heisk.,  798. 


1 64  INABILITY    TO    MAKE    DUE    DEMAND.  §   1 1  25. 

doctrine  is  favored  by  the  later  text  writers,  and  seems  en 
tirely  sound,  and  thougli  Chitty  states  a  different  one,  it 
does  not  seem  to  be  sustained  by  the  case  he  cites  to  its  full 
extent.^ 


SECTION    IV. 

SICKNESS   OF   OR   ACCIDENT    TO   THE    HOLDER. 

^  1 1 25.  In  \\\&  fourth  place,  when  sudden  illness  or  death 
of  or  accident  to  the  holder  or  his  agent  prevents  the  pre- 
sentment of  the  bill  or  note  in  due  season,  or  the  commu- 
nication of  notice,  the  delay  is  excused,  provided  that  pre- 
sentment is  made  and  notice  given  as  promptly  afterward 
as  the  circumstances  reasonably  permit.^  This  doctrine 
rests  upon  the  same  principle  as  that  which  excuses  want 
of  punctuality  when  overwhelming  calamities  or  accidents 
of  a  general  nature  prevent.  Pothier  states  that  where  the 
holder  transmits  a  bill  to  a  distant  correspondent  for  pre- 
sentment and  payment,  and  the  latter  dies  suddenly  on  the 
eve  of  the  time  when  the  bill  ought  to  be  paid  or  protested 
for  dishonor,  it  will  be  sufficient  if  the  presentment  is  made 

'  In  Anderton  v.  Beck,  16  East.,  248,  it  appeared  that,  on  December  26th, 
plaintiff  received  in  Yorkshire  a  bill  on  London,  payable  there  the  28th.  He 
kept  it  till  the  29th,  and  then  sent  it  to  the  Lincoln  Bank,  which  forwarded  it  to 
London  without  delay,  and  it  was  presented  for  payment  on  January  2d.  The 
court  decided  that  the  holder  had  been  guilty  of  laches  in  keeping  the  bill  from 
the  26th  to  the  29th,  and  had  lost  his  remedy  against  drawer  and  indorser.  In 
Chitty  on  Bills  (13  Am.  ed.),  [*339],  440,  it  is  said  :  "  But  the  circumstance  of 
the  holder  having  received  a  bill  very  near  the  time  of  its  becoming  due  consti- 
tutes no  excuse  for  a  neglect  to  present  it  for  payment  at  maturity,  for  he  might 
renounce  it  if  he  did  not  choose  to  undertake  that  duty,  and  send  the  bill  back 
to  the  party  from  whom  he  received  it ;  but  if  he  keep  it,  he  is  bound  to  use  rea- 
sonable and  due  diligence  in  presenting  it But  it  has  been  considered  in 

France,  that  if  an  indorser  himself  transfers  a  bill  so  late  to  the  holder  as  to 
render  it  impracticable  to  present  it  precisely  at  maturity,  he  can  not  take  ad- 
vantage of  a  delay  in  presentment  so  occasioned  by  himself,  though  the  prior 
indorser  and  the  drawer  may."     See  also  Thomson  on  Bills  (Wilson's  ed.),  297. 

=  Story  on  Bills,  §  308  ;  Chitty  on  Bills  (13  Am.  ed.)  [*330,  451,  491],  370,  509, 
556;  Thomson  on  Bills  (Wilson's  ed.),  280,  368;  I  Parsons  N.  &  B.,  267-  Ed- 
wards on  Bills,  649  ;  Duggan  v.  King,  Rice,  239  ;  White  v.  Stoddard,  11  Gray, 
258^  Aymar  v.  Beers,  7  Cow.,  705;  Lord  Kenyon,  C.  J.,  in  Hilton  v.  Shepherd,  6 
East.,  16  ;  Chitty,  Jr.,  710.     See  ante,  chapter  xvil,  §  478,  vol.  i. 


§   1 1 26.       SICKNESS  OF  OR  ACCIDENT  lO  THE  HOLDER.  1 65 

within  a  reasonable  time  after  the  holder  is  informed  of  the 
accident,  and  is  enabled  to  give  orders  to  receive  the  money. 
And  he  puts  the  sudden  illness  of  the  holder  or  his  agent 
on  the  same  footing.'  It  is  said  by  Mr.  Chitty  that  "  it  has 
been  considered  that  the  detention  of  the  bill  by  contrary 
winds,  or  the  holder  having  been  robbed  of  the  bill,  or  the 
like,  would  afford  an  adequate  excuse,  provided  he  present 
it  as  soon  afterward  as  he  is  able."^  He  adds,  however 
"  But  a  notice  of  the  reason  why  the  bill  itself  can  not  be  pro- 
duced should  be  given  ;  and  a  demand  of  payment  should, 
if  possible,  be  made  on  the  very  day  the  instrument  falls 
due  ;  and  if  it  be  a  foreign  bill,  it  should  be  duly  protested, 
in  case  the  drawee  should  refuse  payment."  In  a  subse- 
quent portion  of  his  treatise,  he  places  the  circumstance 
of  the  robbery  of  the  bill  upon  the  same  footing  as  its  loss 
or  destruction,  and  as  not  excusing  delay  in  demand  or 
notice.^  And  we  can  not  see  that  the  robbery  is  distin- 
guishable from  the  loss  or  destruction  of  a  bill  or  note,  in 
which  event  demand  should  be  made  upon  a  copy,  and 
notice  given  accordingly. 

§  1 126.  There  seems  to  be  no  dissent  to  the  opinion  that 
the  sudden  illness  or  death  of  the  holder  or  his  agent  is  a 
sufficient  excuse  for  delay.  Where  an  agent,  intrusted  with 
a  note  to  collect,  died  four  days  before  its  maturity,  after  a 
month's  sickness,  and  the  note  was  discovered  by  his  exec- 
utrix a  month  after  his  death,  in  a  desk  where  it  was 
locked  up,  and  he  immediately  caused  presentment  and 
notice,  the  indorser  was  held  liable.*  And  when  the  holder 
himself  was  dead  at  the  time  the  note  matured,  and  there 
was  no  presentment  or  notice,  there  being  no  personal  rep- 
resentative to  act  in  the  premises,  it  was  held  that,  as  the 
proper  steps  were  taken  as  to  presentment  and  notice  within 


'  Pothier  De  Change,  n.  144;  Chitty  on  Bills  (13  Am.  ed.),  509.  note  a  ;  Story 
on  Bills,  §  309. 

'  Chitty  on  Bills  (13  Am.  ed.)  [*3S9l.  439- 

'Chitty  on  Bills  (13  Am.  ed.)  [491].  556-  *  Duggan  v.  King,  Rice,  239, 


1 66  INABILITY    TO    MAKE    DUE    DEMAND.  §   1 1 27. 

a  reasonable  time  after  a  representative  was  appointed,  the 
indorser  was  charged/ 

§  1 127.  The  illness,  in  order  to  constitute  a  sufficient  ex- 
cuse, must  be  that  of  the  holder  or  his  agent,  and  of  such 
a  character  as  to  prevent  due  presentment  and  notice  by 
the  exercise  of  due  diligence.  And  where  an  indorser.was 
called  from  home,  in  consequence  of  the  dangerous  illness 
of  his  wife,  and  left  his  house  in  care  of  a  lad,  without 
authority  to  open  letters,  it  was  held  that  he  had  lost  re- 
course against  his  prior  indorsers  by  the  consequent  delay 
in  giving  notice.^  He  should  have  left  some  one  in  charge 
with  authority  to  open  letters. 

•White  V.  Stoddard,  11  Gray,  258  ;  Story  on  Bills,  §  365. 
^Turner  v.  Leach,  Hilary  Term,  1818;  Chitty  on  Bills  (13  Am.  ed.)  [*452]. 
509 ;  I  Parsons  N.  &  B.,  532 ;  Thomson  on  Bills  (Wilson's  ed.),  368. 


CHAPTER  XXXIV. 

SPECIAL  CIRCUMSTANCES  OF  EXCUSE  P'OR  WANT  OF  PRE- 
SENTMENT, PROTEST,  AND  NOTICE,  ARISING  FROM  THE 
CONDUCT    OF    THE    PARTY. 


SECTION  I. 

WHEN   PARTY     HAS     RECEIVED    MEANS    TO    TAKE    UP  THE   BILL 

OR  NOTE. 

§  1 1 28.  In  the  first  place,  the  receiving  by  the  drawer 
or  indorser  of  money  from  the  acceptor,  maker,  or  other 
party  for  whose  benefit  the  bill  or  note  was  made,  for  the 
avowed  purpose  of  taking  up  the  bill  or  note' at  its  matu- 
rity, dispenses  as  to  such  drawer  or  indorser  with  the  neces- 
sity of  a  presentment  to  the  acceptor  or  maker,  for  the  ob- 
vious reason  that  the  indorser  becomes  himself  the  person 
who  should  meet  it.  And  so,  receiving  any  other  prop- 
erty, with  the  agreement  that  he  shall  apply  its  proceeds 
to  paying  the  bill  or  note  at  its  maturity,  has  the  same 
effect* 

The  indorser  in  such  cases  has  no  remedy  over  against 
any  one.  His  arrangement  with  his  principal  substitutes 
him  in  that  principal's  place  ;  and  it  would  be  a  fraud  for 
him  to  throw  back  upon  him  the  burden  which  he  had  as- 
sumed wiien  provided  with  the  means  to  bear  it. 

'  Ray  V,  Smith,  17  Wall.,  418  (see  post,  %  1143);  Wright  v.  Andrews,  70 
Maine,' 86;  Bond  v.  Farnhani,  5  Mass.,  170  (demand  and  notice  held  waived); 
Cornay  V.  Da  Costa,  i  Esp.,  302;  Watkins  v.  Crouch,  5  Leigh,  522;  May  v. 
Boisseau,  8  Leigh,  185,  196  ;  Story  on  Notes,  §  281  ;  Bayley  on  Bills,  ch.  \MI, 
sec.  2,  p.  202. 

(167) 


1 68  EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.       §   I  1 29. 

These  reasons  apply  with  equal  force  to  notice  ;  and  that, 
as  well  as  the  demand,  under  such  circumstances,  is  dis- 
pensed with.^ 


SECTION   II. 

WHEN    PARTY    HAS     RECEIVED    SECURITIES   OUT   OF  WHICH   TO 
PROVIDE   FOR   PAYMENT. 

§  1 1 29.  In  the  second  p\3.ce,  the  receiving  of  security  or 
indemnity  from  the  maker,  or  other  party  for  whose  bene- 
fit the  bill  or  note  was  executed  by  the  indorser,  has  been 
often  held  to  operate  as  a  dispensation  of  demand  and  no- 
tice as  to  him.  But  there  is  great  contrariety  in  opinion 
and  decision  on  this  subject,  and  many  subtle  refinements 
have  been  introduced  in  contradistinguishing  particular 
cases.  When  the  acceptance  of  the  security  is  accompanied 
by  any  express  agreement  that  the  indorser  is  himself  to 
provide  for  the  payment  of  the  bill  or  note,  the  dispensa- 
tion is  clear,  whether  he  undertakes  to  do  so  out  of  the  se- 
curity, or  to  look  to  that  for  reimbursement.  And  so  it  is 
clear,  also,  when  an  agreement  to  this  effect  is  implied  by 
all  the  circumstances  of  the  case.  But  in  the  absence  of 
proof  of  any  express  agreement,  the  question  whether  or  not 
demand  and  notice,  or  either,  have  been  dispensed  with, 
has  been  thought  by  some  to  turn  on  the  intention  of  the 
parties,  and  by  others  on  the  effect  of  taking  the  security  ; 
and  the  time  it  was  taken,  its  character  and  sufficiency,  the 
form  of  the  assignment,  and  whether  or  not  it  comprised 
all  of  the  maker's  property,  have  been  considered  as  mate- 
rial elements  in  determining  it. 

§  1 130.  (i)  AssigfDfient  of  all  the  maker  s  property. — The 
doctrine  is  laid  down  by  many  authorities  that  the  accept- 
ance of  an  assignment  of  all  the  maker's  property,  by  the  in- 

'  Ibid.;  Stor>'  on  Notes,  §  357  ;  Story  on  Bills,  §§  316,  374;    Wright  v.  An- 
drews, 70  Maine,  86. 


§   I  130.  WHEN  PARTY  HAS  RECEIVED  SECURITIES.  169 

dorscr,  to  secure  him  against  his  liabiHty,  is  a  waiv^er  of  all 
right  to  require  demand,  protest,  and  notice,^  even  when  it  is 
insufficient  for  that  purpose.^  Under  such  circumstances,  it  is 
urged,  the  indorser  prevents  the  holder  from  obtaining  pay- 
ment of  the  maker,  by  taking  into  his  own  hands  all  his 
available  means ;  and  he  must  be  considered  as  holding  out 
that  he  has  assumed  the  responsibility  of  payment  upon 
himself.^  But  it  should  be  remembered,  that  if  the  indors- 
er's  liability  is  not  fixed,  the  consideration  of  the  assignment, 
so  far  as  he  is  concerned,  fails.  He  can  not  then  exercise 
any  right  of  lien  upon  it,  and  it  reverts  at  once  to  the  maker, 
and  is  liable  for  his  debts.  The  indorser  is  precisely  in  the 
same  situation  as  if  no  assignment  had  been  taken,'*  and  so 
is  the  maker.  Besides,  even  where  the  whole  property  has 
been  assigned,  the  maker  may  have  new  accessions,^  or  he 


'  Watkins  v.  Crouch,  5  Leigh,  522,  obiter,  Tucker,  P.  ;  Duvall  v.  Farmers' 
Bank,  9  Gill  &  J.,  31  ;  May  v.  Boisseau,  8  Leigh,  212,,  obiter,  Tucker,  P. ;  Kramer 
V.  Sandl'ord,  4  Watts  &  S.,  328,  Gibson,  C.  J.  ;  Swan  v.  Hodges,  3  Head.,  251, 
held,  must  be  all  or  enough  ;  Edwards  on  Bills,  637  ;  i  Parsons  N.  &  B.,  560, 
but  see  571. 

"  Watkins  v.  Crouch,  5  Leigh,  522,  Tucker,  P.  (as  to  notice  only) . 

'Bank  of  South  Carolina  v.  Myers,  i  Bailey,  412,  the  indorser  had  taken  from 
the  maker  a  confession  of  judgment  which  covered  his  whole  estate ;  hetd,  a 
waiver  of  demand  and  notice.  See  the  remarks  of  the  American  editor  of  Chal- 
mers on  Bills  and  Notes.     Benjamin's  Chalmers'  Digest,  197. 

*  Dufour  V.  Morse,  9  La.,  333,  Martin,  J.,  said  :  "  Here  the  indorser  received 
nothing  but  a  mortgage  for  his  indemnification.  He  might  well  expect  that  the 
duty  and  interest  of  the  maker  would  prompt  him  to  prevent  the  protest  of  the 
note.  He  knew  that  the  only  obligation  he  had  incurred  toward  the  holder  of 
the  note,  was  to  pay  it  in  case  the  maker  did  not,  and  after  being  duly  and 
legally  notified  of  the  failure  and  neglect  of  the  maker  to  take  it  up  ;  toward  the 
latter  the  indorser  incurred  no  obligation.  The  mortgage  was  a  useless  paper 
in  the  hands  of  the  defendants.  The  inchoate  and  conditional  obligation  which 
resulted  from  the  indorsement  never  became  perfect  and  absolute.  The  indorser, 
nor  those  who  represent  him  in  this  case,  have  not  suffered,  nor  can  they  now 
suffer,  any  injury  for  the  indemnification  of  which  they  could  resort  to  the  mort- 
gage. The  defendants  are  precisely  in  the  same  situation  as  they  would  be  if  no 
mortgage  had  been  taken." 

*  Watkins  v.  Crouch,  5  Leigh,  522,  Cabell,  J. :  "  The  indorser's  right  to  notice 
from  the  holder  depends  on  another  principle,  namely,  his  remedy  over  against 
the  maker.  And  this  principle  applies  as  forcibly  to  a  case  where  a  part  only  of  a 
note  remains  so  unpaid  or  unprovided  for.  Again,  the  assignment  on  this  case 
was  made  about  a  mt>nth  before  the  note  was  to  fall  due.  It  is  impossible  for 
us  to  say  that  no  accession  was  made,  in  that  interval,  to  the  maker's  means  of 
payment  ;  and,  of  course,  we  can  not  say  that  notice  to  the  indorser  would  have 
been  unavailing." 


170  EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.       VJII3I 

may  be  successful  in  negotiations,  which  render  him  per- 
fectly ready  to  pay.  These  circumstances  are  worthy  of 
consideration,^  but  they  are  not  the  controlling  reasons  for 
requiring  demand  and  notice.^ 

§  1 131.  A  sufficient  answer  to  the  argument,  that  the 
indorser  ought  to  be  bound  in  such  cases,  may  be  given  in 
the  observation,  that  the  holder  loses  nothing  that  he  can 
subject  to  the  payment  of  the  debt,  and  any  arrangement 
merely  for  the  indorser's  indemnity  is  a  matter  entirely  be- 
tween him  and  his  principal.  The  case  of  Bond  v.  Farnham, 
5  Mass.,  170,  has  often  been  quoted  as  authority  for  the 
doctrine  that  the  assignment  of  all  the  maker's  property, 
even  when  insufficient,  is  a  waiver  of  notice,^  and  its  influ- 
ence has  been  sensibly  felt  in  relaxing  the  requirement  of 
demand  and  notice  in  the  United  States.  But  there  were 
particular  features  in  that  case  which  have  not  been  suf- 
ficiently distinguished,  and  like  the  case  of  Cornay  v. 
Da  Costa,  i  Esp.,  it  has  been  made  the  pillar  of  a  doctrine 
which  it  by  no  means  upholds.  The  maker  had  assigned 
all  his  property  to  the  indorser,  who  took  it,  as  Chief-Jus- 
tice Parsons  said,  "  for  the  express  purpose  of  meeting  this 
and  his  other  indorsements,"  and  it  was  held  that  he  could 
not  afterward  "  insist  on  a  fruitless  demand  upon  the  maker, 
or  on  a  useless  notice  to  himself  to  avoid  payment  of  de- 
mands, which,  on  receiving  security,  he  has  undertaken  to 
pay."  Thus  understood,  the  principle  decided  conforms 
to  the  doctrine  of  the  text,  and  though  it  has  been  supposed 
that  the  case  has  been  overruled  by  more  recent  decisions  in 
Massachusetts',  there  seems  to  us  no  conflict  between  them.* 

'  I  Parsons  N.  &  B.,  567. 

""  Kramer  v.  Sandford,  4  Watts  &  S.,  828,  Gibson,  C.  J. :  "  The  chance  of  the 
maker's  acquiring  other  property  to  which  he  might  resort,  if  the  funds  in  his 
hands  should  fall  short,  is  so  inconsiderable  as  to  fall  within  the  maxim  da 
mini7nis." 

^Barton  v.  Baker,  i  Serg.  &  R.,  334;  Watkins  v.  Crouch,  5  Leigh,  522, 
Tucker,  P. 

"  I  Parsons  N.  &  B.,  560.  The  learned  author  thinks  it  irreconcilable  with 
Creamer  v.  Perry,  17  Pick.,  332  ;  but  it  seems  to  us  otherwise. 


§   I  13  I-  WHEN  PARTY  HAS  RECEIVED  SECURITIES^  I7I 

The  case  of  Creamer  v.  Perry  ^  meets,  as  it  seems  to  us, 
fully  the  argument  that  an  assignment  of  all  the  maker's 
property  to  a  trustee  accepted  by  the  indorser  waives  de- 
mand and  notice,  the  true  construction  of  the  act  being,  as 
said  by  Chief-Justice  Shaw,  "to  secure  and  indemnify  him 
against  his  legal  liabilities.  And  as  his  liability  as  indorser 
of  the  note  was  conditional,  and  depended  upon  his  having 
seasonable  notice  of  its  dishonor,  his  cllim  upon  the  prop- 
erty depended  upon  the  like  contingency."  Even  where 
there  is  an  assignment  or  mortgage  directly  to  the  indorser 
himself,  unless  it  were  in  a  form  to  show  that  it  was  to  en- 
able him  to  take  up  the  note,  and  he  assumed  to  do  so,  it 
is  now  held  in  Massachusetts  that  it  would  not  amount  to- 
a  waiver  of  demand  or  notice,^  and  the  strict  rule  is  of  late 
finding  favor.^ 

The  opinion  of  Chief-Justice' Nelson  in  an  often-quoted 
case  might  seem  to  sustain  a  contrary  doctrine,  and  has 


'  17  Pick.,  332. 

"  Haskell  v.  Boardman,  8  Allen,  39.  The  maker  executed  mortgages  of  all 
his  real  and  personal  estate  to  the  indorsers,  the  condition  being  that  the  grantor 
should  "  fulfil  and  perform  all  contracts  which  the  said  grantees  have  heretofore 
signed,  indorsed,  or  executed  for  the  said  grantor,  and  which  said  grantees  shall 
hereafter  sign,  indorse,  or  execute  for  said  grantor  as  indorsers,  guarantors, 
sureties,  or  otherwise,  and  save  the  said  grantees  harmless  from  all  costs  and 
expense  in  consequence  thereof."  There  was  due  demand,  but  notice  was  not 
received  in  due  season.  The  indorsers  were  held  discharged,  Bigelow,  C.  J., 
saying  :  "  There  was  no  evidence  offered  at  the  trial  on  which  a  waiver  of  notice 
by  the  indorsers  could  be  legally  found.  The  mortgage  relied  on  to  show  such 
waiver  was  not  made  to  enable  the  mdorsers  to  pay  the  notes,  nor  were  they 
authorized  to  appropriate  the  property  thereby  conveyed  to  such  purpose.  The 
defect  of  the  conveyances  was  only  to  secure  the  defendants  against  the  legal 
liabilities  assumed  by  them  in  behalf  or  on  account  of  the  promisor.  Their  lia- 
bility as  indorsers  was  conditional  only,  dependent  on  the  contingency  of  their 
having  due  and  seasonable  notice  of  the  dishonor  of  the  notes.  Their  claim  on 
the  property  for  indemnity  was  dependent  on  the  like  contingency.  On  this 
point  the  case  is  within  Creamer  v.  Perry,  17  Pick.,  332." 

"  In  Wilson  v.  Senier,  14  Wis.,  380,  the  court  said  :  "  Nothing  short  of  a  gen- 
eral assignment  and  actual  transfer  of  all  the  maker's  effects,  or  the  receipt  of 
money  or  property  by  him  for  the  purpose  of  satisfying  the  debt,  and  with  an 
understanding  that  he  is  to  do  so — in  which  case  he  changes  place  with  the 
maker  and  becomes  himself  the  principal— has  ever  been  held  to  create  such 
dispensation,  and  the  disposition  of  the  court  has  been  to  restrict  rather  than  to 
enlarge  the  doctrine."  Moses  v.  Ela,  43  N.  H.,  560 ;  Woodman  v.  Eastman, 
10  N.  H.,  367. 


172      EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.  '  §  II 3 2. 

been  so  considered  ;  but  it  will  be  seen  that  it  does  not 
necessarily  require  that  construction.^ 

§  1 1 32.  Where  there  was  an  assignment  in  trust  to  the 
indorser  himself  as  trustee,  or  co-trustee,  of  all  the  maker's 
property,  upon  trust,  to  dispose  of  it,  and  pay  the  maker's 
debts  in  a  certain  order,  first  satisfying  the  notes  and  debts 
on  which  the  indorser  and  a  certain  firm  were  liable  as  sure- 
ties or  indorsers,  the  acceptance  of  it  was  held  a  waiver  of 
demand  and  notice  ;  and  under  such  circumstances  it  might 
be  reasonably  inferred  that  the  indorser  assumed  the  pay- 
ment upon  himself.^ 

§  1 133.  (2)  Sufficiency  of  the  security. — The  sufficiency 
of  the  security  is  by  many  authorities  made  the  criterion  of 
the  question  whether  or  not  presentment  and  notice  are 
dispensed  with  ;  and  the  reasoning  by  which  the  conclusion 
is  reached  by  some  that  full  security  or  indemnity  dispenses 
with  these  conditions  is,  that  in  such  cases  *'  it  is  plain  that 
the  indorser  can  receive  no  damage  from  the  want  of  a 
due  presentment,"  as  said  by  Justice  Story  in  his  work  on 
Promissory  Notes,^  and  by  a  number  of  judges  in  render- 
ing decisions.'*     Others  place  the  doctrine  on  the  implied 

*  Spencer  v.  Harvey,  17  Wend.,  489,  Nelson,  C.  J.,  said  :  "  Notice  was  sup- 
posed to  have  been  dispensed  with,  on  the  ground  that  the  indorser  had  taken 
indemnity  of  the  malcers  by  means  of  a  judgment  upon  which  execution  has  been 
issued  ;  but  it  is  extremely  uncertain  if  anything  will  be  realized  out  of  the  prop- 
erty. The  security  is  ah'eady  in  litigation  in  chancery.  The  mere  precaution 
by  an  indorser  of  taking  security  from  his  principal,  has  never  been  adjudged  to 
operate  as  a  dispensation  of  a  regular  demand  and  notice.  It  is,  no  doubt,  a 
common  occurrence,  yet  such  effect  has  never  been  imputed  to  it.  There  must 
be  something  more,  such  as  taking  into  his  possession  the  funds  or  property  ot 
the  principal,  sufficient  for  the  purpose  of  meeting  the  payment  of  the  note  ;  or 
he  must  have  an  assignment  of  all  the  property,  real  and  personal,  of  the  makers 
for  that  purpose.  The  notice  is  dispensed  with  when  funds  are  received,  upon 
the  ground  that  the  object  for  which  it  is  required  to  be  given,  namely,  to  enable 
the  indorser  to  obtain  indemnity  from  his  principal,  has  already  been  attained. 
Partial  or  doubtful  security  falls  short  of  this,  and  leaves  the  rule  requiring  no- 
tice in  full  force." 

"  Mechanics'  Bank  v.  Griswold,  7  Wend.,  165. 

*  Story  on  Notes,  §  281  ;  see  also  Story  on  Bills,  §  374.  No  distinction  is  made 
between  demand  and  notice  in  this  particular. 

*  Watkins  v.  Crouch,  5  Leigh,  522,  Carr,  J.  (security  was  insufficient)  ;  Mar- 
shall V.  Mitchell,  35  Me.,  221,  Welles,  J.  {obiter);  Walker  v.  Walker,  2  Eng. 
(Aik.),  Oldham,  J.  (presentment  and  notice  held  waived)  ;  Nelson,  C.  J.  (the 


§1134-  WHEN  PARTY  HAS  RECEIVED  SECURITIES.  I73 

assumption  of  the  indorser  to  pay}  If  the  question  of 
damage  determined  an  indorser's  liability,  it  would  be  plain 
that  sufficient  indemnity  fixed  it ;  but  when  the  maker  is 
utterly  insolvent,  and  indeed  as  well  when  he  remains  per- 
fectly solvent,  the  indorser  can  in  neither  case  suffer  damage 
by  default  in  demand  or  notice. 

§  II 34.  When  the  maker  or  acceptor  is  insolvent,  he  may 
lose  nothing  by  default  in  demand  and  notice.  If  he  is 
perfectly  solvent,  and  has  merely  neglected  payment,  the 
indorser  is  indemnified  against  loss.  True,  there  are  con- 
tingencies under  which  he  might  lose,  in  the  one  case,  as 
friends  might  have  assisted  the  insolvent ;  and  in  the  other, 
as  misfortune  might  overtake  the  solvent.  But  might  not 
the  indemnity  depreciate,  or  be  destroyed,  or  the  oppor- 
tunity to  use  it  be  lost  ?  It  seems  to  us  a  total  misconcep- 
tion of  the  obligation  of  an  indorser  to  place  his  liability  at 
all  upon  any  question  involving  the  pecuniary  circumstances 
of  his  principal ;  or  of  security  to  himself,  unless  in  taking 
the  security  he  has  stepped  into  the  principal's  shoes.  And 
indeed  when  he  has  thus  stepped  into  his  principal's  place, 
unless  there  be  some  privity  with  the  holder  in  the  arrange- 
ment, it  is  rather  from  his  obligation  to  his  principal,  which 
the  law  transposes  to  the  holder,  than  from  any  other  con- 
sideration, that  the  holder  is  permitted  to  recover  against 
him. 

Chancellor  Kent,^  as  well  as  Justice  Story  already  quoted, 

security  was  insufficient)  ;  Durham  v.  Price,  5  Yerg.,  300,  in  which  case  the  court 
instructed  the  jury  that  if  the  defendant  had  full  indemnity,  or  promised  to  pay 
after  maturity,  with  knowledge  of  the  facts,  demand  and  notice  were  waived. 
Barrett  v.  Charleston  Bank.  2  McMullan,  191  ;  Develing  v.  Ferris,  18  Ohio,  170; 
Kyle  V.  Green,  14  Ohio,  495.  In  Beard  v.  Westerman,  32  Ohio  St.,  29,  it  was 
held  that  demand  and  notice  were  unnecessary  to  charge  an  indorser  who  at 
maturity  had  sufficient  property  of  the  maker  in  his  possession  held  as  security 
against  his  liability.  In  Second  Nat.  Bank  v.  McGuire,  33  Ohio  St.,  295,  where 
property  was  insufficient  to  pay  the  note,  it  was  held  that  the  holder  was  not 
thereby  exonerated  from  demand  and  notice.  In  Smith  v.  Lounsdale,  6  Oregon, 
157,  it  was  held  that  if  indorser  had  sufficient  security  before  or  at  maturity,  he 
would  be  deemed  to  have  waived  demand  and  notice.  Stephenson  v.  Primrose, 
8  Port.  (Ala.),  155  ;  Spencer  v.  Harvey,  17  Wend.,  489,  Nelson,  C.  J.  (the  secu- 
rity was  insufficient). 

'  Watkins  v.  Crouch,  5  Leigh,  522,  Tucker,  P.  "  3  Kent  Com.    113. 


174  EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.       §   II35 

has  considered  ample  indemnity  a  dispensation  with  demand 
and  notice  ;  but  on  the  other  hand,  Professor  Parsons,^  and 
other  eminent  jurists,  have  reached  the  conclusions  which 
we  express,  and  the  grounds  that  these  conclusions  rest 
upon  seem  to  us  entirely  unassailable. 

It  was  well  said  in  a  New  York  case,  by  Ingraham,  J.  : 
"  Mere  security  for  the  indorsement  affords  no  reason  for 
dispensing  with  demand.  On  the  contrary,  it  furnishes  a 
stronger  reason  why  the  indorser  who  holds  the  security 
should  be  informed  of  the  non-payment.  Without  notice 
thereof  he  might  suppose  it  to  have  been  paid,  and  in  con- 
sequence of  such  neglect  have  parted  with  his  security."^ 
And  to  the  same  effect  in  Connecticut,  where  the  indorser 
held  the  goods  for  which  the  note  was  given  as  security, 
and  there  had  been  laches  as  to  notice,  Bissell,  J.,  said : 
"  From  the  fact  that  no  notice  was  given,  he  would  have  a 
right  to  presume  that  the  note  was  paid  by  the  maker,  and 
might  thus  be  induced  to  part  with  his  security."^ 

§  1 1 3 5.  ''  ff  the  secin'ity  be  to  the  ftdl  aniount  of  the  note, 
the  indorser  will  be  held  liable,  without  notice,  for  the  full 
payment  of  the  note  ;  if  the  security  be  partial,  he  will  be 
bound /r^  taittoj'  says  Mr.  Justice  Story  in  his  treatise  on 
Promissory  Notes;''  but  he  quotes  no  authority  for  such  a 
doctrine,  and  we  have  not  found  it  so  much  as  intimated  by 
any  other  writer  or  jurist.  And  it  seems,  on  the  contrary,  to 
be  universally  conceded  that,  unless  the  security  is  full,  or 
comprises  all  the  maker's  estate,there  is  no  waiver  of  demand,^ 

'  I  Parsons  N.  &  B.,  571.  In  Kramer  v.  Sandford,  4  Watts  &  S.,  329,  a  judg- 
ment bond  was  taken  from  the  maker  by  the  indorser  in  double  the  amount  of 
the  note,  and  judgment  had  been  entered,  and  execution  issued,  and  levied  on 
sufficient  personal  property  to  pay  the  note,  but  it  was  held  no  waiver  of  demand, 
protest,  or  notice,  Gibson,  C.  J.,  delivering  the  opinion  of  the  court. 

"^  Taylor  v.  French,  4  E.  D.  Smith,  458  ;  see  also  Seacord  v.  Miller,  3  Ker.,  55. 

'  Holland  v.  Turner,  10  Conn.,  308.  Where  the  indorser  took  mortgage  to 
secure  the  note  in  suit,  and  another,  from  the  maker,  held  no  waiver.  Woodman 
V.  Eastman,  10  N.  H.,  359. 

*  Story  on  Notes,  §  357. 

^  Burrows  v.  Hanegan,   i  McLean,  309  ;  Watkins  v.  Crouch,  5  Leigh,  522 
Kyle  V.  Green,  14  Ohio,  495  ;  Brunson  v.  Napier,  i  Yerg.,  199  ;  Wilson  v.  Senier 


§   I  137-         WHEN  PARTY  HAS  RECEIVED  SECURITIES.  175 

and,  with  a  single  exception,^  the  concession  seems  equally 
universal  as  to  notice.^  But  even  that  exception  does  not 
adopt  Story's  doctrine.  And  where  the  sufficiency  or  the 
entirement  of  the  assignment  is  urged  as  a  waiver,  proof  of 
such  sufficiency,  or  that  it  comprises  the  maker's  entire  es- 
tate, must  be  given. ^ 

§  II 36.  Distinctioji  as  to  demand  and  notice. — The  opin- 
ion has  been  intimated  that  an  insufficient  assignment  ac- 
cepted by  the  indorser  would  operate  a  waiver  of  notice, 
but  not  of  a  regular  demand.  And  it  is  based  on  the 
ground  that  the  object  of  notice  is  to  put  the  indorser  on 
the  alert,  which  can  not  be  necessary  when  he  has  been 
warned  by  the  assignment,  w^hile  the  demand  is  a  part  of 
the  holder's  contract,  which  he  must  comply  with  strictly.* 
But  the  distinction  rests  on  no  well-defined  idea.  Knowl- 
edge and  alertness  are  not  notice,  and  unless  the  indorser 
has  placed  himself  in  the  maker's  place,  in  which  event 
neither  demand  nor  notice  would  be  necessary,  he  can  not 
be  regarded  as  waiving  any  right  as  an  indorser.  And  it 
has  been  so  held.^ 

§  1 137.  Some  of  the  cases,  while  recognizing  the  prin- 
ciple that  the  criterion  is  whether  or  not  the  indorser  has 
obligated  himself  to  take  up  the  note,  consider  that  when 
he  has  received  an  assignment  of  the  w^hole  estate  of  the 
inaker,^  or  has  received  an  assignment  adequate  to  meet  the 

14  Wis.,  380 ;  Holman  v.  Whiting-,  19  Ala.,  708  ;  Woodman  v.  Eastman,  10  N. 
H.,  359.  In  Brandt  v.  Mickle,  28  Md.,  436,  it  was  held  that  a  transfer  of  part 
of  the  maker's  property  to  the  indorser  did  not  dispense  with  demand  and  notice, 
although  it  covered  all  he  had  when  the  note  fell  due.  Spencer  v.  Harvey,  17 
Wend.,  489,  Nelson,  C.  J. ;  Chitty  on  Bills  (13  Am.  ed.)  [*44i],  496  ;  i  Parsons 
N.  &  B.,  569,  570. 

'  Watkins  v.  Crouch,  5  Leigh,  522,  Tucker,  J.  '  Ante,  §  1134. 

'  Benedict  v.  Caffe,  5  Duer,  226 ;  Duvall  v.  Farmers'  Bank,  9  Gill  &  J.,  31  ; 
Marshall  v.  Mitchell,  34  Me.,  227. 

"  Watkins  v.  Crouch,  5  Leigh,  522,  Tucker,  P. 

*  Denny  v.  Palmer,  5  Ired.,  610,  Ruffin,  C.  J. 

'  Barton  v.  Baker,  i  Serg.  &  R.,  334  (1S15).  In  this  case  James  Brown  &  Co. 
were  makers  of  the  note,  and  a  few  months  before  it  was  due,  Armat  Brown, 
one  of  the  partners,  made  an  assignment  of  his  whole  estate,  for  the  purpose, 


176  EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.       §   I  1 38. 

note,*  that  he  places  himself  in  the  maker's  shoes,  and  im- 
pliedly assumes  its  payment.  But  there  have  been  circum 
stances  connected  with  the  transaction,  in  some  of  the  cases 
at  least,  which  strengthened  that  presumption  on  the  part 
of  the  court  ;^  and  for  the  reasons  already  stated,  we  can 
not  perceive  that  the  mere  assignment  of  all  of  the  maker's 
estate,  whether  it  be  sufficient  or  not,  in  itself  creates  an 
implied  obligation  on  the  part  of  the  indorser  to  pay  the 
note. 

§  II 38.  (3)  When  security  given  at  time  of  indorsenie7tt. 
— When  the  security  is  given  at  the  time  the  indorser  be- 
comes a  party  to  the  paper,  whether  it  be  in  the  form  of 
collaterals  deposited  with  him,  or  of  a  deed  transferring 
real  or  personal  property  to  trustees,  to  indemnify  and  hold 
him  harmless,  it  could  hardly  be  reasonably  inferred  that 
the  indorser  intended  to  dispense  with  any  diligence  on  the 
part  of  the  holder  either  in  respect  to  demanding  payment 
at  maturity,  or  notifying  him  in  case  of  default.  The 
proper  construction,  as  it  seems  to  us,  of  the  indorser's  re- 
ceiving such  security,  would  be  that  if  he  became  liable  to 
pay  the  bill  or  note,  he  would  resort  to  it  as  indemnity,  and 
not  to  dispense  with  any  of  the  conditions  precedent  to  the 
fixing  of  such  liability  upon  him.  If  he  designed  in  the 
outset  to  be  unconditionally  bound  he  would  naturally  sign 
as  a  co-maker  if  it  were  a  note,  and  as  drawee  and  acceptor 

amongst  other  things,  of  indemnifying  the  indorser  against  his  indorsements  on 
account  of  James  Brown  &  Co.  The  sufficiency  of  the  assignment  did  not  ap- 
pear, nor  was  it  adverted  to.  Tilghman,  C.  J.,  said  :  "  It  is  confessed  that  due 
notice  was  not  g^iven ;  but  the  plaintiff  contends  that,  under  the  circumstances 
of  the  case,  notice  was  not  necessary Now,  by  the  taking  of  this  assign- 
ment, it  is  not  unreasonable  to  presume  that  the  defendant  took  upon  himself 
the  payment  of  the  indorsed  notes,  especially  as  when  he  did  receive  notice  (ten 
days  after  the  note  fell  due),  although  he  knew  and  remarked  that  it  was  out  of 
time,  he  did  not  deny  his  responsibility,  but  said  that  his  ability  to  pay  would 
depend  upon  the  arrival  of  a  vessel.  I  agree,  therefore,  with  Bond  v.  Farnham, 
5  Mass.,  170,  where  it  was  held  that  in  such  a  case  the  indorser  dispenses  with 
notice."     Kramer  v.  Sandford,  4  Watts  &  S.,  328,  Gibson,  C.  J. 

'  Watkins  v.  Crouch,  5  Leigh,  522.  In  this  case  the  assignment  was  to  a 
trustee,  and,  amongst  other  purposes,  to  indemnify  the  indorser  to  the  extent  of 
one-fourth  of  the  note.     It  was  held  no  waiver  of  demand. 

^  Barton  v.  Baker,  i  Serg.  &  R.,  334,  supra. 


§   I  139-  WHEN  PARTY  HAS  RECEIVED  SECURITIES.  I  77 

if  it  were  a  bill,  or  with  express  waiver  of  demand  and  no- 
tice written  over  his  signature ;  and  in  becoming  an  in- 
dorser  he  indicates  sufficiently  by  the  very  form  of  his  con- 
tract that  he  requires  due  demand  and  notice  before  he  will 
be  charged.  If  demand  is  not  made,  or  notice  not  given, 
we  should  say  that  the  contingent  liability  against  which  he 
was  indemnified  had  not  accrued,  and  the  consideration  of 
the  indemnity  failing,  it  would  revert  to  the  party  who  had 
made  it.  But  these  inferences  may  be  all  met  with  proof 
that  it  was  the  agreement  of  the  parties  that  the  indorscr 
should  pay  the  note,  and  that  the  security  was  given  either 
to  provide  the  means  of  payment  or  to  reimburse  him.^ 

§  1 1 39.  (4)  When  security  given  after  indorsement  and 
before  disJionor. — When  the  security  is  given  after  the  in- 
dorsement, during  the  currency  of  the  instrument — that  is, 
before  its  maturity — and  nothing  but  the  mere  naked  fact 
of  its  acceptance  by  the  indorscr  appeared,  the  inference,  as 
it  seems  to  us,  would  arise  that  he  became  apprehensive 
that  the  party  who  was  primarily  liable  might  be  unable  to 
meet  it,  and  that  to  provide  for  the  contingency  of  having 
the  liability  devolved  upon  him,  he  had  taken  the  security 
as  indemnity  against  such  liability  ;  but  that  liability  still 
being  contingent  upon  due  demand  and  notice,  the  mere 
fact  that  the  indorscr  had  guarded  himself  against  personal 
loss,  in  whole  or  in  part,  would  still  seem  to  us  to  create 
no  presumption  that  he  designed  to  change  the  nature  of 
his  contract,  and  dispense  with  the  conditions  necessary  to 
make  his  liability  absolute.  There  is  no  privity  with  the 
holder  in  the  subsequent  arrangement  between  the  principal 
and  his  indorscr.  The  indorscr  does  not  change  his  con- 
tract, but  only  protects  himself  from  loss,  and  it  is  going 
very  far  to  say,  that  a  transaction  with  one  person,  of  itself 
affects  his  contract  with  a  third.  There  may  be  circum- 
stances, however,  connected  with  the  indorsement,  or  with 

'  Bond  V.  Farnham,  5  Mass.,  170. 

Vol.  TI.— 12 


178  EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.       §   II 40. 

the  acceptance  of  security,  which  indicate  an  intention  of 
the  indorser  to  dispense  with  demand  and  notice  ;  or  from 
which  such  intention  may  be  so  strongly  presumed  that  it 
would  operate  as  a  fraud  upon  his  principal  or  the  holder, 
to  discharge  him.  These  views  are  borne  out  by  high 
authority.^  "  The  true  criterion,"  as  expressed  by  Chief- 
Justice  Gibson,  "  seems  to  be  the  obligation  to  take  up  the 
note."  ^ 

§1140.  (5)  When  security  is  given  afte}'  dishonor. — As 
a  general  rule,  it  is  the  settled  doctrine  that  where  security 
is  taken  after  dishonor  of  the  instrument,  the  drawer  or  in- 
dorser taking  it  does  not  thereby  waive  the  right  to  show 
any  laches  of  the  holder  in  respect  to  presentment  or  no- 
tice.^ In  Massachusetts,  where  the  indorser  took  two  as- 
signments, the  one  before  and  the  other  after  maturity,  and 
it  appeared  that  neither  demand  nor  notice  were  in  proper 
time,  Shaw,  C-  J.,  said  :  "The  second  assignment  does  not 
affect  the  question  ;  it  does  not  appear  to  have  been  made 
till  several  days  after  the  note  became  due."  *  And  it  has 
been  said,  in  New  York,  that  where  the  indorser  takes  an 
assignment  after  maturity,  even  supposing  himself  liable  to 
pay  the  same,  it  will  not  amount  to  a  waiver  of  the  objec- 
tion to  want  of  due  presentment  or  notice,  "  since  it  can 
not  justly  be  inferred  that  he  intends,  at  all  events,  to  make 
himself  liable  for  the  payment  of  the  note,  but  he  takes  the 
security  merely  contingently,  in  case  of  his  ultimate  lia- 
bility." ^ 

Where,  however,  it  is  distinctly  shown  that  the  drawer 
or  indorser,  taking  security  after  maturity,  knew  at  the 
time  of  the  holder's  laches  in  respect   to   presentment  or 

'  Haskell  v.  Boardman,  8  Allen,  38;  Taylor  v.  French,  4  E.  D.  Smith,  458 ; 
I  Parsons  N.  &  B.,  571,  572 ;  Kramer  v.  Sandt'ord,  4  Watts  &  S.,  329. 
"  Kramer  v.  Sandford,  4  Watts  &  S.,  328. 
"  Story  on  Notes,  §  278  ;  i  Pars.  N.  &  B.,  595. 

*  Creamer  v.  Perry,  17  Pick.,  332.  To  same  effect  see  May  v.  Boisseau,  8 
Leig-h,  164 ;  Tower  v.  Durell,  9  Mass.,  332 ;  Richter  v.  Selin,  8  Serg.  &  R.,  425. 

*  Otsego  Co.  Bank  v.  Warren,  18  Barb.,  290. 


§   1 141.  WHEN  PARTY  HAS  RECEIVED  SECURITIES.  I  79 

notice,  the  fact  that  he  took  the  security  would  be  a  ci'rcum 
stance  of  evidence  to  show  a  waiver  of  the  objection, 
though  not  conclusive,  or  perhaps  even  presumptive  proof. 
Such,  at  least,  is  the  view  which  seems  to  us  correct. 
Further,  we  do  not  think  the  law  could  justly  go,  but  the 
doctrine  of  the  text,  as  above  stated,  is  not  without  dis- 
sent.^ 

Taking  an  assignment  of  all  the  maker's  property  by  the 
indorser  to  cover  his  liability  to  him,  after  dishonor,  does 
not  waive  the  want  of  notice,  the  note  not  being  mentioned 
in  the  deed.^ 

§  1 141.  (6)  Form  of  assignment  and  character  of  secu- 
rity.— The  form  in  which  the  security  is  given  may  often  be 
an  important  matter  of  consideration  in  determining  whether 
or  not  the  indorser  assumed  the  payment  of  the  note. 
When  the  property  has  been  placed  directly  in  his  hands, 
and  he  has  power  to  convert  it  immediately  into  money, 
slighter  circumstances  might  suffice  to  complete  the  proof 
of  such  assumption  by  him,  than  when  it  has  been  conveyed 
to  a  trustee.^ 

In  the  latter  case,  unless  there  was  plain  language  to  in- 
dicate the  contrary,  the  presumption  would  be  strong  that 
the  trust  was  created  as  an  indemnity  in  the  event  of  liabil- 


'  Debuys  v.  Mollere,  15  Mart.  (La.),  318.  And  in  i  Parsons  N.  &  B.,  619,  it 
is  said  :  "There  is  certainly  ground  to  contend  that  if  an  indorser  takes  security 
after  maturity,  this  is  evidence  of  demand  and  notice  ;  for  why  should  a  person 
take  these  steps  to  secure  himself  unless  his  liability  actually  existed.-^  " 

^  Walters  v.  Munroe,  17  Md.,  154,  Goldsborough,  J.,  saying:  "The  deed  to 
Funsten  "  (the  trustee)  "  was  executed  after  the  note  had  fallen  due,  and  the 
question  is,  whether  such  a  deed  dispenses  with  proof  of  notice  to  the  indorser. 
And  we  think  a  sufficient  answer  is,  that  this  note  is  nowhere  mentioned  or  re- 
ferred to  in  the  deed.  But,  then,  it  is  said,  if  the  defendant  admits  he  was  fully 
indemnified,  that  will  excuse  the  want  of  notice.  Whatever  effect  such  an  ad- 
mission might  have,  if  made  by  a  party  with  full  knowledge  of  the  facts  which 
discharge  him  from  liability  on  the  note,  it  is  unnecessary  for  us  to  decide.  In 
this  case,  the  declaration  of  Munroe  "  (the  indorser)  "  relied  on  is,  '  that  he  was 
fully  indemnified  for  all  his  liabilities  for  Harrison  '  "  (the  maker),  "which  must 
be  understood  to  refer  to  his  legal  liabilities,  and  can  not  be  construed  to  deprive 
him  of  his  legal  defence  in  this  case,  based  upon  want  of  notice,  without  which 
he  was  not  legally  liable." 

'Story  on  Notes  §  282  ;  Denny  v.  Palmer,  5  Ired.,  610. 


l8o      EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.   §  I  I42 

ity  being  fixed  ;  and  in  the  former  that  presumption  would 
still  exist,  if  nothing  but  the  mere  assignment  appeared, 
but  it  might  be  much  more  easily  overcome  by  circum- 
stances.* 

§  1 142.  The  character  of  the  security  may  also  have  a 
material  bearing  on  the  question.  If  before  maturity  the 
maker  placed  in  the  indorser's  hands  a  sufficient  sum  of 
money,  the  latter's  intention  to  assume  the  payment  would 
be  presumed  ;  and  if  the  security  were  bills,  or  notes  falling 
due  before  maturity,  or  other  securities  readily  made  avail- 
able, slighter  circumstances  would  prove  the  assumption 
than  if  it  consisted  of  real  or  personal  property,  which  is 
not  so  easily  convertible  into  money.  And  some  of  the 
cases  have  intimated  that  the  acceptance  of  securities  readily 
convertible  is  in  itself  an  implied  assumption  to  pay  the 
note.^ 

A  confession  of  iudgment  is  />rima  /acz'e,  but  not  conclu- 
sive evidence  of  waiver  of  laches  in  respect  to  demand  and 
notice.  "  It  may  be  evidence  of  an  acknowledgment  of 
liability,  but  is  not  conclusive  evidence.  It  is  not  a  legal 
presumption.  It  is  capable  of  being  explained  and  repelled 
by  the  circumstances  under  which  it  was  given."  ^ 

§  1 143.  Where  the  money  or  the  security  is  received  to 
meet  a  particular  indorsement  or  indorsements,  there  is  no 
waiver  of  demand  or  notice  as  to  any  other.* 

In  England  it  has  been   held,  that  where  the  acceptor 

'May  V.  Boisseau,  8  Leigh,  195.  Brockenburgh,  J.,  said:  "It  must  be  ob- 
served that  there  is  a  great  difference  between  an  absolute  conveyance  and  a 
mere  conveyance  to  a  trustee,  as  an  indemnity.  In  this  case  the  property  was 
not  put  into  the  hands  of  Peter  Boisseau  to  pay  off  these  particular  debts,  but  into 
the  hands  of  a  trustee  as  an  indemnity.  It  was  designed,  too,  to  indemnify  not 
only  against  these  supposed  indorsements,  but  against  various  other  suretyships 
on  which  Peter  was  bound  for  Edward,  and  to  secure  a  debt  due  from  Edward 
to  Peter,  and  a  debt  and  an  annuity  due  from  Edward  to  his  mother,  Priscilla 
Boisseau."  See  also  Tucker,  P.,  p.  213  ;  s.  C.  and  Cabell,  J.,  p.  204,  and  Cornay 
/.  DaCosta,  i  Esp.,  303. 

^  Dufour  V.  Morse,  9  La.,  333  ;  Kramer  v.  Sandford,  4  Watts  &  S.,  328. 

'  Richter  v.  Selin,  8  S.  &  R.,  425. 

*  Prentiss  v.  Danielson,  5  Conn.,  175  ;  Bond  v.  Farnham,  5  Mass.,  170. 


§   1 144-    WHEN  MAKER  OR  ACCEPTOR  HAS  ABSCONDED.  l8l 

told  the  drawer  a  few  days  before  maturity  that  he  could 
not  pay  the  bill,  and  that  the  latter  must  take  it  up,  and 
gave  him  a  part  of  the  money  for  that  purpose  ;  and  the 
drawer  received  the  money  and  promised  to  take  it  up  ; 
nevertheleijs  he  might  still  set  up  want  of  due  presentment, 
and  the  money  received  as  had  and  received  to  plaintiff's 
use.^  This  decision  is  quoted  with  apparent  approval,^  but 
it  seems  to  us  unjust. 

The  fact  that  the  indorser  has  funds  in  his  hands  belong- 
ing to  the  maker,  which  he  is  merely  authorized  to  apply  to 
the  payment  of  the  note,  but  which  he  has  not  received  for 
that  avowed  purpose,  nor  agreed  to  apply  to  that  purpose, 
is  no  waiver  of  presentment,  protest,  or  notice.** 


SECTION   III. 

WHEN   MAKER   OR  ACCEPTOR   HAS   ABSCONDED. 

§  1 144.  In  the  third  place,  the  absconding  of  the  maker 
or  acceptor  is  a  valid  excuse. 

When  the  payor  of  the  bill  or  note  has  actually  abscond- 
ed between  its  execution  and  its  maturity,  and  especially 
when  he  is  notoriously  insolvent,  inquiries  are  unnecessary. 
Presentment  to  him  personally  is  of  course  impossible,  and 
presentment  at  his  last  place  of  residence  or  business  is 
altogether  unnecessary.  The  mere  fact  of  absconding  is 
all  that  it  is  necessary  for  the  holder  to  show.  This  doc- 
trine is  well  settled  in  England,'*  and  by  the  current  of 
American  authorities;^  and  Massachusetts  is  perhaps  the 

'  Baker  v.  Birch,  3  Camp.,  107  ;  Chitty,  Jr.,  on  Bills,  848. 

"  Chitty  on  Bills  (13  Am.  ed),  [*338],  379;  i  Parsons  N.  &  B.,  587. 

'  Ray  V.  Smith,  17  Wall.,  416. 

■*  Bayley  on  Bills,  chap,  vii,  sec.  i,  p.  196  ;  Anonymous  Ld.  Raym.,  743.  "  It 
is  clear,"  says  Chitty  (13  Am.  ed.)  [*367j,  412,  "that  if  the  drawee  has  never 
lived  at  the  place  of  address,  or  has  absconded,  this  circumstance  will  sufficiently 
excuse  the  holder  from  not  making-  further  inquiries  after  him." 

'  In  T.ehman  v.  Jones,  i  Watts  &  S.,  126,  the  court  said  :  "  Where  indeed  the 
drawer  of  a  note  or  the  drawee  of  a  bill  has  merely  removed  from  the  place  uf 


1 82  EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.       §   II 44. 

only  State  in  which  a  contrary  view  is  taken.  The  earlier 
authorities  in  that  State  were  of  the  same  tenor,^  but  the 
more  recent  cases  have  adopted  a  more  rigid  theory,  plac- 
ing the  absconding  debtor  upon  the  same  footing  as  one 
merely  removing  into  another  jurisdiction.^  It  is  to  be  re- 
gretted that  there  is  any  departure  from  a  principle  so  rea- 
sonable and  so  well  settled. 

Even  when  he  had  absconded  to  another  place  in  the 
same  State  or  country,  the  excuse  for  non-presentment 
would  be  sufficient,  unless  the  holder  knew  where  he  was, 
in  which  case  he  should  seek  him.^ 

But  the  absconding  of  the  drawee,  acceptor,  or  maker  is 
no  excuse  for  want  of  notice  to  the  drawer  or  indorser, 
who  all  the  more  need  to  be  put  upon  their  guard.* 

When  the  drawer  or  indorser  has  himself  absconded, 
notice  should  be  left  at  his  last  place  of  abode,  or  left  with 
the  person  representing  his  estate  ;^  but  if  he  had  no  fixed 

his  residence  indicated  by  the  bill,  it  is  the  business  of  the  holder  to  inquire  for 
him  and  ascertain  where  he  is  gone,  in  order  that  he  may  follow  him  ;  but  when 
he  has  secretly  fled,  an  application  at  the  place  would  lead  to  no  information  in 
respect  to  him  ;  and  the  law  requires  nothing  which  is  nugatory."  Gillespie  v. 
Hannahan,  4  McCord,  503  ;  Wolfe  v.  Jewett,  10  La.  Ann.,  383  ;  Taylor  v.  Snyder, 
3  Den.,  145  ;  Duncan  v.  ]\IcCullough,4  Serg.  &  R.,  480  ;  Bruce  v.  Lytle,  13  Barb., 
163;  Ratcliff  V.  Planters'  Bank,  2  Sneed,  425,  455;  Hunt  v.  Maybee,  3  Seld., 
266  ;  Story  on  Bills,  §  351. 

'  Putnam  v.  Sullivan,  4  Mass.,  45  ;  Hale  v.  Burr,  12  Mass.,  85  ;  Shaw  v.  Reed, 
12  Pick.,  132  ;  Widgery  v.  Munroe,  6  Mass.,  449.  These  cases  were  positive  and 
clear;  and  in  one  of  them.  Hale  v.  Burr,  12  Mass.,  89,  it  was  said  :  "  It  is  well 
settled  that  if  the  promisor  absconded  before  the  day  of  payment,  or  has  con- 
cealed himself,  the  necessity  of  a  demand  is  taken  away.  Due  dihgence  to  find 
him  is  all  that  is  required  in  the  latter  case ;  and  in  the  case  of  absconding,  even 
that  is  not  necessary." 

''Pierce  v.  Gate,  12  Gush.,  190  (1853).  In  this  case  the  doctrine  is  reversed, 
the  court  overruling  instructions  that  "  if  the  maker  had  absconded,  leaving  no 
visible  property  subject  to  attachment,  no  presentment  of  the  note  to  the  maker, 
or  demand  at'  the  dwelling-house,  or  other  inquiry  for  him,  was  necessary." 
The  contrary  doctrine  was  deemed  so  well  settled,  that  the  question  was  not 
discussed.  See  i  Parsons  N.  &  B.,  450.  A  return  to  the  former  ruling  has  been 
anticipated  in  Redfield  &  Bigelow's  Gases,  452 ;  but  in  Grafton  Bank  v.  Gox,  13 
Gray,  504,  it  has  been  reiterated. 

^  Reid  v.  Morrison,  2  Watts  &  S.,  401  ;  Duncan  v.  McGuUough,  4  Serg.  &  R., 
480.  In  Redfield  &  Bigelow's  Gases,  339,  it  is  said  :  "  If  the  absconding  is  any 
excuse  at  all,  it  should  be  without  reference  to  the  locality  of  the  hiding  place 
unless  this  is  within  the  jurisdiction,  and  the  holder  knows  where  it  is." 

*  May  V.  Goffin,  4  Mass.,  341. 

*•  Ex  parte  Rohde,  Mont.  &  M.,  430;  i  Parsons  N.  &  B.,  528. 


§   1 145-        WHEN  MAKER  OR  ACCEPTOR  HAS  REMOVED.  183 

place  of  abode,  or  it  be  unknown,  and  undiscovered  after 
reasonable  inquiries,  and  there  be  no  known  representative 
of  his  estate,  want  of  notice  is  altogether  excused.^ 


SECTION    IV. 

WHEN   THE   MAKER   OR  ACCEPTOR  HAS   REMOVED  HIS  DOMICILE 
TO   ANOTHER   STATE   OR  A   FOREIGN   COUNTRY. 

§  1 145.  In  the  fotu'th  place,  if  between  the  time  a  note 
is  made  or  a  bill  accepted  and  its  maturity,  the  maker  or 
acceptor  removes  from  the  place  at  which  he  resided  and 
transacted  business  to  another  State  or  country,  no  obliga- 
tion is  imposed  upon  the  holder  to  go  out  of  his  own  State 
in  order  to  make  a  demand  upon  him  personally,  or  at  his 
new  place  of  residence  or  business. 

It  will  be  sufficient  under  such  circumstances  to  make  a 
demand  at  the  payor's  last  place  of  residence  or  business, 
and  when  that  has  been  done  due  diligence  requires  no 
more.^  Whether  or  not  it  requires  this  much  is  questioned, 
and  it  has  been  held  that  when  the  payor  has  gone  into  a 
foreign  jurisdiction,  no  demand  whatever,  is  necessary,  either 
upon  him  personally  or  at  his  last  place  of  residence  or 
business,  such  removal  placing  him,  according  to  this  view, 
in  the  same  position  as  if  he  had  absconded.^     But  a  mere 

•Story  on  Notes,  §  356. 

"  McGruder  v.  Bank  of  Washing-ton,  9  Wheat.,  598  ;  Taylor  v.  Snyder,  3  Den., 
145  ;  Adams  v.  Leland,  30  N.  Y.,  309 ;  Foster  v.  Julien,  24  M.  Y.,  28  ;  Anderson 
V.Drake,  14  Johns,  114;  Dennie  v.  Walker,  7  N.  H.,  199;  Gist  v.  Lybrand,  3 
Ohio,  308;  Reid  v.  Morrison,  2  Watts  &  S.,  401  ;  Grafton  Bank  v.  Cox,  13 
Gray,  503  ;  Wheeler  v.  Field,  6  Mete,  290 ;  Central  Bank  v.  Allen,  16  Me.,  41  ; 
Gillespie  v.  Hannahan,  4  McCord,  503;  Whittier  v.  Graham,  3  Greenl.,  32; 
Herrick  v.  Baldwin,  17  Minn.,  209;  Cromwell  v.  Hynson,  2  Esp.,  211  ;  3  Kent 
Com.,  96;  Chitty  (13  Am.  ed.),  318,  413;  Story  on  Bills,  §  451. 

'  Gist  V.  Lybrand,  3  Ohio,  307,  in  which  case  it  is  said  :  "  Whether  a  demand 
should  be  made  at  any  other  place  is  not  made  a  point,  or  adjudicated  upon  in 
that  case  (McGruder  v.  Bank  of  Washington).  But  it  seems  to  us  a  clear 
consequence  of  the  decision,  that  such  a  demand  is  unnecessary.  The  fact  ot 
removal  commits  the  indorser,  and  dispenses  with  all  demand,  unless  a  particu- 
lar place  be  appointed  for  the  payment  of  the  note  in  the  note  itself."  Dennie 
V.  Walker,  7  N.  H.,  199  ;  Foster  v.  Julien,  24  N.  Y.,  28  (Mason,  J.,  dissenting)  ; 
Eaton  V.  McMahon,  42  Wis.,  487. 


184  EXCUSE  ARISING  FROM  CONDUCT  OF  PARTY.       §   II46. 

removal  would  not  warrant  the  supposition  that  the  payor 
had  not  made  arrangements  to  meet  his  obligations  at  his 
previous  domicile  ;  and  the  better  opinion  is  that  the  holder 
would  not  exercise  due  diligence  w^ithout  presenting  the 
bill  or  note  at  his  last  place  of  residence  or  business.^  It 
would  be  sufficient,  however,  to  present  it  at  the  last  place 
of  business,  without  inquiry  at  his  last  residence,  or  of  the 
indorser  as  to  his  present  residence.^  If  he  leaves  no  one 
at  his  last  place  of  residence  on  whom  demand  can  be  made, 
in  the  place  where  he  last  resided,  no  demand  is  necessary 
to  charge  an  indorser.^ 

§  1 1 46,  When  the  removal  is  to  another  locality  within 
the  same  State  or  country,  it  is  the  duty  of  the  holder  to 
seek  and  demand  payment  of  the  promisor,  at  his  new  place 
of  residence  or  business;^  but  when  he  has  crossed  the  line 
into  another  State  or  country,  it  matters  not  how  near  his 
new  place  of  residence  may  be  to  his  former  one  ;  the  mere 
fact  that  he  has  passed  into  a  foreign  jurisdiction  is  sufficient 
to  excuse  non-fuUilment,  either  upon  him  personally  or  at 
his  new  place  of  residence  or  business.^  This  latter  doctrine 
was  applied  by  the  United  States  Supreme  Court  where  the 

'  Wheeler  v.  Field,  6  Mete,  290;  Grafton  Bank  v.  Cox,  13  Gray,  503  ;  i  Par- 
sons N.  &  B.,  452  ;  Redfield  &  Bigelow's  Cases,  330, 

"^  Grafton  Bank  v.  Cox,  13  Gray,  503. 

^  Brown  v.  Petrie,  Iowa  S.  C,  June,  1881,  9  N.  W.  Reporter,  190. 

^  Louisiana  Ins.  Co.  v.  Shamburgh,  7  Mart.  (La.)  N.  S.,  260,  the  maker  having 
removed  from  New  Orleans  to  Plaquemine,  in  Louisiana.  Anderson  v.  Drake, 
14  Johns,  114,  the  maker  having  removed  from  New  York  City  to  Kingston,  in 
New  York  State. 

''  McGruder  v.  Bank  of  Washington,  9  Wheat.,  598,  Johnson,  J.,  saying :  "  We 
think  that  reason  and  convenience  are  in  favor  of  sustaining  the  doctrine  that 
such  a  removal  is  an  excuse  from  an  actual  demand.  Precision  and  certainty  are 
often  of  more  importance  to  the  rules  of  law  than  their  abstract  justice.  On 
this  point  there  is  no  other  rule  that  can  be  laid  down  which  will  not  leave  too 
much  latitude  as  to  place  and  distance.  For  his  absconding  or  removal  out  of 
the  kingdom,  the  indorser  is  held  in  England  to  stand  committed,  and  although 
from  the  contiguity,  and  in  some  instances  reduced  size  of  the  States,  and  their 
union  under  the  general  government,  the  analogy  is  not  perfect,  yet  it  is  ob- 
vious that  a  removal  from  the  seaboard  to  the  frontier  ^izX^?,,  ox  vice  versa, 
would  be  attended  with  all  the  hardships  to  a  holder,  especially  one  of  the  same 
State  with  the  maker,  that  could  result  from  crossing  the  British  Channel."  To 
same  effect,  see  Gillespie  v.  Hannahan,  4  McCord,  503  ;  Widgery  v.  Monroe,  6 
Mass.,  449. 


§   I  146.        WHEN  MAKER  OR  ACCEPTOR  HAS  REMOVED.  185 

maker  removed  from  the  District  of  Columbia  to  a  new 
residence  in  Virginia  only  nine  miles  distant,  and  it  seems 
well  established,^  though  not  without  some  dissent.  In 
some  cases,  however,  it  has  been  held  that  in  the  event  of 
a  permanent  removal  beyond  the  State  line,  the  holder 
must  use  reasonable  efforts  to  ascertain  the  new  place  of 
residence,  and  give  notice  there.^  In  respect  to  notice, 
when  the  drawer  or  indorser  entitled  to  it  has  left  the  State, 
it  is  sufficient  to  leave  it  at  his  last  place  of  residence.^ 

*  See  supra. 

^  Barker  v.  Clark,  20  Me.,  156  ;  Phipps  v.  Chase,  6  Mete,  491. 

'  Herrick  v.  Baldwin,  17  Minn.,  209. 


CHAPTER  XXXV. 

SPECIAL  WAIVERS  OF  PRESENTMENT,  PROTEST,  AND  NOTICE; 
AND  OF  THE  EVIDENCE  THEREOF,  BY  PROMISES  TO  PAY, 
AND    PART    PAYMENTS    AFTER    MATURITY. 


SECTION  I. 

WAIVER  BY  PROMISE  OF  THE  DRAWER  OR  INDORSER  TO  PAY 
MADE  AFTER  MATURITY  WITH  KNOWLEDGE  OF  HOLDER'S 
DEFAULT. 

§  1 147.  In  the  first  place,  promises  to  pay  after  matu- 
rity, or  acknowledgments  of  continued  liability  and  obliga- 
tion to  pay,  with  knowledge  that  the  usual  steps  of  demand, 
protest,  or  notice  were  not  duly  taken,  are  almost  universally 
regarded  as  absolutely  fixing  the  liability  of  the  drawer  or 
indorser  making  them,  and  he  will  not  afterward  be  per- 
mitted to  set  up  the  defence  that  the  demand  or  protest 
were  not  made  in  point  of  fact,  or  the  notice  not  given.^ 
The  doctrine,  as  thus  laid  down,  is  settled  in  England  and 
in  the  United  States,  indeed  almost  wherever  the  law  mer- 
chant prevails,  though  the  particular  grounds  upon  which 

•  Yeager  v.  Falwell,  13  Wall,  12  ;  Sigerson  v.  Mathews,  20  How.,  496;  Rey- 
nolds V.  Douglass,  12  Pet.,  497  ;  Thornton  v.  Wynn,  12  Wheat.,  183  ;  Salisbury 
V.  Renick,  44  Mo.,  554;  Hughes  v.  Bowen,  15  Iowa,  446;  Martin  v.  Winslow, 
2  Mason,  241  ;  Spurlock  v.  Union  Bank,  4  Humph.,  336  ;  Hazard  v.  White,  26 
Ark.,  280;  James  v.  Wade,  21  La.  Ann.,  548  ;  Walker  v.  Rogers,  39  111.,  279  ; 
Mathews  v.  Allen,  16  Gray,  594  ;  Smith  v.  Curlee,  59  111.,  221  ;  Tardy  v.  Boyd, 
26  Grat.,  637  ;  Carter  v.  Sprague,  51  Cal.,  239;  Givens  v.  Merchants'  National 
Bank,  85  III,  444;  Ross  v.  Hurd,  71  N.  Y.,  14;  Trimble  v.  Thorne,  16  Johns, 
152  ;  Duryee  v.  Dennison,  5  Johns,  248  ;  Scott  v.  Meeker,  20  Hun,  163;  Fell  v. 
Dial,  14  S.  C.,  247  ;  Armstrong  v.  Chad  wick,  127  Mass.,  156  ;  Gove  v.  Vining, 
7  Met.,  212  ;  Moyer's  Appeal,  87  Penn.  St.,  129  ;  Smith  v.  Lounsdale,  6  Oregon, 
80;  Story  on  Bills,  §§  280,  320,  373;  Story  on  Notes,  274,  275  ;  3  Kent.  Com. 
lect.,  44 ;  I  Parsons  N.  &  B.,  594 ;  Byles  on  Bills  (Sharswood's  ed.),  349 ;  Ed« 
wards  on  Bills,  650,  651,  652 ;  2  Ames  B.  &  N.,  505,  notes. 
(186) 


§1147^-       WAIVER  BY  PROMISE  MADE  AFTER  MATURITY.        187 

it  rests  are  the  subject  of  difference  of  opinion,  and  there 
are  authorities  denying  it  altogether.^ 

§  1 147^.  Discussion  of  the  principle  that  promises  to  pay 
with  knowledge  of  laches  bind  party  without  demand  or 
notice. — The  objection  to  it  is  placed  upon  the  ground  that 
the  drawer  or  indorser  is  absolutely  discharged  by  default 
of  the  holder  in  respect  to  making  due  presentment  and 
giving  notice  ;  and  that,  being  no  longer  a  party  to  the 
contract,  he  can  not  renew  his  liability  by  a  new  promise, 
unless  it  be  supported  by  a  new  consideration.^  This  argu- 
ment is  a  forcible  one,  but  it  has  not  impressed  the  courts, 
with  few  exceptional  cases,  as  valid,  and  may  be  regarded 
as  overruled  and  obsolete.  And  when  we  refer  to  the  fun- 
damental principles  upon  which  the  requirements  of  demand 
and  notice  are  based,  it  seems  more  plausible  than  sound. 
The  object  of  demand  and  notice  is  to  secure  the  drawer  or 
indorser  from  loss — not  actual  loss  necessarily,  but  from 
any  possible  loss  by  delay  in  making  the  demand  of  pay- 
ment of  the  principal  party,  and  notifying  the  indorser  of 
his  default.  The  law  presumes  an  injury,  or  at  least  his 
exposure  to  injury,  when  these  steps  have  not  been  taken  ; 
but,  as  it  exacts  them  rigidly  from  the  holder,  it  allows  him 
the  advantage  of  any  assurance  from  the  drawer  or  indorser 
that  no  injury  has  been  suffered,  and  that  he  will  not  avoid 
his  Hability  by  the  mere  chance  of  suffering  it.  Waiver  is 
not,  therefore,  the  revival  of  the  claim  of  recourse  against 
him,  but  a  declaration  that  there  was  no  ground  for  the 
only  plea  on  which  it  could  be  discharged.^  Indeed,  while 
it  is  everywhere  said  that  the  indorser's  liability  is  condi- 
tioned upon  due  demand  and  notice,  it  should  be  remem- 
bered that  the  condition  is  not  a  strict  and  absolute  condi- 


'  Lawrence  v.  Ralston,  3  Bibb  (Ky.),  102  ;  Donelly  v.  Howie,  Hayes  &  J.,  436 
(Irish  Court  of  Exchequer).     See  also  Cathcart  v.  Gibson,  i  Rich.  (S.  S.),  10 
Huntington  v.  Harvey,  4  Conn.,  124;  2  Ames  B.  &  N.,  504. 

°  Story  on  Notes,  §  275  ;   i  Parsons  N.  &  B.,  611. 

'  Thomson  on  Bills  (Wilson's  ed.),  377  ;  Edwards  on  Bills,  650,  651. 


l88  WAIVERS  BY  PROMISES  TO  PAY.  §1148. 

tion  precedent  as  conditions  in  contracts  construed  by  the 
common  law.  We  have  already  seen  that  even  overruling 
necessity  does  not  exonerate  a  contractor  at  common  law, 
while  it  is  a  well-settled  excuse  for  non-compliance  with 
the  requirement  of  demand  and  notice.  And  in  the  same 
liberal  spirit,  and  for  the  benefit  of  trade,  the  obligation  of 
the  indorser  is  regarded  rather  as  voidable  by  non-fulfilment 
of  these  conditions  than  as  actually  avoided.  If  he  chooses 
to  affirm  rather  than  disaffirm  his  liability,  it  can  injure  no 
one  to  leave  him  to  the  exercise  of  his  discretion.^. 

§  1 148.  It  makes  no  difference,  when  the  promise  to  pay 
is  made  with  knowledge  of  laches,  that  the  party  making  it 
did  not  know  its  legal  effect  as  a  waiver,^  or  that  he  had  a 
legal  defence  to  the  bill  or  note,^  for  it  is  a  maxim  that  ig- 
norance of  the  law  excuses  no  one.  The  contrary  notion 
has  been  long  since  exploded,"*  though  at  one  time  it  found 
favor.^ 

And  it  makes  no  difference  at  what  particular  time  the 
promise  is  made.  It  may  be  after  suit  brought,®  and  even 
while  a  motion  for  a  new  trial  is  pending.''' 


'  In  Ross  V.  Hurd,  71  N.  Y.,  14,  the  holder  and  maker  of  a  note  went  to  the 
indorser  who  had  been  discharged  by  want  of  demand  and  notice,  and  on  the 
holder  agreeing  to  an  extension,  the  indorser  said,  "  Then  I  will  waive  protest." 
Held  that  this  authorized  recovery  against  the  indorser. 

-  Third  National  Bank  v.  Ashworth,  105  Mass.,  503;  Mathews  v.  Allen,  16 
Gray,  594  ;  Hughes  v.  Bowen,  15  Iowa,  446 ;  Cheshire  v.  Taylor,  29  Iowa,  492  ; 
Davis  V.  Gowen,  17  Me.,  387  ;  Beck  v.  Thompson,  5  Har.  &  J.,  537  ;  Pate  v, 
McClure,  4  Rand.,  164  ;  Richter  v.  Selin,  8  Serg.  &  R  ,  425  ;  Kennon  v.  McRea. 
7  Port.  (Ala.),  175  ;  Bilbie  v.  Lumley,  2  East-,  469;  Stevens  v.  Lynch,  12  East., 
38  ;  Chitty  on  Bills  (13  Am.  ed.)  [*503],  447  ;  Story  on  Bills,  §  320;  2  Ames  B. 
&  N.,  505. 

=  Givens  v.  Merchants'  Nat.  Bank,  85  III.,  444,  Scholfield,  C.  J. :  "  The 
plaintiff  in  error  says  he  was  not  aware  at  the  time  he  made  these  promises  that 

he  had  any  legal  defence  to  the  note If  it  was  because  of  his  ignorance 

of  the  law,  it  can  not  avail  him,  and  he  must  be  charged  with  full  knowledge." 

*  Tebbets  v.  Dowd,  23  Wend.,  379. 

'  Chatfield  v.  Paxton,  N.  P.,  quoted  in  Bilbie  v.  Lumley,  2  East.,  469  ;  Free- 
man V.  Boynton,  7  Mass.,  483  ;  Warder  v.  Tucker,  Id.,  449. 

^  Oglesby  v.  Steamboat  Co.,  10  La.  Ann.,  117  ;  Hart  v.  Long,  i  Rob.  (La),  83. 

'  Hart  v.  Long,  i  Rob.  (La.),  83. 


ft   1 149.       WAIVER  BY  PROMISE  MADE  AFTER  MATURITY.  1 89 

§  1 149.  Proof  of  knowledge — how  far  essential  to  proof 
of  waiver. — Knowledge  on  the  part  of  the  drawer  or  in- 
dorser  that/die  holder  has  been  in  default,  in  not  making 
due  presentment  and  giving  notice,  is  an  element  of  the 
waiver  as  indispensable  as  the  promise  itself,  according  to 
the  American  text  writers  on  the  subject,  and  the  great 
body  of  the  adjudicated  cases.^  Thus,  it  has  been  decided 
by  the  United  States  Supreme  Court  that  where  an  in- 
dorser  of  a  note,  on  being  informed  that  the  maker  had  not 
paid  it,  observed  that  "  he  knew  he  had  not  to  pay  it ;  that 
it  was  the  concern  of  himself  (the  indorser)  alone  ;  and 
that  the  maker  had  nothing  to  do  with  it,"  was  an  admission 
of  liability,  but  that  the  plaintiff  could  not  recover  against 
him  without  proving  that  he  was  apprised  of  his  laches  in 
not  making  a  regular  demand  of  payment.^ 

'  Thornton  v.  Wynn,  12  Wheat.,  183.  And  to  same  effect,  holding  that  it  must 
be  proved  in  addition  to  the  promise  itself,  see  Spurlock  v.  Union  Bank,  4 
Humph.,  336;  Ford  v.  Dalian,  3  Cold.,  67;  Ticknor  v.  Roberts,  11  La.,  14; 
Blum  V.  Bidwell,  20  La.  Ann.,  43  ;  Walker  v.  Rogers,  40  111.  278  ;  Van  Wickle 
V.  Downing,  19  La.  Ann.,  83  ;  Baskerville  v.  Harris,  41  Miss.,  535  ;  Harvey  v. 
Troupe,  23  Miss.,  538  ;  Farrington  v.  Brown,  7  N.  H.,  271 ;  Hunter  v.  Hook,  64 
Barb.,  469  ;  Jones  v.  Savage,  6  Wend.,  658  ;  Gawtry  v.  Doane,48  Barb.,  148  ;  U. 
S.  Bank  v.  Southard,  2  Ham,  473  ;  Barkalow  v.  Johnson,  i  Ham,  397  ;  Bank 
U.  S.  V.  Leathers,  10  B.  Mon.,  64  ;  Walker  v.  Rogers,  39  III,  279  ;  Cheshire  v. 
Taylor,  29  Iowa,  492  ;  Sigerson  v.  Mathews,  20  How.,  464 ;  Davis  v.  Gowen, 
387  ;  Salisbury  v.  Renick,  44  Mo.,  454  ;  Otis  v.  Hussey,  3  N.  H.,  346  ;  Newberry 
V.  Trowbridge,  13  Mich.,  264;  Freeman  v.  O'Brien,  38  Iowa,  406;  Kelley  v. 
Brown,  5  Gray,  108;  Baer  v.  Leppert,  12  N.  Y.  S.  C.  (5  Hun),  453;  i  Parsons 
N.  &  B.,  601  ;  Story  on  Bills,  §  320  ;  Lilly  v.  Petteway,  73  N.  C,  358  ;  Williams 
V.  Union  Bank,  9  Heisk.,  441  (1872),  in  which  case  it  was  held  that  it  must  ap- 
pear that  the  party  promising  was  under  no  misapprehension  as  to  the  law  or 
the  facts.  In  Arnold  v.  Dresser,  8  Allen.  435,  Bigelow,  C.  J.,  saying:  "  No  such 
waiver  is  made  where  an  indorser  promises  to  pay  the  note  in  ignorance  of  the 
fact  that  he  has  been  discharged  by  the  laches  of  the  holder  in  not  making  due 
demand  of  the  promisor,  or  where  such  promise  is  made  under  a  misapprehen- 
sion or  mistake  of  facts  concerning  the  due  presentment  and  demand  of  the 
note."     See  ^os/,  §  1161. 

^  Thornton  v.  Wynn,  12  Wheat.,  183.  "These  declarations,"  said  the  Su- 
preme Court,  "  amounted  to  an  unequivocal  admission  of  the  original  liability  ot 
the  defendant  to  pay  the  note,  and  nothing  more.  It  does  not  necessarily  ad- 
mit the  right  of  the  holder  to  resort  to  him  on  the  note,  and  that  he  had  re- 
ceived no  damage  from  the  want  of  notice,  unless  the  jury  to  whom  the  conclu- 
sion of  the  fiict  from  the  evidence  ought  to  have  been  submitted,  were  satisfied 
that  the  defendant  was  also  apprised  of  the  laches  of  the  holder  in  not  making  a 
regular  demand  of  payment  of  the  note,  by  which  he  was  discharged  of  re- 
sponsibility to  pay  it.  The  knowledge  of  this  fact  formed  an  indispensable  part 
of  the  plaintiff's  case,  since  without  ft,  it  can  not  be  inferred  that  the  defendant 
intended  to  admit  the  right  of  the  plaintiff  to  resort  to  him,  if,  in  point  of  fact,  he 
had  been  guilty  of  such  laches  as  would  discharge  him  in  point  of  law." 


I  go  WAIVERS    BY    PROMISES    TO    PAY.  §   II50. 

Even  where  the  party  wrote  a  written  acknowledgment, 
addressed  to  the  plaintiffs  counsel,  stating,  "  I  hereby  hold 
myself  accountable  for  the  payment  of  a  note  signed  by  J. 
Brown,  payable  to  me,  and  indorsed  by  me,"  etc.,  it  was 
held  insufficient,  no  proof  of  knowledge  of  laches  appear- 
ing.^ And  it  is  said  and  held  that  even  if  the  drawer  or  in- 
dorser  pays  the  amount  of  the  bill  or  note,  in  ignorance 
that  he  has  been  discharged  by  laches,  he  may  recover  it 
back.^ 

§  1 150.  There  is  certainly  strong  ground  for  contending 
that  upon  principles  of  estoppel,  proof  of  a  distinct  promise 
to  pay  after  maturity  (no  question  of  fraud  or  deceit  arising) 
should  in  itself  close  all  controversy  as  to  demand,  protest, 
and  notice.  The  drawer  or  indorser  may  not  only  waive 
the  fact  that  demand,  protest,  and  notice  were  not  duly 
made  or  given,  they  may  also  waive  proof  that  they  were 
made  or  given.  And  when  he  promises  to  pay  the  bill  or 
note,  such  promise  imports  an  unconditional  assumption  of 
it ;  and  a  dispensation  with  whatever  preliminary  evidences 
might  be  necessary  to  charge  him  with  its  payment.  The 
holder  is  thereby  advised  that  the  party  raises  no  question 
as  to  his  liability,  and  to  permit  him  when  sued  to  require 
other  proofs  of  what  he  has  recognized,  might  enable  him 
to  practice  a  fraud  by  lulling  the  holder  to  quiet  reliance  on 
his  promise,  and  then  springing  the  defence  upon  him  un- 
awares. If  there  were  a  failure  as  to  demand  and  notice, 
there  might  be  excuses  which  the  holder  would  come  pre- 
pared to  prove  if  the  promise  had  not  intimated  that  it  was 
unnecessary.  Or  there  might  be  witnesses  wiiom  he  would 
have  summoned,  or  testimony  which  he  would  have  pre- 
served, if  not  thus  warned  that  the  indorser  acknowledged 
his  liability.  And  good  faith  would  seem  to  suggest  that 
if  the  party  deliberately  promises  to  pay,  he  shall  not  af- 

'  Farrington  v.  Brown,  7  N.  H.,  271. 

'  Story  on  Promissory  Notes,  §  361  ;  Crutchers  v.  Wolf,  2  Mon.,  88. 


§1151.      WAIVER  BY  PROMISE  MADE  AFTER  MATURITY.  I9I 

tervvard  go  behind  that  promise  and  deny  facts  which  it 
presuppose^,  and  is  impHedly  based  upon.^  Nevertheless, 
it  may  be  said  per  contra,  that  to  consider  the  promise  to 
pay  as  evidence  p7'ima  facie  of  due  demand  and  notice,  or 
of  kno\vledo:e  of  the  want  of  the  one  or  the  other,  and  to 
throw  the  burden  of  proving  want  of  dihgence  and  igno- 
rance thereof,  with  due  circumspection-  taken  to  prevent 
surprise  to  the  plaintiff,  are  all  that  is  essential  to  protect 
him  ;  and  the  authorities  which  adopt  this  equitable  inter- 
mediate view  are  perhaps  upon  the  whole  best  calculated  to 
effectuate  justice.* 

§  1 151.  In  Virginia  it  was  held,  that  where  the  drawer 
of  a  protested  bill  who  was  sued,  called  for  proof  of  notice, 
and  it  was  proved  that  when  he  was  applied  to  for  payment 
he  acknowledged  that  the  debt  was  a  just  one,  and  said  he 
would  pay  it,  it  was  a  waiver  of  all  notice,  though  nothing 
was  said  about  notice  in  the  acknowledgment ;  and  that  in- 
structions that,  "  unless  the  said  acknowledgment  was  made 
with  a  knowledge  of  all  the  facts  of  the  case  as  to  the  laches 
of  the  holders  of  the  said  bill,  the  said  evidence  was  not  to 
be  received,"  were  properly  refused  by  the  court  below.^ 
And  in  a  subsequent  case  the  doctrine  was  reiterated.*     It 

'  Debuys  v.  Mollere,  15  Mart.  (La.),  318,  Mathews,  J.,  saying:  "The  indorser 
must  have  known  whether  he  was  duly  notified  of  the  protest.  If  he  w^ere  not, 
by  promising  to  pay  he  waived  the  advantage  which  such  negligence  would 
otherwise  have  given  ;  if  he  did  not  receive  regular  notice  he  is  liable  under  his 
subsequent  promise."     See  Bogart  v.  M'CIurg,  11  Heisk.,  105. 

^  See  post,  §  1 1 52  et  seq. 

^  Walker  v.  Laverty,  6  Munf.,  487  (18 10).  No  authorities  quoted.  Devendorl 
V.  West  Va.  O.  &  O.  L.  Co.,  17  W  Va.,  175.  See  Cardwell  v.  Allen,  33  Grat., 
166. 

*  Pate  V.  McClure,  4  Rand.,  169  (1826),  Carr,  J.,  saying:  "  Alexander  McClure 
says,  in  direct  response  to  a  particular  interrogatory  in  the  bill,  that  immediately 
on  the  return  of  the  bills  he  gave  due  notice  of  the  protest,  both  to  Lynham  and 
Pate  ;  and  this  is  strongly  corroborated  by  the  correspondence.  But  in  truth, 
the  case  is  taken  wholly  off  that  ground  by  the  various  subsequent  promises  to 
pay  and  acts  of  sanction  and  ratification  given  and  done  by  Pate — promises  and 
acts  covering  an  interval  of  twelve  years,  and  done  in  the  most  solemn  manner 
with  full  knowledge  of  the  facts."  [The  court  evidently  does  not  mean  knowl- 
edge of  any  laches,  which  it  thought  had  not  been  committed,  but  knowledge  o< 
non-payment.]  "After  this,"  continues  the  judge,  "it  is  equally  repugnant  to 
reason  and  to  law,  that  he  should  claim  to  be  discharged  for  want  of  notice,  and 


1 


192  WAIVERS    BY    PROMISES    TO    PAY.  ^   1 1 52. 

will  be  observed,  that  in  neither  of  these  cases  was  there 
any  proof  of  any  laches  ;  but  the  doctrine  which  they  rec- 
ognize is,  that  such  proof  is  absolutely  precluded  by  the 
waiver. 


SECTION  11. 

PROMISE  TO   PAY  AS   PRESUMPTIVE    EVIDENCE    OF  KNOWLEDGE 

OF   LACHES. 

§  1 152.  When  it  is  conceded  or  proved  that  there  were 
laches  in  respect  to  the  demand,  protest,  or  notice,  the  prom- 
ise to  pay  after  maturity  should  be  regarded  as  prima  facie 
evidence  that  the  party  making  it  knew  of  such  laches,  when- 
ever such  knowledge  is  deemed  necessary  to  constitute  a 
waiver.  It  is  a  promise  against  interest.  The  drawer  or  in- 
dorser  should  know  when  the  instrument  to  which  he  was  a 
party  fell  due.  His  promise  to  pay  presupposes  it  to  be 
overdue  and  unpaid.  And  if  he  has  not  received  notice, 
he  has  every  reason  to  suppose  that  it  was  not  sent,  and 
that  the  steps  which  should  precede  it  were  not  taken.*  If 
he  received  notice  of  due  dishonor,  and  nevertheless  de- 
mand and  protest  were  not  duly  made,  it  might  be  other- 
call  on  the  other  party  to  prove  that  he  proceeded  in  strict  conformity  with  all 
the  niceties  of  the  law  merchant.  If  he  had  intended  to  place  himself  on  this 
ground,  the  time  was  when  the  bills  came  back  and  he  was  pressed  for  payment 
of  them.  He  should  then  have  said,  '  Show  that  in  all  things  you  have  proceed- 
ed strictly ;  that  the  bills  have  been  regularly  protested,  and  due  notice  of  pro- 
test given  to  me.'  Nor  will  it  avail  him  to  say  that  he  was  ignorant  of  the  law ; 
every  man  is  bound  to  know  the  law." 

'  "  The  weight  of  authority,"  says  Chancellor  Kent,  "  is  that  this  knowledge 
may  be  inferred  as  a  fact  from  the  promise  under  the  attending  circumstances, 
without  requiring  clear  and  affirmative  proof  of  the  knowledge."  3  Comm. 
lect.,  44.  In  Thomson  on  Bills  (Wilson's  ed.),  p.  381,  it  is  said,  "  There  must  be 
proof  of  knowledge  of  the  failure '' ;  and  p.  384, "  Though  it  should  not  be 
proved,  it  will  be  presumed  that  he  knew  of  the  failure  "  ;  Chitty  on  Bills  (13 
Am.  ed.),  [*504-5],  570  ;  i  Parsons  N.  &  B.,  603 ;  Hopley  v.  Dufresne,  15  East., 
275  (1812)  ;  Taylor  V.Jones,  I  Camp.,  105  ;  Turnbull  v.  Hill  (Scotch  case),  Thom., 
381  ;  Barkalow  v.  Johnson,  i  Harr.,  397,  Hornblower,  C.  J.,  saying:  "The  in- 
dorser  knew  indeed  whether  he  had  or  had  not  received  a  notice  of  demand  and 
non-payment."  Landrum  v.  Trowbridge,  2  Mete.  (Ky.),  283  ;  Loose  v.  Loose, 
36  Penn.  St.,  538  ;  Nash  v.  Harrington,  i  Aik.,  39;  Debuys  v.  Mollere,  15  Mart, 
(La.),  318;  ante,  §  1150,  note  i. 


$  1154-   PROMISE  TO  PAY  AS  PRESUMPTIVE  EVIDENCE.     1 93 

wise.  As  a  general  rule,  however,  the  American  decisions 
require  separate  proof  of  knowledge  in  all  cases.*  And  it 
has  been  held  that  a  promise  to  pay,  with  knowledge  that 
no  notice  was  given,  would  not  be  a  waiver  unless  there 
was  also  knowledge  that  due  demand  was  not  made.'* 

§  1 153.  Inferences  as  to  knowledge  in  respect  to  present- 
ment and  notice. — The  inference  is  not  so  strong  as  to 
knowledge  of  laches  respecting  the  presentment  as  to  the 
notice,  but  still  strong  enough,  we  think,  to  bear  out  the 
views  expressed.  Where  there  has  been  due  presentment, 
and  a  promise  to  pay  afterward  resisted  on  the  ground  of 
no  notice,  the  presumption  that  it  was  given,  or  that  if  not 
given  the  promisor  knew  the  fact,  would  be  very  strong.^ 
Where  it  is  alleged  that  there  was  neither  presentment  nor 
notice,  the  promise  to  pay  would  still  lead,  we  think  (for 
the  reasons  already  given),  to  the  same  conclusions,*  though 
respecting  the  presentment,  high  authority,  which  recog- 
nized the  inference  respecting  notice,  has  thought  differ- 
ently.^ 

§  1 1 54.  Distinctio7i  between  promises  to  pay  in  respect  to 
notice  of  7ion-payment  and  notice  of  non-acceptance. — A 
distinction  may  well  be  taken  between  the  effect  of  a  prom- 
ise to  pay,  in  regard  to  the  inference  of  notice,  in  cases 
of  non-payment  and  non-acceptance,  where  a  bill  has  been 

'See  ante,  §  1149;  Ford  v.  Dallam,  3  Cold.,  67;  Trimble  v.  Thorn,  16 
Johns,  152  (overruled  by  Tebbetts  v.  Dowd,  23  Wend.,  379)  ;  New  Orleans 
Bank  v.  Harper,  12  Rob.  (La.),  231  ;  Lilly  v.  Petteway,  73  N.  C..  358. 

°  Low  V.  Howard,  1 1  Cush.,  268. 

"Ladd  V.  Kenney,  2  N.  H.,  340;  Chitty  on  Bills  (13  Am.  ed.),  [*504-5],  570. 

*  Croxen  v.  Worthen,  5  M.  &  W.,  5.  An  action  against  maker  of  a  note  pay- 
able at  a  specified  place.  There  was  no  evidence  of  presentment  there,  which 
was  charged  in  the  declaration,  but  the  defendant  had  promised  to  pay  by  in- 
stalments. Alderson,  B.,  said:  "The  defendant  is  supposed  to  know  the  law; 
he  knows,  therefore,  that  he  is  not  liable  unless  the  note  has  been  duly  presented. 
With  that  knowledge  he  undertakes  to  pay  it.  Is  not  that  evidence  for  the  jury 
that  he  knows  it  has  been  presented  }  " 

'  Thornton  v.  Wynn,  12  Wheat.,  183,  Washington,  J.,  saying  :  "  That  due  notice 
was  not  given  to  the  defendant,  he  could  not  fail  to  know  ;  but  a  regular  demand 
of  the  maker  of  the  note  could  not  be  inferred  from  the  admissions  of  the  de- 
fendant." 

Vol.  II.— 1-, 


194  WAIVERS    BY    PROMISES    TO    PAY.  §   1 1 55. 

presented  for  acceptance  before  it  becomes  due.  In  the 
former  case  (non-payment)  the  party  is  supposed  to  have 
known  when  the  bill  became  due,  and  must  actually  know, 
or  might  readily  have  ascertained,  whether  or  not  there  had 
been  laches  ;  and,  therefore,  the  inference  arises  from  a 
promise  to  pay,  of  a  regular  presentment  for  payment  and 
of  due  notice.  But  in  the  latter  case  (when  the  bill  was 
dishonored  for  non-acceptance),  the  fact  of  a  bill  having 
been  presented  for  acceptance  before  it  fell  due,  and  dis- 
honored, lies  peculiarly  in  the  knowledge  of  the  party  pre- 
senting it  ;  and  there  is  no  inference  that  a  party  who  prom- 
ises to  pay  after  the  bill  falls  due,  would  have  known  of  the 
refusal  to  accept,  or  of  the  neglect  to  give  notice  of  such 
non-acceptance.  Therefore,  in  such  cases,  the  promise  to 
pay  would  not  be  in  itself  a  waiver  of  laches,  nor  presump- 
tive evidence  of  diligence.^  This  doctrine  is  held  in  Eng- 
land as  well  as  in  the  United  States.^ 

§  1 155.  When  proof  of  knowledge,  apart  from  any  pre- 
sumption which  the  promise  to  pay  may  give  rise  to,  is  re- 
quired, all  the  circumstances  may  be  looked  at,  and  it  may 
be  made  out  inferentially  by  the  relations,  acts,  and  expres- 
sions of  the  parties,  and  the  time  which  had  elapsed  after 
maturity  when  it  was  made.^  Where  the  indorser  applied 
for  an  extension  of  time  after  suit  brought  in  which  due 
presentment  was  alleged,  it  was  thought  sufficient  evidence 
to  go  before  a  jury  of  knowledge.*  Where  the  drawer, 
knowing  that  notice  had  not  been  sent,  himself  took  the 
bill  and  demanded  it  of  the  drawee  some  time  after  it  was 
due,  it  was  inferred  that  he  must  have  known  the  failure  in 
making  a  previous  demand.^ 

'Landrum  v.  Trowbridg-e,  2  Mete.  (Ky.),  283;  Bank  of  Tennessee  v.  Smith,  9 
B.  Mon.,  609;  Phillips  v.  McCurdy,  i  Har.  &  J.,  187, 

-  Blessard  v.  Hurst,  5  Burr.,  2670  (1770).  The  promise  to  pay  was  made 
without  knowledge  that  the  holder  had  presented  for  acceptance,  and  not  given 
notice  of  refusal  till  after  payment  had  been  likewise  refused.  Goodall  v. 
Dolley,  I  T.  R.,  712. 

'Martin  v.  Winslow,  2  Mason,  241 ;  Givens  v.  Merchants'  Nat.  Bank,  85  111., 
444- 

■■Hopley  V.  Dufresne,  15  East.,  275.  '  Cram  v.  Sherburne,  14  Me.,  48. 


§   1 1  57*       Pl^OMISE  TO  PAY  AS  EVIDENCE  OF  DILIGENCE.  1 95 


SECTION    HI. 

PROMISE  TO  PAY   AS   EVIDENCE   OF   DILIGENCE,   OR    WAIVER    OF 
PROOF  OF  NEGLIGENCE. 

§  1 1 56.  We  have  already  seen  the  double  aspect  in 
which  a  promise  to  pay  after  maturity  may  appear,  and  that 
when  relied  on  as  a  waiver  of  laches,  knowledge  of  such 
laches  by  the  promisor  must  accompany  it.  But  when  no 
laches  are  proved  or  conceded,  it  assumes  another  aspect. 
Instead  of  proving  demand  and  notice,  the  holder  proves 
an  acknowledgment  of  liability,  and  a  promise  to  discharge 
it — a  liability  presupposing  and  based  upon  demand  and 
notice,  or  dispensation  with  them.  It  is,  therefore,  pre- 
sumptive evidence  that  demand  was  duly  made  and  notice 
duly  given,  and  sufficient  in  itself  to  the  plaintiff's  recovery, 
unless  it  be  rebutted.* 

§  1 157.  Order  hi  which  burden  of  proof  shifts. — A  fail- 
ure to  discriminate  between  the  promise  to  pay  as  a  waiver 
of  demand  and  notice,  and  as  a  waiver  of  proof  of  demand 
and  notice,  has  led  to  much  confusion  in  the  adjudicated 
cases. 

There  is  certainly  great  force  in  the  view  that  a  distinct 
promise  to  pay,  made  after  maturity,  ought  to  be  regarded 
either  as  conclusive  evidence  that  there  was  due  demand 
and  notice,  which  the  promisor  is  estopped  to  rebut,  or  as 
an  absolute  waiver  of  all  proof  to  that  effect.^  But  a  ma- 
jority of  the  cases  consider  it  prima  facie  evidence  of  de- 

>  Tebbetts  v.  Dowd,  23  Wend.,  379  ;  Lewis  v.  Brehme,  33  Md.,  412  ;  Hazard 
V.  White,  26  Ark.,  280;  Dickerson  v.  Turner,  12  Ind..  223  ;  Edwards  on  Bills, 
652.  The  objection  has  been  urged  that  a  promise  to  pay,  when  made  by 
parol,  is  within  the  statute  of  frauds,  being  a  promise  to  pay  the  debt  of 
another.  The  liabilities  of  drawers  and  indorsers  are  governed  by  the  law  mer- 
chant, and  are  not,  as  we  think,  at  all  affected  by  the  statute  of  frauds.  See 
ante,  §  567.  And  it  seems  to  us  that  there  is  nothing  in  this  objection. 
In  an  action  on  the  promise  to  pay,  it  was  sustained,  however,  in  Peabody  v. 
Harvey,  4  Conn.,  119.  But  in  an  action  on  the  note,  it  was  decided  to  be  un- 
availing, in  U.  S.  Bank  v.  Southard,  2  Harr.,  473. 

'  See  ante,  §  1150,  Byles  on  Bills  (Sharswood's  ed.)  [*29i],  450. 


196  WAIVERS    BY    PROMISES    TO    PAY.  §    II5S. 

mand  and  notice  merely,  and  open  to  rebuttal ;  and  that  if 
the  defendant  does  rebut  it,  with  proof  of  laches,  the  plain- 
tiff must  rejoin  with  proof  that  the  defendant  had  knowl- 
edge of  the  laches,  his  position  being  shifted  from  a  reliance 
on  his  own  diligence,  to  proof  that  his  negligence  was  waived. 
This  view  has  been  illustrated  with  great  power  in  New 
York  (in  Tebbetts  v.  Dowd),  and  is  adopted  in  other 
cases,^  and  is,  upon  the  whole,  as  it  seems,  the  best  calcu- 
lated to  effectually  protect  the  interests  of  all  parties.  The 
order  in  which  the  burden  of  proof  shifts,  and  is  borne, 
may  therefore  be  stated  as  follows : 

(i).   Plaintiff  must  prove  demand  and  notice. 

(2).  By  proving  a  promise  to  pay  after  maturity  this 
"^xooi  prima  facie  is  supplied. 

(3).  Defendant  rebuts  this  proof  by  showing  laches  in 
respect  to  demand  or  notice. 

(4).  Plaintiff  makes  sufficient  rejoinder  by  showing  that 
defendant  had  knowledge  of  laches  when  promise  to  pay 
was  made. 

It  has  been  held  that  even  where  the  promise  to  pay  was 
in  writing,  it  is  only  pri7na  facie  evidence,  and  open  to  re- 
buttal^ 

§  II 5 8.  E^iglish  autJiorities. — In  England,  there  is  no 
doubt  that  acknowledgment  of  liability  or  a  promise 
to  pay  by  the  drawer  or  indorser  after  maturity  is  sufficient 
evidence  of  due  demand,  protest,  and  notice.  Thus,  where 
the  drawer  said  when  demand  was  made  that  he  would  be 
glad  to  pay  as  soon  as  his  accounts  with  his  agents  were 
cleared,  Lord  Ellenborough  said  :  "  By  the  promise  to  pay 
he  admits  his  liability  ;  he  admits  the  existence  of  every- 
thing which  is  necessary  to  render  him  liable.  When 
called  upon   for  payment  of  the  bill  he  ought  to  have  ob- 

'  Tebbetts  v.  Dowd,  23  Wend.,  379 ;  Loose  v.  Loose,  36  Penn.  St.,  588  ;  Nash 
V.  Harrington,  i  Aik.,  39;  Bruce  v.  Lytle,  13  Barb.,  163  ;  Dorsey  v.  Watson,  14 
Mo.,  59 ;  Thomson  on  Bills  (Wilson's  ed.),  383,  384. 

■"  Commercial  Bank  v.  Clark,  28  Vt.,  325. 


§   1 158.       PROMISE  TO  PAY  AS  EVIDE^XE  OF  DILIGEXCE.         I97 

jected  that  there  was  no  protest.  I  must  therefore  presume 
that  he  had  due  notice,  and  that  a  protest  was  regularly 
drawn  up  by  a  notary."  ^  And  demand,  protest,  or  notice 
have  been  presumed  where  the  indorser  promised  a  subse- 
quent indorser  to  pay;*  where  the  indorser  said  "  he  had 
not  regular  notice,  but  as  the  debt  was  justly  due  he  would 
pay  it";  ^  where  the  drawer  and  indorser  wrote  a  letter 
promising  a  payment ;  *  where  the  drawer  entered  into  an 
agreement  to  pay  the  bill  by  instalments.^  And  it  has 
been  held  that  an  offer  on  the  part  of  an  indorser  to  com- 
promise by  paying  one-half  of  a  bill  of  exchange,  or  secur- 
ing the  payment  of  it,  dispensed  with  proof  of  notice, 
there  being  no  evidence  on  the  subject  of  notice.^  But 
this  seems  to  go  too  far,  and  is  dissented  from  by  high  au- 
thority ; '  and  an  offer  to  pay  costs  and  the  residue  on  time 
has  been  held  insufficient  to  dispense  with  proof  of  notice, 
Lord  Denman,  C.  J.,  saying:  "The  defendant  might,  if 
time  had  been  given  him,  have  been  willing  to  have  waived 
any  objection  with  respect  to  the  notice  of  dishonor."  ^ 
But  the  English  decisions  are  not  at  all  clear  or  reconcil- 
able. In  one  case,  where  the  drawer  had  written  a  letter 
promising  to  see  the  bill  arranged,  and  had  also  promised 
to  give  a  judgment  for  the  amount,  but  swore  that  he  knew 
nothing  of  the  dishonor  until  a  fortnight  after  maturity, 
the  judge  told  the  jury  that  they  must  arrive  at  the  conclu- 
sion that  notice  was  given  the  day  of  maturity,  but  if  they 
believed  the  defendant  they  must  find  for  him.  A  verdict 
for  the  plaintiff  was  sustained.®     In  another  case  a  verdict 

'Gibbon  v.  Coggen,  2  Camp.,  188  ;  Taylor  v.  Jones,  2  Camp.,  105  ;  Stevens  v. 
Lynch,  2  Camp.,  332;  12  East.,  38;  Hopes  v.  Alder,  6  East.,  16;  Croxen  v. 
Worthen,  5  M.  &  W.,  5. 

'  Potter  V.  Rayworth,  13  East.,  417.  'Lundie  v.  Robertson,  7  East.,  231. 

*  Wood  V.  Brown,  i  Stark.,  217  ;  Campbell  v.  Webster,  2  C.  B.,  258. 
'  Gunson  v.  Metz,  i  Barn.  &  Cres.,  193. 

•Dixon  V.  Elliott,  5  Car.  &  P.,  437;  see  Edwards  on  Bills,  652,  653,  note; 
Metcalf  V.  Richardson,  73  E.  C.  L.  R.,  1070. 
'Phillips  on  Evidence,  vol.  2,  p.  24;  Chitty,  Jr.,  on  Bills,  1619,  note  a. 

*  Standage  v.  Creighton,  5  Car.  &  P.,  406. 
•Jones  v.  O'Brien,  26  E.  L.  &  Eq.,  283., 


T98  WAIVERS    BY    PROMISES    TO    PAY.  §   II 59, 

for  the  defendant  was   directed,  although  he  had  used  lan- 
guage which  the  court  thought  equivalent  to  a  promise  to 

pay.' 

But  where  it  appears  that  there  were  laches  in  respect  to 
demand,  protest,  or  notice,  and  that  the  drawer  or  indorser 
could  not  from  his  situation  have  known  the  fact,  or  was 
really  ignorant  of  it,  the  holder  can  not  recover.^  Thus, 
where  the  day  after  a  bill  was  dishonored  in  London,  and 
before  the  fact  of  its  dishonor  could  be  known  in  York- 
shire, the  drawer's  clerk  called  in  Yorkshire  upon  the  in- 
dorser prior  to  the  holder,  and  a  conversation  took  place 
as  to  the  bill  being  likely  to  come  back,  and  the  clerk  said  : 
"  I  suppose  there  will  be  no  alternative  but  my  taking  up 
the  bill,  and  if  you  will  bring  it  to  Sheffield  on  Tuesday  I 
will  pay  the  money";  and  the  indorser  did  not  receive 
either  the  bill  or  notice  until  some  days  after  the  Tuesday, 
and  notice  of  dishonor  was  not  given  to  the  drawer  in  due 
time :  it  was  held  that  such  promise  was  not  sufficient  to 
dispense  with  due  notice  of  dishonor  to  the  drawer,^ 

§  1 1 59.  Circumstances  ope^^ating  as  presumptive  evi- 
dence of  de?na7id  and  notice. — There  are  other  circum- 
stances which  operate  as  presumptive  evidence  of  due 
demand,  protest,  and  notice.  Thus  a  written  admission 
of  notice  would  waive  the  necessity  of  proof,  but  it 
might  be  explained  away  by  showing  that  it  was  made 
under  mistake,  and  that  the  holder  was  duly  warned 
not  to  rely  on  it.*  So  an  agreement  by  the  indorser  with 
the  maker  to  take  back  the  note  and  return  the  prop- 
erty for  which  it  was  given,  is  evidence  from  which  a  jury 
might  infer  demand  and  notice  ;  and  it  would  also  oper- 
ate as  a  waiver   if  there  were  laches.^      So  the  insertion 

'  Chapman  v.  Annett,  i  Car.  &  K.,  552. 

-Blesard  v.  Hirst,  5  Burr.,  2670;  Pickin  v.  Graham,  i  Cromp.  &  Mees.,  725; 
Stevens  v.  Lynch,  2  Camp.,  332;  Chitty  on  Bills  (13  Am.  ed.)  [^504],  570. 
^  Pickin  V.  Graham,  supra.     See  Yeager  v.  Falwell,  13  Wall.,  12. 

*  Commercial  Bank  of  Albany  v.  Clark,  28  Vt.,  325. 

*  Andrews  v.  Boyd,  3  Mete,  434. 


§    Il6r.       PROMISE  TO  PAY  AS  EVIDENCE  OF  DILIGENCE.  199 

of  a  bill  in  a  schedule  of  liabilities  by  an  insolvent/  or  the 
recognition  by  an  indorscr  of  an  account  with  a  request 
that  the  bill  be  charged  separately,*^  would  afford  presump- 
tive evidence  of  demand  and  notice. 

§  1 160.  The  courts  have  gone  so  far  in  admitting  circum- 
stances to  go  to  the  jury  as  evidence  of  demand  and  no- 
tice, that  Professor  Parsons  very  justly  observes:^  "  Some 
of  the  cases  have  almost  gone  so  far  that  the  only  safe 
course  for  an  indorscr  or  drawer,  when  payment  is  demand- 
ed of  him,  would  be  expressly  to  deny  both  presentment 
and  notice.  Thus,  for  instance,  a  verdict  against  the  drawer 
of  a  bill  was  sustained  where  the  only  evidence  of  notice 
was,  that  the  defendant,  two  days  after  maturity,  sent  a 
person  to  the  plaintiff  to  say  that  he  had  been  defrauded 
of  the  bill,  and  should  defend  any  action  upon  it."'*  So, 
objecting  to  payment  upon  any  other  grounds  than  laches 
in  respect  to  presentment  and  notice;^  and  so  failure  to 
produce  a  letter  containing,  as  alleged,  notice  of  dishonor, 
and  the  production  of  which  was  called  for.^  So  an  answer 
by  the  drawer  on  being  informed  of  non-payment  by  the 
acceptor  that  he  would  see  the  acceptor  about  it.' 

§  1 161.  Ignorance  of  material  facts  affectifig  pro7nise. 
— In  Massachusetts,  it  has  been  held  that  if  the  indorscr 
promises  to  pay,  without  knowledge  of  material  facts 
affecting  his  liability,  as,  for  instance,  that  an  agreement 
had  been  made  by  the  holder  by  which  he  was  discharged, 
he  will  not  be  bound,  although  he  knew  of  the  laches  re- 
specting demand  and  notice.^  This  view  depends  upon  the 
principles  which  regulate  the  liabilities  of  all   sureties,  and 

'  Hyde  v.  Stone,  20  How.,  170;  see  contra,  Jones  v.  Savage,  6  Wend.,  658. 
"  Bank  U.  S.  v.  Lyman,  20  Vt.,  666.  '  i  Parsons  N.  &  B.,  616. 

*  Wilkins  v.  Jadis,  i  Moody  &  R.,  41. 

'  Curlewis  v.  Corfield,  I  Q.  B.,  814;  i  Gale  &  D.,  4S9. 
'  Roberts  v.  Bradshavv,  i  Stark.,  28. 

*  Metcalfe  v.  Richardson,  73  E.  C.  L.  R.,  loio;  Edwards  on  Bills,  652,  653. 

*  Low  V.  Howard,  10  Cush.,  159.     See  Arnold  v.  Dresser,  8  Allen,  435,  and 
ante,  §  1 149  and  note. 


200  WAIVERS    BY    PROMISES    TO    PAY.  §   II 62. 

is  sustainable  without  reference  to  the  peculiar  doctrines 
respecting  demand  and  notice.  And  it  concurs  with  the 
English  doctrine  on  the  subject.^ 


SECTION    IV. 

WHAT  AMOUNTS  TO  AN  ACKNOWLEDGMENT   OR  PROMISE  TO  PAY. 

§  II 62.  The  burden  of  proof  is  upon  the  plaintiff  to 
show  clearly  and  distinctly  the  acknowledgment  of  liability 
and  promise  to  pay  the  bill  or  note.^  But  it  matters  not 
what  particular  phrase  may  be  used,  so  that  it  amounts  to 
such  acknowledgment  or  promise.  Where  the  indorser  of 
a  note  said  to  the  plaintiff's  agent,  who  called  on  him  and 
inquired  what  he  was  going  to  do,  "that  in  a  few  days  he 
would  see  the  agent  and  arrange  it,"  the  United  States  Su- 
preme Court  said  :  "  This  was  an  unconditional  promise  to 
pay  the  note,  which  no  one  could  misunderstand,  and  which 
he  could  not  repudiate  at  any  subsequent  period."  ^ 

So  where  the  drawer  said  he  would  see  the  bill  paid;* 
and  where  the  drawer  said,  on  being  informed  of  the  dis- 
honor of  the  bill,  "it  must  be  paid";^  but  where  an  in- 
dorser, on  being  asked  what  would  be  done  with  the  note, 
replied  that  "  it  will  be  paid,"  it  was  thought  that  "  from 
the  general  tenor  of  his  conversation,  it  could  not  be  in- 
ferred that  it  was  his  intention,  knowing  of  his  discharge, 
to  waive  his  defence,  and  promise  to  pay  the  note,  or  see 
it  paid  at  all  events,"  and  that  it  might  have  been  "  a  mere 
assertion  of  his  expectation  that  it  would  be  paid  by  the 
promisor."  ^ 

So  it  was  considered  sufficient  where  the  drawer  prom- 

•  Stevens  v.  Lynch,  12  East.,  38  ;  2  Camp.,  332 ;  see  Story  on  Bills,  §  320. 

^  Creamer  v.  Perry,  17  Pick.,  332.  '  Sigerson  v.  Mathews,  20  How.,  496, 

*  Hopes  V.  Alder,  6  East.,  16.  '  Rogers  v.  Stephens,  2  T.  R.,  713. 
'•  Creamer  v.  Perry,  17  Pick.,  332. 


§1163.         WHAT  AMOUNTS  TO  AN  ACKNOWLEDGMENT.  201 

ised  to  pay  when  it  was  in  his  power ;  ^  and  where  the  n> 
dorser  said  he  would  pay  as  soon  as  he  could,  but  he  doubted 
when  that  would  be;^  so  a  promise  to  pay  in  a  few  days 
with  a  request  for  delay  ;^  a  promise  to  arrange  with  the 
drawee  so  that  the  draft  should  be  paid  ;  ^  a  promise  to  pay 
if  the  note  could  not  be  collected  of  the  maker  by  suit  ',^ 
an  acknowledgment  by  the  drawer,  with  a  promise  to  send 
funds  with  which  to  take  up  the  bill  ;^  a  promise  by  the 
indorser  that  he  would  set  the  matter  to  rights,  when  he 
returned  ;'^  a  promise  to  pay  in  a  few  months  ;^  or  by  in- 
stalments on  short  time.^ 

§  1 163.  There  imist  be  an  absolute  promise  to  operate  a 
waiver  of  laches. — If  the  remark  of  the  party  do  not  amount 
to  a  promise,  or  is  a  conditional  promise  unaccepted,  it  will 
not  suffice  as  a  waiver  of  absence  of  due  demand  or  notice. 

Thus,  where  the  indorser  said,  on  being  arrested,  it  was 
true  the  note  had  his  name  on  it,  but  he  had  security, 
though  he  wished  for  time  to  pay  it,  it  was  held  insufficient. 
So  where  he  said  he  would  rather  pay  the  note  than  be 
sued  ;  ^"  or,  if  I  am  bound  to  pay  it,  I  will ; "  or  that  he  would 
see  what  he  could  do,  and  endeavor  to  provide  effects  ;  ^'•^  or 
where  the  indorser  remarked  to  a  third  party,  talking  gen- 
erally, that  he  would  take  care  of  the  bill,  or  see  it  paid  ;  ^^ 
so  a  reply  that  the  indorser  knew  of  no  defence  is  not  a 
promise  ;  ^^  nor  is  any  equivocal  answer. ^'^ 

"  The  promise  must  be  unequivocal,  and  amount  to  an 
admission  of  the  risfht  of  the  holder ;  or  the  act  done  must 


'  Donaldson  v.  Means,  4  Dall.,  109.  '  Rogers  v.  Hackett,  i  Fost.,  100. 

'  Hopkins  v.  Liswell,  12  Mass.,  52. 

*  Bryam  v.  Hunter,  36  Me.,  207  ;  see  Moyer's  Appeal,  87  Penn.  St.,  129. 

"  Lane  v.  Stewart,  20  Me.,  98.  '  Read  v.  Wilkinson,  2  Wash.  C.  C,  514. 

'  Anson  v.  Bailey,  Boll,  N.  P.,  276.  *  Hart  v.  Long,  i  Rob.  (La.),  83. 

'  Union  Bank  v.  Grimshaw,  15  La.,  321  ;  Croxen  v.  Worthen,  5  M.  &  W.,  5. 

'"  Keyes  v.  Fenstermaker,  24  Cal.,  329.  "  Dennis  v.  Morrice,  3  Esp.,  158, 

'^  Prideaux  v.  Collier,  2  Stark.,  57.  "  Miller  v.  Hackley,  5  Johns,  375. 

"  Griffin  v.  Goff,  12  Johns,  423. 

"  Borradaile  v.  Lowe,  4  Taunt.,  93  ;  Sherrod  v.  Rhodes,  5  Ala.,  683. 


202  WAIVERS    BY    PROMISES    TO    PAY.  §    1 1 64. 

be  of  a  nature  clearly  importing  a  like  admission  of  the 
richt.  If  it  be  defective  in  either  respect,  or  if  it  be  a  con- 
ditional offer  of  payment  unaccepted,  then,  and  in  such  a 
case,  the  holder  has  no  right  to  insist  upon  it  as  a  waiver. 
So  if  the  promise  be  qualified,  it  must  be  received  with  its 
qualification,  and  can  not  be  insisted  upon  as  an  absolute 
waiver."* 

If  the  promise  is  conditional,  the  acceptance  of  it  must 
be  proved  in  order  to  make  it  binding.  And  where  it  ap- 
peared that  the  indorser  offered  to  give  his  own  note,  which 
was  not  accepted,  it  was  held  no  waiver.*  So  an  offer  to 
pay  part  cash  and  give  his  note  for  the  balance  ;^  or  to  pro- 
cure a  renewal  ;*  or  to  pay  in  depreciated  bank  bills,^  or  in 
Confederate  States  currency.^ 

§  1 1 64.  Circumstances  cottpled  with  qiialzjied promises. — 
But  qualified  or  conditional  promises  to  pay,  taken  in  con- 
nection with  other  circumstances,  have  been  held  presump- 
tive evidence  that  due  demand  was  made  and  notice  given."'' 
Edwards  says  ^  of  such  a  promise  :  "  As  an  admission,  it  is 
evidence  for  the  jury  like  any  other  conversation  ;  if  the 
liability  of  the  drawer  or  indorser  be  conceded  by  him,  the 
concession  is  quite  as  good  evidence  of  demand  and  notice 
as  a  promise  to  pay ;  for,  as  we  have  said,  the  promise  to 
pay  is  deemed  an  admission  of  liability  —  an  admission 
that  the  bill  or  note  has  been  presented  in  time,  and  that 
due  notice  of  non-payment  has  been  given.     And  there  is 


'  Story  on  Bills,  §  321  ;  Grain  v.  Colwell,  8  Johns,  384 ;  Kennon  v.  McRea,  7 
Port.  (Ala.),  175  ;  Ross  v.  Hurd,  .71  N.  Y.,  14;  Tardy  v.  Boyd,  26  Grat.,  637, 
Christian,  J. :  "  If  the  conduct  or  acts  of  the  indorser  be  equivocal,  or  the  lan- 
guage used  be  of  a  qualified  or  uncertain  nature,  the  indorsee  will  not-  be  held 
responsible." 

"  Sice  V.  Cunningham,  i  Cow.,  397;  Agan  v.  McManus,  11  Johns,  180. 

'  Barkalow  v.  Johnr.on,  i  Harr.,  397  ;  but  see  Dixon  v.  Elliott,  5  Car.  &  P., 
437- 

*  Laporte  v,  Landry,  17  Mart.  (La.),  359. 
^  Newberry  v.  Trowbridge,  13  Mich.,  637. 

«  Tardy  v.  Boyd,  26  Grat.,  637.  ''  Dixon  v.  Elliott,  5  Car.  &  P.,  437- 

*  Edwards  on  Bills,  655. 


§   I  165.       WAIVER  BY  PART  PAYMENT  AFTER  MATURITY.  203 

no  reason  why  the  same  admission  may  not  be  made  by  a 
negotiation  for  time,  or  by  any  other  act  or  language  that 
acknowledges  the  obligation  to  pay  the  note  or  bill."  In 
Tennessee  it  is  held  that  if  the  indorser  knew  he  was  dis- 
charged by  want  of  notice,  cither  an  admission  of  liability 
or  promise  to  pay  would  bind  him.^ 


SECTION  V. 

WAIVER   BY   PART   PAYMENT  AFTER   MATURITY. 

§  1 165.  In  the  second  place,  the  part  payment  of  a 
bill  or  note  after  its  maturity,  by  the  drawer  or  indorser, 
is  an  acknowledgment  of  liability,  and  therefore  alone  and 
unexplained  is  presumptive  evidence  that  the  liability  was 
duly  fixed  according  to  la\v.^  And  if  it  be  shown  that 
such  part  payment  was  made  with  knowledge  of  laches  of 
the  holder  in  respect  to  demand,  protest,  or  notice,  it  is 
settled  that  it  constitutes  a  waiver  of  such  laches,  and  binds 
the  party  making  it  absolutely.^  And  it  is  held,  in  some 
cases,  that  a  part  payment  is  a  distinct  concession  of  liability, 
and  that  whenever  the  drawer  acknowledges  himself  to  be 
liable  to  payment,  the  necessity  of  proving  demand  and  no- 
tice is  dispensed  with,  because  such  acknowledgment  carries 
with  it  internal  evidence  that  the  drawer  knew  that  due 
diligence  had  been  used  by  the  holder,  or  even  if  it  had  not, 
that  still  the  drawer  confessed  that  he  was  under  an  obliga- 
tion to  pay.^     But  it  has  been  held  that  part  payment  will 

'  Bogart  V,  McClurg,  11  Heisk.,  614. 

*  Vaug-hn  v.  Fuller,  2  Stra.,  1246.  Lee,  C.  J.,  said  that  part  payment  by  the 
indorser  made  proof  of  demand  upon  the  maker  unnecessary.  Holford  v.  Wil- 
son, I  Taunt.,  12,  held  that  part  payment  warranted  the  jury  in  presuming  that 
due  notice  had  been  given  the  drawer.  Whitaker  v,  Morrison,  i  Fla.,  25,  held 
waiver  of  notice;  Chitty  on  Bills  [*5oo],  564,  565. 

^  Sherer  v.  Easton  Bank,  33  Penn.  St.,  134;  Williams  v.  Robinson,  13  La., 
419 ;  Harvey  v.  Troupe,  23  Miss.,  538, 

^  Levy  V.  Peters,  pSerg.  &  R.,  125,  Tilghman,  C.  J. ;  Curtiss  v.  Martin,  20  111., 
557  ;  Bank  U.  S.  v.  Lyman,  20  Vt.,  666  ;  Read  v.  Wilkinson,  2  Wash.  C.  C, 
514;  Bibb  v.  Peyton,  12  Sm.  &  M.,  575  ;  Lane  v.  Steward,  20  Me.,  98;  see 
Whitaker  v.  Morrison,  i  Fla.,  25  ;  i  Parsons  N.  &  B.,  608,  609 ;  see  Story  on 
Bills,  §  320. 


204  WAIVERS    BY    PROMISES    TO    PAY.  §   1X66. 

not  operate  as  a  waiver  unless  the  indorser  knew  of  the  in- 
sufficiency of  the  demand  or  notice.^ 

§  1166.  It  seems  to  us  that  part  payment  after  maturity 
stands  upon  precisely  the  same  footing  as  a  promise  to  pay. 
It  is  simply  the  executed  act,  while  the  promise  is  executory. 
Therefore  it  is /r2;;2«/«^z>  evidence  that  the  party  was  duly 
charged  by  demand  and  notice.  If  he  shows  that  he  was 
not  so  charged,  it  is  still  prima  facie  evidence  that  he  knew 
of  the  holder's  laches.  But  when  he  shows  in  rebuttal  that 
he  paid  the  part  supposing  there  was  no  laches,  and  that  in 
fact  there  was,  it  becomes  unavailing,  being  paid  under  a 
mistake  of  fact,  and  may  be  recovered  back,  negligence  not 
impairing  the  right  of  recovery.^ 

§  1 1 67.  An  offer  to  pay  a  part  of  the  bill  or  note,  without 
any  objection  made  as  to  demand  and  notice,  has  been  held 
sufficient  to  dispense  with  proof  of  demand  and  notice ;  ^ 
but  it  has  been  held  otherwise  where  the  drawer,  on  being 
arrested,  offered  as  a  compromise  to  give  his  bill  at  two 
months,*  and  where  the  plaintiff's  attorney  offered  to  pay  a 
part  cash  and  secure  the  residue  ;^  and  such  offers  when  re- 
fused seem  to  signify  nothing  but  tenders  of  compromise, 
and  not  to  be  alone  either  acknowledgments  of  due  demand 
and  notice,  or  waivers  of  laches. 

§  1 1 68.  Where  the  promise  is  only  as  to  part  of  the  sum, 
it  is  only  a  waiver  pro  tanto.  Thus  where  the  drawer  of  a 
bill  for  ^200,  who  had  not  received  notice,  said  :  "  I  do 

•  Newberry  v.  Trowbridge,  13  Mich.,  264. 

=>  See  as  to  negligence  not  affecting  the  right  to  recover  money  paid  under 
mistake,  National  Bank  of  Commerce  v.  National  M.  B.  Ass'n,  55  N.  Y.,  211 ; 
Lawrence  v.  American  Nat'l  Bank,  54  N.  Y.,  435  ;  post,  §  1220. 

'  Dixon  V.  Elliott,  5  Car.  &  P.,  437 ;  Margetson  v.  Aitken,  3  Car.  &  P.,  388  ; 
Harvey  v.  Troupe,  23  Miss.,  538  ;  Smith,  C.  J.,  said  :  "  A  promise  to  pay  gener- 
ally, or  a  promise  to  pay  a  part,  or  a  part  payment  made,  with  a  full  knowledge 
that  he  has  been  released  from  liability  on  the  bill  by  the  neglect  of  the  holder, 
will  operate  as  a  waiver,  and  bind  the  party  who  makes  it  for  the  payment  of 
the  whole  bill." 

*  Cuming  v.  French,  2  Camp.,  106. 

^  Standage  v.  Creighton,  5  Car.  &  P.,  406. 


§   1 1 68.       WAIVER  BY  PART  PAYMENT  AFTER  MATURITY.         20$ 

not  mean  to  insist  on  want  of  notice,  but  I  am  only  bound 
to  pay  you  £70,"  Abbott,  C.  J.,  said  :  "  The  defendant  does 
not  say  that  he  will  pay  the  bill,  but  that  he  is  only  bound 
to  pay  ■£70.     I  think  the   plaintiff  must  be  satisfied  with 

the:^7o."^ 

If  the  part  payment  were  made  by  the  indorser  as  agent 
of  the  maker,  or  were  otherwise  explained,  it  would  not 
operate  as  a  waiver.  ^  Story  considers  that  part  payment  is 
ordinarily  a  sufficient  excuse  for  the  omission  of  notice,  be- 
cause it  evinces  that  the  party  so  paying  could  not  have 
sued  on  the  note  on  payment  thereof,  and  is  in  fact  the  true 
party  for  whose  benefit  the  note  was  made.^ 

» Fletcher  v.  Froggatt,  2  Car.  &  P.,  569  (12  E.  C.  L.  R.) 

*  Whitaker  v.  Morrison,  i  Fla.,  25.  *  Story  on  Notes,  §  359. 


CHAPTER  XXXVI. 

CIRCUMSTANCES     WHICH     WILL      NOT      EXCUSE      FAILURE     TO 
MAKE    PRESENTMENT    OR    PROTEST,    OR    GIVE    NOTICE. 

§  1 1 69.  Circumstances  not  infrequently  arise  under  which 
the  making  presentment  of  the  bill  or  note,  or  giving  no- 
tice of  its  dishonor,  would  seem  to  be  a  useless  formality, 
or  a  peculiarly  onerous  task,  and  which  on  these  accounts 
have  been  often  urged  as  excuses  for  failure  to  make  such 
presentment,  or  give  such  notice  ;  but  they  are  of  a  charac- 
ter which  the  law  does  not  recognize  as  sufficient  to  exon- 
erate the  holder  from  taking  the  usual  steps  in  order  to 
charge  an  indorser.     They  may  be  classified  as  follows  : 

(ij  The  want  of  injury  to  the  party. 

(2)  The  bankruptcy  or  insolvency  of  the  acceptor  or 
maker. 

(3)  The  loss  or  mislaying  of  the  bill  or  note. 

(4)  The  appointment  of  drawer  or  indorser  as  executor 
or  administrator. 

(5)  The  transfer  of  the  bill  or  note  as  collateral  security. 

(6)  The  death  of  the  maker  or  acceptor. 

(7)  The  misdating  of  a  bill  or  note  by  a  foreign  resi- 
dent. 


SECTION  I. 

THE   WANT   OF  INJURY   TO   THE   PARTY. 

§  1 1 70.  In  \}i\Q  first  place,  the  want  of  prejudice  or  injury 
to  the  drawer  or  indorser  is  never  a  sufficient  excuse  for  de- 
fault in  making  presentment  or  protest,  or  giving  notice  of 
(206) 


§    I  170.  WANT    OF    INJURY    TO    THE    PARTY.  207 

dishonor.*  In  some  of  the  early  cases,  and  indeed  in  some 
modern  cases,  and  treatises  also,  the  holder  is  said  to  be  ex- 
cused for  his  failure  in  making  presentment  and  giving  no- 
tice, when  there  are  no  funds  in  the  drawee's  hands,  on  the 
ground  that  there  could  be  no  prejudice  or  injury  to  the 
drawer  or  indorser,^  and  at  one  time  the  question  of  injury 
seems  to  have  been  the  criterion  whether  or  not  present- 
ment or  notice  was  excused.^  The  reports  exhibit  frequent 
expressions  of  regret  that  the  strict  rule  requiring  present- 
ment and  notice  has  been  even  so  far  relaxed  as  to  admit 
the  exception  arising  from  the  want  of  funds  ;  ■*  and  it  is 
now  perfectly  well  settled  that  the  question  of  injury  does 
not  enter  at  all  into  the  consideration.  The  law  requires 
presentment  and  notice  as  conditions  precedent  to  the  fixed 
liability  of  the  drawer  and  indorser,  not  merely  as  an  in- 
demnity against  actual  injury,  but  as  security  against  a  pos- 
sible injury,  which  might  result  from  the  holder's  laches.""^ 
It  is  true,  that  when  the  drawer  has  no  funds  in  the 
drawee's  hands,  he  can,  as  a  general  rule,  suffer  no  injury 
from  want  of  presentment  or  notice  ;  but  drawing  in  such 
a  case  would  be  a  fraud,  and  it  is  for  that  reason,  rather 
than  the  absence  of  actual  injury,  that  presentment  and  no- 

'  Chitty  on  Bills  (13  Am.  ed.)  [*439,  436],  490;  i  Parsons  N.&  B.,  551,  630  ; 
Foster  v.  Parker,  Law  R„  2  C.  P.  Div.,  19  (1876),  Lindley,  J.:  "  He  (the  indorser) 
would  be  damnified  in  tlie  legal  sense  if  he  had  a  remedy  over  against  any  of 
them  (prior  parties),  and  was  not  bound,  as  between  himself  and  them,  to  meet 
the  bill." 

^  Cory  V.  Scott,  3  B.  &  Aid.,  519  ;  Mechanics'  Bank  v.  Griswold,  7  Wend.,  165  ; 
Commercial  Bank  v.  Hughes,  17  Wend.,  94;  Edwards  on  Bills,  446,  636;  Story 
on  Bills,  §  280. 

^  Meggadow  v.  Holt,  12  Mod.,  15  (1691) ;  Mogadara  v.  Holt,  i  Show.,  317; 
Chitty,  Jr.,  on  Bills,  57,  182. 

*  Ex  parte  Heath,  2  Ves.  &  B.,  240  ;  Clegg  v.  Cotton,  3  Bos.  &  P.,  239  ;  Carter 
V.  Flower,  16  M.  &  VV.,  743. 

^  Hill  V.  Martin,  12  Mart.  (La.),  177,  Porter,  J.,  said :  "  The  plaintiff  read  from 
Chitty,  p.  151,  to  show  that  when  the  indorser  was  not  injured  by  want  of  notice 
the  laches  to  give  it  was  cured.  The  rule  is  stated  in  a  note  to  the  edition  of 
1809,  but  it  is  not  law."  Foster  v.  Parker,  2  C.  P.  Div.,  18  ;  19  Moak's  E.  R., 
293,  Denman,  J.  ;  French  v.  Bank  of  Columbia,  4  Cranch,  141,  Marshall,  C.  J. ; 
May  V.  Cotiin,  4  Mass.,  341  ;  Nash  v.  Harrington,  2  Aitkens,  9 ;  Hill  v.  Heap, 
Dow.  &  R.,  15;  Bickerdike  v.  BoUman,  i  T.  R.,  405  ;  Edwards  on  Bills,  636; 
Story  on  Bills,  §  306. 


208      WHAT  WILL  NOT  EXCUSE  FAILURE  TO  PRESENT.     §   II 7 1. 

tice  are  excused.*  Where  it  was  endeavored  to  show  ex- 
cuse for  want  of  notice  by  showing  want  of  injury,  Lord 
Kenyon  said  :  "  I  can  not  hold  the  law  to  be  so.  The  only 
case  in  which  notice  is  dispensed  with,  is  where  there  are 
effects  of  the  drawer  in  the  drawee's  hands.  This  would 
be  extending  the  rule  still  further  than  ever  has  been  done, 
and  opening  new  sources  of  litigation,  in  investigating 
whether  in  fact  the  drawer  did  receive  a  prejudice  from  the 
want  of  notice  or  not.^ 


SECTION    II. 

THE     BANKRUPTCY     OR     INSOLVENCY     OF     THE     ACCEPTOR     OR 

MAKER. 

§  1 171.  In  the  second  place,  the  bankruptcy  and  insolv- 
ency of  the  drawee  of  a  bill,  however  well  known,  consti- 
tute no  excuse  for  neglect  to  make  due  presentment  there- 
of for  acceptance,^  or  to  give  due  notice  of  its  dishonor  *  to 
the  drawer  and  indorsers  if  it  is  not  accepted.  And  the  same 
rule  applies  as  to  the  necessity  of  presentment  for  payment 
to  the  acceptor  of  a  bill  or  maker  of  anote,^  and  as  to  notice 
of  its  dishonor  by  non-payment.®  This  doctrine  rests  upon 
the  twofold  ground  that  it  is  a  part  of  the  contract  of 
drawer  and  indorser  that  the  bill  or  note  should  be  pre- 
sented for  acceptance  or  payment,  as  the  case  may  be,  and 
due  notice  given  if  it  be  dishonored ;  and  further,  that  it 
can  not  be  definitely  settled  without  a  presentment  that  the 
instrument  will  be  dishonored,  as  through  friends  or  re- 
sources unknown  to  others,  the  principal  party  may  derive 
the  means  for  payment. 

*  An/e,  chapter  xxxi,  sec.  i.  *  Dennis  v.  Morris,  3  Esp.,  158. 
'Chitty  on  Bills  (13  Am.  ed.)  [*33o],  369. 

*  Chitty  (13  Am.  ed.)  [*33o],  369. 

"Chitty  [*354].  396;    Story  on  Notes,  §  286;  Story  on  Bills,  §§  318,  326,  346 
I  Parsons  N.  &;  B.,  446. 

^  Story  on  Notes,  §  367  ;  i  Parsons  N.  &  B.,  528. 


§1172.  BANKRUPTCY  OF  ACCEPTOR  OR  MAKER.  2O9 

§  1 1 72.  The  English  and  American  cases  are  now  uni- 
form on  this  subject/  and  it  was  long  ago  said  :  "  It  sounds 
harsh  that  a  known  bankruptcy  should  not  be  equivalent  to 
a  demand  or  notice,  but  the  rule  is  too  strong  to  be  dis- 
pensed with,"  ^  though  at  one  time  a  different  view  ob- 
tained.^ 

The  same  rule  applies  where  the  insolvency  arises  be- 
tween drawing  or  indorsing  and  maturity  ;■*  and  where  the 
insolvency  is  known  to  the  party  at  the  very  time  when  he 
signs  his  name,^  expectation  or  knowledge  of  the  drawer  or 


'  Nicholson  v.  Gouthit,  2  H.  Bl.,  609;  Bowes  v.  Howe,  5  Taunt.,  30  ;  Warring- 
ton V.  Furbor,  8  East.,  242  ;  Esdaile  v.  Sowerby,  1 1  East.,  1 14 ;  Thackeray  v. 
Blackett,  3  Camp.,  164;  Smith  v.  Becket,  13  East.,  187  ;  Cory  v.  Scott,  3  B.  & 
Aid.,  619;  Leach  v,  Hewitt,  4  Taunt.,  731  ;  Free  v.  Hawkins,  8  Taunt.,  92; 
Russell  V.  Langstaffe,  Doug,  496;  Armstrong  v.  Thurston,  11  Md.,  14S  ;  May 
V.  Coffin,  4  Mass.,  341  ;  Clair  v.  Barr,  2  Marsh,  255  ;  Benedict  v.  Caffee,  5  Duer, 
226  ;  Watkins  v.  Crouch,  5  Leigh,  522  ;  Hunt  v.  Wadleigh,  26  Me.,  271  ;  Barton 
V.  Baker,  i  S.  &  R.,  334  ;  Hightower  v.  Ivy,  2  Port.  (Ala.),  308  ;  Denny  v.  Palmer. 
5  Ired.,  610  ;  Nash  v.  Harrington,  2  Aik.,  9.  The  maker  was  insolvent  and  in 
prison.  See  Chitty  on  Bills  [*438]  ;  Bank  of  Seaford  v.  Connowav,  4  Houston, 
206.    But  cofttra.  Bogy  v.  Keil,  i  Mo.,  743;  Strothart  v.  Parker,  i  Overton.  260. 

^Nicholson  v.  Gouthit,  2  H.  BL,  609  ;  Chitty  [*449]. 

'  De  Berdt  v.  Atkinson,  2  H.  Bl.,  336.  In  Jackson  v.  Richards,  2  Caines,  343, 
Kent  C.  J.,  said  :  "  Within  two  years  subsequent  to  the  decision  (in  De  Berdt 
V.  Atkinson)  the  same  court  decided  directly  the  contrary  in  the  case  of  Nichol- 
son V.  Gouthit.  I  think  the  reasoning  in  the  last  decision  the  best,  and  ought  to 
be  followed." 

^Crossen  v.  Hutchinson,  9  Mass.,  205. 

'  In  Brown  v.  Ferguson,  4  Leigh,  53,  it  was  said  by  Tucker,  P.  :  "  It  has  been 
long  since  settled  that  notice,  or  rather  knowledge,  by  anticipation  will  not  dis- 
pense with  the  necessity  of  notice  of  non-payment.  Even  the  known  insolvency 
of  the  drawee  will  not  have  that  effect ;  for  as  many  means  of  securing  payment 
may  exist  through  the  assistance  of  friends,  or  otherwise,  it  is  reasonable  that 
the  drawer  or  indorsers  shall  have  notice  that  the  holder  designs  to  look  to  them, 
in  order  that  they  may  have  the  opportunity  of  availmg  themselves  of  such 
means.  Knowledge  of  the  fact  of  insolvency,  or  that  a  bill  will  be  dishonored,  is 
one  thing,  and  notice  of  protest  for  non-payment  is  another.  For,  until  the 
drawer  or  indorser  receives  such  notice,  he  has  no  reason  to  conclude  that  resort 
will  be  had  to  him.  He  is  lulled  into  security,  instead  of  being  awakened  to  the 
necessity  of  providing  for  his  own  indemnity."  In  the  same  case  (4  Leigh,  49), 
Carr,  J.,  said  :  "  Upon  the  reason  and  justice  of  the  case,  I  at  first  felt  doubts 
whether  the  drawer  was  entitled  to  strict  commercial  notice.  There  is  no  doubt 
that  he  was  authorized  to  draw  the  bill,  for  the  jury  find  that  the  drawees  owed 
him  the  sum  for  which  it  was  drawn.  This,  under  the  general  rule,  would  en- 
tiUe  the  drawer  to  notice.  But  it  is  also  found  that,  before  the  bill  was  presented 
for  acceptance,  the  drawees  having  been  advised  of  it,  wrote  a  letter  to  the 
drawer  on  the  subject,  in  answer  to  which  letter  he  (the  drawer)  writes :  '  I  am 
sorry  you  will  be  unable  to  retire  the  draft.  When  the  draft  is  nearly  due,  you 
can  draw  on  me  at  sixty  days,  to  enable  you  to  take  it  up.'  It  is  found  also  that 
when  the  time  for  paying  the  bill  drew  near,  the  drawees  did  draw  on  Ferguson 

Vol.  II.— 14 


2IO      WHAT  WILL  NOT  EXCUSE  FAILURE  TO  PRESENT.    §   I  173. 

indorser  that  the  bill  or  note  will  not  be  paid  are  not  ex- 
cuses, for  knowledge  is  not  notice.^ 

The  bankruptcy  and  insolvency  of  the  drawer  or  indorser 
is  no  excuse  for  want  of  notice  to  him  ;  it  should  be  given 
to  his  assignee.^ 


SECTION   III. 

THE   LOSS   OR    MISLAYING   OF  THE   BILL   OR   NOTE. 

§  1 1 73.  In  the  third  place. — The  loss  or  mislaying  or 
destruction  of  a  bill  or  note  payable  on  a  day  certain,  so 
that,  at  its  maturity,  the  holder  is  not  able  to  deliver  it  up 
to  the  acceptor  or  maker,  upon  its  being  paid,  is,  as  a  gen- 
eral rule,  no  excuse  for  want  of  a  demand  of  payment  of  ac- 
ceptor or  maker,  or  of  due  notice  to  drawer  or  indorser.^ 
Due  demand  should  be  made,  accompanied  by  a  tender  of 

(the  drawer)  for  the  purpose  of  meeting  it ;  that  this  bill  was  sold  on  condition 
that  Ferguson  should  accept  it,  and  was  sent  on  and  presented  to  him  and  dis- 
honored by  him.  These  facts  seemed  to  me  to  show  clearly  that  Ferguson  (the 
drawer)  had,  if  not  a  perfect  knowledge,  the  strongest  grounds  to  conclude  that 
Foster  and  Moore  (the  drawees)  would  not  pay  the  bill  he  had  drawn  on  them, 
and  therefore  was  not  entitled  to  strict  notice.  An  examination  of  the  subject, 
however,  has  satisfied  me  that  my  first  impressions  are  in  opposition  to  the  fixed 
and  settled  law  of  the  subject.  Nicholson  v.  Gouthit,  2  H.  Bl.,  609,  is  the  lead- 
ing case  on  the  point,  which  has  been  since  uniformly  followed.  In  Esdaile  v. 
Sowerby,  11  East.,  117,  the  indorser  of  a  bill  had  full  knowledge  of  the  bank- 
ruptcy of  the  drawer,  and  the  insolvency  of  the  acceptor,  before  and  at  the  time 
when  the  bill  became  due  ;  yet  the  court  held  that  this  did  not  dispense  with  the 
necessity  of  giving  such  indorser  regular  notice  of  the  dishonor  of  the  bill.  The 
case  of  Staples  v.  O'Kines,  i  Esp.  R.,  332,  seems  directly  in  point  to  the  present 
case.  In  an  action  against  the  drawer  of  a  bill,  the  defence  was  want  of  notice  ; 
the  plaintiff  called  the  acceptor,  who  proved  that,  when  the  bill  was  drawn,  he 
was  indebted  to  the  defendant  in  more  than  the  amount,  but  that  he  then  repre- 
sented to  the  defendant  that  it  would  not  be  in  his  power  to  provide  for  the  bill 
when  it  should  become  due,  and  that  it  was,  therefore,  then  understood  between 
them  that  the  drawer  should  provide  for  it ;  and  it  was  contended  that  this 
superseded  the  necessity  of  giving  the  drawer  notice,  but  Lord  Kenyon  held 
that  it  did  not,  and  nonsuited  the  plaintiff.  There  are  many  more  cases  to  the 
same  point.  The  authority  of  these  adjudications,  and  the  reason  on  which 
they  are  founded,  satisfy  me  that  the  drawer,  in  the  case  before  us,  was  entitled 
to  regular  notice  of  the  non-payment  of  the  bill."  Farnum  v,  Fowle,  12  Mass., 
89;  Sandford  v,  Dillaway,  10  Mass.,  52  ;  AUwood  v.  Hasledon,  2  Bail.,  457. 

'  Cases  ante,  p  202,  note  5.  ^  Ex  parte  Johnson,  i  Mont.  &  A.,  622, 

'  Story  on  Notes,  290  ;  Story  on  Bills,  §  348. 


§    1 1  74-  LOSS  OR  MISLAYING  OF  BILL  OR  NOTE.  211 

indemnity  to  maker  or  acceptor,  and  then  should  he  refuse, 
due  protest  should  be  made  (where  requisite)  and  due 
notice  given.  But  the  acceptor  or  maker  is  not  bound 
under  such  circumstances  to  pay  the  amount  due  by  the 
bill  or  note,  if  lost  or  mislaid,  although  he  may  at  his  elec- 
tion do  so  ;  for  he  is  entitled  in  all  cases  to  have  the  bill  or 
note  delivered  up  to  him  as  a  voucher  upon  payment 
thereof.^  The  proper  remedy  for  the  holder  in  case  of  a 
refusal  to  pay  is  in  equity.^  If  the  instrument  be  destroyed, 
however,  he  may  recover  at  law,  and  there  are  some  other 
exceptional  circumstances  under  which  he  may  do  so,  else- 
where considered.^ 

In  respect  to  a  bill  drawn  at  sight,  and  which  must  be 
presented  within  a  reasonable  time,  the  loss  thereof  will 
excuse  a  reasonable  delay ;  *  and  if,  upon  its  loss,  a  second 
one  be  given  by  the  drawer,  necessary  delay  in  presenting 
that  will  be  excused.^  But  where  the  word  "  duplicate  " 
was  written  on  the  second  draft,  it  was  deemed,  in  view  of 
extrinsic  facts,  to  import  that  it  was  made  as  a  substitute 
for,  and  to  take  the  place  of,  the  original ;  and  the  defend- 
ant having  been  discharged  from  liability  upon  the  original, 
by  laches  as  to  presentment,  the  plaintiff  could  not  recover 
on  the  duplicate.^ 

§  1 1 74.  St©ry,  upon  the  authority  of  Pothier,  lays  down 
the  doctrine,  that  if  the  holder  has  lost  or  misplaced  the 
bill  before  acceptance,  he  should  still  apply  for  acceptance 
thereof,  and  upon  refusal  protest  the  bill.'''  We  know  of  no 
other  authority  for  this  doctrine. 

'  See  chapter  XLVI,  on  Lost  Bills  and  Notes,  and  chapter  xxxvill,  on  Pay- 
ment ;  Thomson  on  Bills,  204 ;  Story  on  Bills,  §  348  ;  Edwards,  508  ;  Lane  v. 
Bank  of  West  Tenn.,  435. 

'  See  chapter  XLVi,  on  Lost  Bills  and  Notes. 

'See  chapter  XLVI,  on  Lost  Bills  and  Notes. 

*  Abom  V.  Bosworth,  I  R.  L,  403. 

'Benton  v.  Martin,  31  N.  Y.  (4  Tiff.).  3S2  (1865). 

"Benton  v.  Martin,  i  Hand  (N.  Y.),  346  (1869)  ;  51  N.  Y.  (7  Sickles),  572 
0873)- 

'  Story  on  Bills,  §  279  ;  Pothier  de  Change,  n.  145. 


212       WHAT  WILL  NOT  EXCUSE  FAILURE  TO  PRESENT.    <^   1 175- 


SECTION   IV. 

THE  APPOINTMENT  OF  DRAWER  OR  INDORSER  AS  EXECUTOR  OR 

ADMINISTRATOR   OF   MAKER  OR  ACCEPTOR. 

§  II 75.  In  the  fourth  place,  it  is  well  settled  that  the 
appointment  of  the  drawer  or  indorser  as  executor  or  ad- 
ministrator of  the  maker  or  acceptor  does  not  excuse  the 
holder  from  making  a  demand  upon  him  as  personal  repre- 
sentative/ or  from  giving  him  notice  that  he  is  looked  to 
personally  for  payment*  Demand  is  indispensable  in  order 
to  fix  the  liability  of  drawer  or  indorser  ;  and  then,  it  is 
said,  notice  to  the  indorser  is  necessary  in  order  that  he 
may  be  informed  that  the  holder  does  not  mean  to  resort 
solely  to  the  estate  of  which  he  is  personal  representative, 
but  to  him  also  in  his  individual  character  as  indorser ;  and 
that,  if  he  received  no  notice,  he  would  have  a  right  to 
conclude  that  the  holder  intended  to  look  to  the  estate 
only.^  But  when  demand  for  payment  is  made  to  the  rep- 
resentative of  the  maker  or  acceptor,  who  is  also  his  in- 
dorser, such  person  would  be  bound  to  make  the  payment 
primarily  for  his  principal ;  and  it  might  be  reasonably  in- 
ferred that  in  the  event  of  his  refusal  to  do  so  in  that  char- 
acter, the  Hke  demand  applied  to  him  in  his  individual 
character.  And  it  would  seem  to  be  superfluous  to  add  to 
it  a  new  and  formal  notification  that  he  is  looked  to  as  in- 
dorser for  payment."*  Indeed,  knowledge  of  dishonor  ob- 
tained by  communication  from  the  holder  amounts  to 
notice,  though  knowledge  derived  from  a  stranger  does 
not ;  ^  and  it  has  been  held  in  England,  that  where  a  de- 
mand was  made  at  the  house  of  the  acceptor,  and  it  was 

'  Magruder  v.  Union  Bank,  3  Pet.,  87  ;  7  Pet.,  287  ;  Juniata  Bank  v.  Hale,  16 
S.  &  R.,  157  ;  Carolina  N.  B.  v.  Wallace,  13  S.  C,  347  ;  Story  on  Bills,  §  376. 
"  Ibid.  '  Juniata  Bank  v.  Hale,  16  S.  &  R.,  157. 

*  I  Parsons  N.  &  B.,  526. 

*  Miers  v.  Brown,  11  Mees.  &  W.,  372;  Tindal  v.  Brown,  i  T.  R.,  167. 


§1176.  APPOINTMENT  OF  DRAWER  AS  EXECUTOR.  213 

answered  by  the  drawer  that  the  acceptor  was  dead,  and 
that  he  was  his  executor,  and  requesting  that  the  bill  might 
be  allowed  to  stand  over  for  a  few  days,  and  he  would  see 
it  paid — that  this  was  sufficient  notice  of  dishonor.^  It  has 
been  observed  that  the  case  cited  "  does  not  decide  that 
where  the  party  sought  to  be  charged  has  become  executor 
of  the  payor,  notice  is  dispensed  with,  but  that  the  circum- 
stance in  that  particular  case  constituted  notice."^  But  it 
seems  to  have  been  considered  by  the  court  that  informa- 
tion of  dishonor  derived  in  such  a  manner  from  the  holder 
necessarily  constituted  notice. 

If  the  maker  die,  leaving  his  estate  insolvent,  neither 
demand  ^  nor  notice  *  will  be  excused. 


SECTION   V. 

THE  TRANSFER  OF  THE  BILL  OR  NOTE  AS  COLLATERAL  SECURITY. 

§  1 176.  In  \hQ  fifth  place,  if  the  bill  or  note  has  been 
transferred  to  the  holder  by  mere  delivery  without  indorse- 
ment, as  collateral  security,  the  transferrer  is  not  entitled  to 
insist  on  a  strict  presentment  at  maturity  to  the  maker  or 
acceptor ;  nor  will  he  be  released  from  the  debt  for  which 
the  bill  or  note  is  delivered  as  collateral  security,  unless  he 
can  show  that  he  has  actually  sustained  damage  or  preju- 
dice by  such  non-presentment.°     And  to  the  same  extent 


'  Caunt  V.  Thompson,  7  Com.  B.,  400.  Creswell,  J.,  after  quoting  cases  cited 
in  preceding  note,  says  :  "  In  substance,  these  cases  seem  to  establish,  that  in 
order  to  hold  a  prior  holder  responsible,  he  must  derive  from  some  person  enti- 
tled to  call  for  payment  information  that  the  bill  has  been  dishonored,  and  that 
the  party  is  in  condition  to  sue  him  ;  from  which  he  may  infer  that  he  will  be 
held  responsible." 

"  Redfield  &  Bigelow's  Leading  Cases,  428. 

'  Gower  v.  Moore,  25  Me.,  16  ;  Johnson  v.  Haith,  I  Bailey,  482. 

*  Lawrence  v.  Langley,  14  N.  H.,  70, 

'  Van  Wart  v.  Woolley,  3  B.  &  Cres.,  439 ;  Swinyard  v.  Bowes,  5  M  &  S.,  62 ; 
Story  on  Notes,  §  284 ;  Story  on  Bills,  §  372. 


214      WHAT  WILL  NOT  EXCUSE  FAILURE  TO  PRESENT.    ^   1177- 

only  can  he  claim  exoneration  by  failure  to  give  him  due 
notice.^ 

This  circumstance  of  transfer  without  indorsement  as  col- 
lateral security  is  generally  enumerated  amongst  the  cases 
in  which  presentment  and  notice  are  dispensed  with  or  ex- 
cused ;  but  really  it  is  simply  a  case  in  which  the  transferrer 
does  not  come  at  all  within  the  rule  entitling  him  to  notice.^ 
It  is  true  that  Mr.  Chitty  has  several  times  in  his  treatise 
declared  that  a  transferrer  by  delivery  of  a  note  or  bill 
payable  to  bearer,  is  ordinarily  entitled  to  regular  notice  as 
a  party  to  the  bill  ;^  but  this  is  incorrect.  Declining  to  in- 
dorse, he  declines  to  become  a  party  to  the  bill,  and  the 
only  liability  which  he  incurs  is  for  the  consideration  given, 
which,  if  the  instrument  be  forged  or  illegal  (and  in  Eng- 
land if  it  be  worthless  by  reason  of  insolvency  of  the  parties), 
may  be  r«ceived  back.''  He  is  in  no  sense  a  party,  and  not 
entitled  to  strict  demand  and  notice.^ 


SECTION  VI. 

THE   DEATH   OF  THE   MAKER   OR  ACCEPTOR. 

§  II 7  7.  In  the  sixth  place. — The  death  of  the  maker  of 
a  note,  or  acceptor  of  a  bill,  is  no  excuse  for  want  of  pre- 
sentment for  payment.  In  such  a  case,  the  holder  should 
make  presentment  to  executor  or  administrator  of  the  de- 
ceased, if  one  has  been  appointed,  and  his  whereabouts  can 
be  ascertained  ;  ^  or  if  there  be  no  personal  representative, 

'  Ibid.        '  Story  on  Bills,  §  372.      »  Chitty  on  Bills  (13  Am.  ed.)  [*443.  479]- 

*  See  atite,  §§  732  et  seq.,  vol.  i. 

'  I  Parsons  N.  &  B.,  503  ;  Story  on  Bills,  §  372. 

«  Story  on  Notes,  §  241  :  Chitty  on  Bills  [*356],  399;  Story  on  Bills,  §  318  ; 
White  V.  Stoddard,  11  Gray,  528;  Landry  v.  Stansbury,  10  La.,  484;  Frayzer  v. 
Dameron,  6  Mo.  Ap.,  153  ;  see  chapter  XX,  on  Presentment  for  Payment,  §  591, 
vol.  I,  and  chapter  xvil,  on  Presentment  for  Acceptance,  §  458,  vol.  I. 


§1178.  DEATH  OF  THE  MAKER  OR  ACCEPTOR.  215 

the  presentment  should  be  made  at  the  house  of  the  de- 
ceased/ unless,  indeed,  the  instrument  be  payable  at  a  par- 
ticular place,  in  which  case  presentment  there  is  always 
sufficient.*  Nor  is  this  circumstance  an  excuse  for  want  of 
notice  to  drawer  and  indorser.^  It  may  be  all  the  more 
needful,  and  should  be  immediately  given.  It  has  been 
held,  however,  that  the  indorser  who  knew  of  the  maker's 
death  when  he  indorsed  is  not  entitled  to  notice  ;  *  but  this 
distinction  rests  on  no  sound  principle. 

In  like  manner,  the  death  of  the  drawer  or  indorser  is 
no  excuse  for  want  of  notice,  which  should  be  given  to  his 
personal  representative.^ 

§  1 1 78.  Effect  of  drawees  death  before  presentme7it  for 
acceptance. — When  the  drawee  dies  before  the  bill  is  pre- 
sented for  acceptance,  it  is  generally  stated  that  it  will  not 
operate  as  an  excuse  for  non-presentment  for  acceptance.' 
But  this  may  be  doubted.  The  acceptance  of  the  personal 
representative,  to  whom  it  is  said  the  bill  should  be  pre- 
sented for  acceptance,  would  not  be  according  to  the  tenor 
of  the  bill,  whether  he  bound  himself  personally,  or  bound 
himself  to  pay  out  of  the  decedent's  assets ;  and  as  the 
holder  would  not  be  bound  (as  we  think)  to  take  such  an 
acceptance,  there  is  no  reason  why  he  should  be  required  to 
present  the  bill  for  such  acceptance.'''  There  is  an  obvious 
difference  between  this,  and  the  presentment  to  the  per- 
sonal representative  for  payment.  He  may  have  assets, 
and  be  ready  to  pay,  and  it  is  due  to  drawer  and  indorsers 
to  afford  him  the  opportunity.^ 

'  Juniata  Bank  v.  Hale,  16  Serg.  &  R.,  157  ;  Magruder  v.  Bank  of  Georgetown, 
3  Pet.,  87  ;  Story  on  Notes,  §  241  ;  Chitty  [*356],  398  ;  Story  on  Bills,  §  346. 

'  Chitty  P356-7],  399  ;  Story  on  Notes,  §  253. 

'  I  Parsons  N.  &  B.,  525  ;  Edwards,  454,  See  ante,  %  1000  et  seq. ;  2  Ames 
B.  &  N.,  510  ;  Lane  v.  Bank,  9  Heisk.,  219. 

*  Davis  V.  Francisco,  1 1  Mo.,  572  ;  Edwards  on  Bills,  489. 

'  See  chapter  xxix,  on  Notice,  sec.  iv  ;  Oriental  Bank  v.  Blake,  22  Pick., 
206. 

'  Stor}'  on  Bills,  §  230. 

^  See  chapter  xvil,  on  Presentment  for  Acceptance,  §  458,  vol.  I.  See  also 
Smith  V.  Bank,  L.  R.,  4  P.  C,  194 ;  2  Ames  B.  &  N.,  510. 

*  Edwards  on  Bills,  454. 


2  1 6       WHAT  WILL  NOT  EXCUSE  FAILURE  TO  PRESENT.     §   II 79- 

§  1 1 79-  But  even  as  to  presentment  for  payment,  the 
death  of  the  maker  or  acceptor  has  been  held  to  operate  as 
an  excuse. 

Thus  where  an  executor  or  administrator  is  allowed  by 
law  a  certain  time  within  which  to  settle  up  the  estate,  and 
is  not  liable  before  its  expiration,  he  will  seldom  hazard  the 
payment  of  a  debt  before  he  has  ascertained  the  condition 
of  the  estate,  or  pay  the  debt  before  he  is  obliged  to  do  so ; 
and  a  demand  upon  him  would  doubtless  be  met  with  a 
refusal.  "  And  therefore"  (as  said  by  Parker,  C.  J.)  "  such 
a  demand  would  be  merely  a  troublesome  formality,  without 
any  use  ;  and  notice  to  the  indorser  that,  the  promisor  being 
dead,  he  will  be  looked  to  for  payment,  will  in  every  respect 
be  as  advantageous  to  him  as  a  previous  demand  upon  the 
promisor."^  In  England  a  different  policy  and  a  different 
rule  exist.^  The  fact  that  the  indorser  is  the  personal  rep- 
resentative of  the  maker  will  not  excuse  non-presentment 
to  him.^ 


SECTION  VII. 

THE   MISDATING  OF  A   BILL   OR  NOTE   BY  A  FOREIGN   RESIDENT. 

§  ii8o.  In  the  seventh  place. — When  a  foreign  resident 
dates  a  bill  or  note  in  another  State,  where  he  executes  and 
delivers  it,  and  if  he  knew  of  such  foreigner's  residence  at 
the  time  he  received  the  note,  or  learned  it  within  such 
period  as  afforded  him  time  to  present  it,  it  would  be  his 
duty  to  do   so.*     Whether,  indeed,   the  holder  would  be 


'Hale  V.  Burr,  12  Mass.,  86 ;  see  also  Landry  v.  Stansbury,  10  La.,  485  ;  Ori- 
ental Bank  v.  Blake,  22  Pick.,  206. 

^  Hale  V.  Burr,  supra. 

"Magruder  v.  Union  Bank,  3  Pet.,  87  ;  7  Id.,  287.     See  ante,  §  1175. 

*  Taylor  v.  Snyder,  3  Den.,  145  ;  Burrows  v.  Hannegan,  i  McLean,  309  ;  Bank 
of  Orleans  v.  Whittemore,  12  Gray,  473,  the  court  saying  :  "  Where  the  maker 
of  a  note,  when  it  is  made  and  indorsed,  has  a  known  residence  out  of  the  State, 
which  residence  remains  unchanged  at  the  maturity  of  the  note,  demand  must 
be  made  on  him,  or  due  diligence  used  for  that  purpose,  and  notice  of  non-pay- 
ment given  to  the  indorser  before  the  indorser  can  be  charged.     So  it  was 


§   Il8o.  THE  MISDATING  OF  A  BILL  OR  NOTE.  217 

excused,  even  if  misled  by  the  date,  is  questionable.  Cer- 
tainly the  burden  would  be  upon  him  to  show  that  he  was 
misled.  In  all  cases  the  holder  must  exercise  due  diligence, 
and  the  only  question  is,  what  does  due  diligence  require  ? 
The  holder  may,  as  it  seems,  presume  the  party  making  the 
note  to  reside  where  he  has  dated  it,  and  may  proceed  ac- 
cordingly to  inquire  for  him  at  that  place,  and  prepare  to 
make  presentment  there  at  maturity.  If,  then,  he  learns 
for  the  first  time  that  he  resides  elsewhere,  his  failure  to 
present  to  him  would  be  excused.  Such,  at  least,  seems  to 
us  the  correct  doctrine.^  But  if  note  be  dated  at  one  place, 
and  there  be  a  memorandum  of  the  maker's  address  under 
his  name,  or  elsewhere  upon  the  paper,  due  diligence  would 
require  inquiry  at  the  place  designated.^  There  are  author- 
ities which  maintain  the  view  that  if  the  maker  of  a  note 
resides  and  has  his  domicile  in  one  State,  and  actually  dates 
and  makes  and  delivers  a  promissory  note  in  another  State, 
it  will  be  sufficient  for  the  holder  to  demand  payment 
thereof  at  the  place  where  it  is  dated,  if  the  maker  can  not 
personally,  upon  reasonable  inquiries,  be  found  within  the 
State,  and  has  no  known  place  of  business  there.^ 

decided  by  the  Court  of  Appeals  in  New  York,  in  Taylor  v.  Snyder,  before  re- 
ferred to,  and  in  Spies  v.  Gilmore,  i  Comst.,  321.  In  this  last  case,  Bronson,  J., 
said :  '  The  only  excuse  which  has  been  offered  for  not  making  demand  is,  that 
it  would  have  been  inconvenient  to  go  or  send  to  Matamoras  for  the  purpose. 
It  is  often  inconvenient  to  present  tlie  note  for  payment  when  the  maker  and 
holder  both  reside  in  the  same  State ;  and  yet,  when  the  maker  has  a  known 
place  of  residence,  and  there  has  been  no  'change  of  circumstances  after  the 
giving  of  the  note,  mere  trouble  or  inconvenience  to  the  holder  has  never  been 
held  a  good  excuse  for  omitting  demand.  And  this  is  so,  however  wide  asunder 
the  maker  and  holder  may  live.  If  the  plaintiff  wished  to  avoid  the  inconveni- 
ence of  sending  to  Matamoras,  he  should  have  made  the  note  payable  in  New 
York,  or  got  an  indorsement  with  a  waiver  of  demand.  He  has  no  right  to 
change  the  contract  which  the  indorser  made,  for  the  purpose  of  promoting  his 
own  convenience.'  "     i  Parsons  N.  &  B.,  459,  note  c. 

»  Smith  V.  Philbrick,  10  Gray,  252  ;  Meyer  v.  Hibscher,  47  N.  Y.,  270;  Stayler 
V.Williams,  24  Md.,  199;  Apperson  v.  Bynum,  5  Cold.,  348;  Moodie  v.  Morrall, 
3  Const.,  367.  See  especially  chapter  XX,  on  Presentment  for  Payment,  §§  ^•j'- 
et  seq.,  vol.  i,  and  chapter  xxix,  on  Notice  of  Dishonor,  sec.  vi,  vol.  2. 

'  Nicholson  v.  Barnes,  Nebraska,  S.  C.  9  N,  W.  Reporter,  652. 

'Story  on  Notes,  1236  ,  Hepburn  v.  Toledano,  10  Mart.  (La.),  643. 


BOOK   V. 

ACTION    ON     NEGOTIABLE     INSTRUMENTS  ;     AND 
DEFENCES,   DISCHARGES,   AND   DAMAGES. 


CHAPTER  XXXVII. 

ACTION    OR    SUIT    UPON    BILLS    AND    NOTES. 


SECTION   I. 

GENERAL  PRINCIPLES   AS  TO   WHO   MAY   SUE. 

§  1181.  It  is  not  within  the  province  of  this  volume  to 
treat  otherwise  than  incidentally  of  those  questions  which 
concern  negotiable  instruments  in  a  collateral  way,  rather 
than  being  immediately  associated  with  their  negotiable 
qualities.  Therefore  this  chapter  will  not  enter  into  any 
minute  discussion  of  the  intricacies  of  pleading  and  practice 
involved  in  the  prosecution  of  a  suit  upon  a  bill  or  note, 
but  confine  itself  to  a  statement  of  the  leading  general 
principles  of  the  most  important  character. 

§  1181^.  Holder  with  legal  title  may  sue. — Any  holder 
of  a  bill  or  note  who  can  trace  a  clear  legal  title  to  it,  is  en- 
titled to  sue  upon  it  in  his  own  name,  whether  he  possesses 
the  beneficial  interest  in  its  contents  or  not.*  If  the  note 
be  payable  to  A.  or  B.,  it  may  be  sued  upon  by  them 
jointly  or  by  either  one  of  them.^  If  there  be  a  special  in- 
dorsement, or  assignment  to  a  particular  person,  he  is  the 
proper  person  to  sue  ;  and  if  he  is  in  possession  he  may  sue 

*  Caldwell  v.  Lawrence,  84  111.,  161,  §  1 191. 
'  Westgate  v.  Healy,  4  R.  I.,  524. 

(2l8) 


§   I  I  82.        GENERAL  PRINCIPLES  AS  TO  WHO  MAY  SUE.  2I9 

although  his  name  be  indorsed  on  the  paper  after  the  special 
indorsement  or  assignment.  For  in  such  case  his  indorse- 
ment will  be  presumed  to  be  a  mere  memorandum,  or  evi- 
dence that  he  had  negotiated  the  paper  and  then  taken  it 
up.^ 

Agents,^  receivers,  assignees,*  trustees,^  or  personal  repre- 
sentatives^ may  sue  on  a  note  or  bill  payable  to  bearer,  or 
indorsed  in  blank.  And  the  donee  causa  mortis  of  a  note 
payable  to  the  donor's  order  may  use  the  name  of  his  per- 
sonal representative,  even  against  his  protest.*  But  a  mere 
depositary  of  such  a  note  can  not  maintain  suit.'''  If  the 
paper  be  indorsed  specially  to  a  particular  person,  none  but 
such  person  or  his  representative  can  sue.^  A  party  for 
accommodation  who  pays  the  bill  may  sue  prior  parties, 
but  not  subsequent  ones.  If  an  acceptor  or  maker  for  ac- 
commodation pays  the  bill  he  can  not  sue  drawer  or  in- 
dorser  upon  the  bill,  because,  according  to  its  terms,  he  is 
liable  to  them.  But  he  may  sue  the  accommodation  party 
for  money  paid  at  his  request.^ 

§  II 82.  In  partnership  cases. — If  a  bill  or  note  be  made 
payable  to,  or  indorsed  specially  to  a  firm,  all  the  partners 
must  join  in  the  suit  ;^°  and  if  so  payable  or  indorsed  to  A. 
&  Co.,  A.  can  not  recover  unless  he  shows  that  he  alone 
composed  the  nominal  firm."  If  one  of  the  copartners  of 
a  firm  should  die,  suit  should  be  brought  by  the  survivor  or 

*  Humphrey ville  v.  Culver,  73  111.,  485.     See  §1198. 
"  Law  V.  Parnell,  7  C.  B.  N.  S.,  282,  §§  1192,  1192a. 

'  Smith  V.  Kendal,  i  Esp.,  231  ;  6  T.  R.,  123  ;  Bowman  v.  Wood,  15  Mass., 
534. 

*  Haxtun  v.  Bishop,  3  Wend.,  13. 

'  See  ante,  §  264,  vol.  I  ;  2  Parsons  N.  &  B.,  446. 

'  Grover  v.  Grover,  24  Pick.,  261 ;  Sessions  v,  Moseley,  4  Cush.,  87  ;  Bates  v. 
Kempton,  7  Gray,  382  ;  Brown  v.  Brown,  18  Conn.,  410. 
'  Sherwood  v.  Roys,  14  Pick.,  172. 
'  See  vol.  I,  §  692. 

'  Stark  v.  Alford,  49  Tex.,  260 ;  §  1206. 
'"  Guidon  v.  Robson,  2  Camp.,  302 ;  Atwood  v.  Rattenbury,  6  J.  B.  Moore, 

579- 
"  Robb  V.  Bailey,  13  La.  Ann.,  457. 


220  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.         §1183 

survivors  ;^  but  if  the  paper  be  indorsed  in  blank  to  a  firm, 
either  copartner  may  fill  it  up  in  his  own  name  and  sue,^ 
even  though  one  of  the  copartners  be  dead.^ 

§  1 183.  A  copartner  can  not  sue  a  firm  of  which  he  is  a 
member,  upon  a  bill  or  note  payable  by  it  to  himself,  be- 
cause he  would  be  in  fact  suing  himself  ;■*  but  if  a  firm  make 
its  bill  or  note  payable  to  the  order  of  a  copartner,  and  the 
latter  indorse  it,  the  indorsee  may  sue.^  Nor  will  an  indorse- 
ment by  one  of  a  firm  which  is  the  payee  of  a  note  to  an- 
other, enable  the  latter  to  sue  thereon  in  his  own  name  ;  for 
anything  less  than  indorsement  of  the  partnership  name 
is  an  irregularity  and  a  departure  from  the  legitimate  mode 
of  transfer  in  such  cases.^  But  if  a  note  indorsed  by  two 
of  three  payees  to  the  third  payee  and  a  stranger,  be  subse- 
quently indorsed  by  the  third  payee,  the  indorsee  may  sue 
in  his  own  name."^  And  a  firm  may  indorse  to  one  member 
who  may  sue.^ 

§  1183(2.  Joint  paj^ties  not  partners  vcwxst  all  unite  in 
the  action  if  Hving.  On  the  death  of  one  of  them  the  reme- 
dies for  collection  survive  to  those  living,  who  may  law- 
fully receive  payment,  and  sue  at  law  or  in  equity,  as  may  be 
appropriate,  without  uniting  the  personal  representative  of 
the  deceased  joint  party.^ 

§  II 84.  In  cases  of  married  womeii. — On  a  bill  or  note 
given  to  a  single  woman,  who  afterward  marries,  the  hus- 
band must  join  her  in  the  action.^"    If  she  dies,  the  right  of 


■  Parsons  on  Partnership,  447.  *  Lovell  v.  Evertson,  1 1  Johns,  52. 

*  Atwood  V.  Rattenbury,  6  J.  B.  Moore,  579. 

*  Parsons  on  Partnership,  510,  note. 

»  Thayer  v.  Buffam,  11  Mete,  398  ;  Davis  v.  Briggs,  39  Me.,  304. 

"  Estabrookv.  Smith,  6  Gray,  570. 

^  Goddard  v.  Lyman,  14  Pick.,  268.  *  Manegold  v.  Dulan,  30  Wise,  541. 

'  Lannay  v.  Wilson,  30  Md.,  536 ;  Martin  v.  McReynoIds,  6  Mich.,  70 ;  Allen 
V.  Tate,  58  Miss.,  586. 

"  Sherrington  v.  Yates,  12  M.  &  W.,  855  ;  overruling  M'Neilage  v.  Holloway, 
I  B.  &  Aid.,  218. 


^   I  1 85.       GENERAL  PRINCIPLES  AS  TO  WHO  MAY  SUE.  221 

action  is  in  her  personal  representative,  not  in  the  husband.^ 
If  the  husband  dies,  the  right  of  action  is  in  her,  and  not  in 
the  husband's  personal  representative.-  So  the  right  of  ac- 
tion survives  to  the  wife,  upon  a  note  payable  to  husband 
and  wife,  when  the  husband  dies,  and  does  not  pass  to  his 
representative.^ 

On  a  bill  or  note  made  payable  to  a  married  woman 
after  marriage  the  husband  may  sue  alone  as  payable  to 
him,'*  or  he  may  join  in  an  action  with  his  wife.^  If  paya- 
ble to  the  husband,  or  to  his  wife,  in  the  alternative,  he 
should  sue.^ 

The  wife  can  not  sue  her  husband  on  a  note  made  by  him 
to  her  after  marriage;''  nor  on  a  joint  and  several  note 
made  to  her  by  him  and  others;^  but  in  this  case  if  he 
dies  she  may  sue  the  others.^ 

§  II 85.  If  the  instrument  be  payable  to  "  A.  for  the  use 
of  B.,"  ^°  or  "  on  account  of  B.,"  ^^  A.  is  the  proper  person  to 
bring  the  suit.  One  who  has  paid  a  note  to  the  payee,  who 
indorsed  it  to  him  upon  payment,  may  sue  as  indorsee 
against  the  maker,  though  he  is  a  party  to  the  note  as  guar- 
antor.^^ In  some  cases  it  is  held  that  the  plaintiff  may  sue 
in  a  fictitious  name.^^ 

A  deposit  book  issued  by  a  savings  bank  is  not  negotia- 
ble, and  the  assignee  of  it  can  not  sue  the  bank  in  his  own 
name.^^ 

'  Hart  V.  Stevens,  6  Q.  B.,  637. 

'  Stanwood  v.  Stanwood,  17  Mass.,  57  ;  Dean  v.  Richmond,  5  Pick.,  461. 
'  May  V.  Boisseau,  12  Leigh,  512  ;  Perkins  v.  Clements,  I    Pat.  &  H.,  151  ; 
Draper  v.  Jackson,  16  Mass.,  480. 

•  Burrough  v.  Moss,  10  B.  &  C,  558. 

'  Philliskirk  v.  Pluckwell,  2  Maule  &  S.,  393. 

•  Young  V.  Ward,  21  111.,  223.  '  Sweat  v.  Hall,  8  Vt.,  187. 

•  Richards  v.  Richards,  2  B.  &  Ad.,  447.  *  Ibid. 

"*  Barry  Co.  v.  McGlothlin,  19  Mo.,  397 ;  Cramlington  v,  Evans,  2  Ventris, 
307. 

"  Nelson  v.  Wellington,  5  Bosworth,  178. 

"  McGregory  v.  McGregory,  107  Mass.,  543. 

"  Epting  V.  Jones,  47  Ga.,  622.  See  also  Ogilby  v.  Wallace,  2  Hall,  553; 
Pearce  v.  Austin,  4  Whart.,  489. 

'*  Howard  v,  Windham  Co.  S.  B,,  40  Vt.,  597. 


22  2  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.  §   II 86. 

§  1 1 86.  Any  person  not  originally  a  party,  but  who  has 
paid  the  bill  supra  protest,  may  sue  all  parties  not  subse- 
quent to  the  party  for  whose  honor  he  has  paid  ;*  but  a 
banker  who  pays  the  acceptance  of  a  customer,  payable  at 
his  house,  but  unprovided  for,  does  not  stand  on  the  foot- 
ing of  the  party  paying  supra  protest,  and  must  sue  for 
the  consideration.^ 

§  \\Z6a.  Cause  of  actio7t  indivisible. — It  is  a  general 
principle  of  law  that  a  party  can  not  divide  an  ^ntire  de- 
mand or  cause  of  action,  and  maintain  several  suits  for  its 
recovery  ;  and  a  recovery  for  part  of  an  entire  demand  will 
bar  an  action  for  the  remainder,  if  due  at  the  time  that  the 
first  action  was  brought.^  What  constitutes  an  entire  or 
single  demand  is  often  difficult  to  determine.  When  a 
note  payable  at  a  future  day  carries  interest  payable  an- 
nually or  semi-annually,  the  holder  may,  before  its  maturity, 
recover  the  interest  as  it  matures  without  barring  an  action 
as  to  the  principal  or  unaccrued  interest.*  If  the  interest 
be  due  by  a  coupon  or  other  separate  security,  it  can  be 
sued  for  as  an  independent  cause  of  action.^  Whether 
when  the  principal  of  a  note,  and  its  interest  (not  payable 
by  separate  security),  are  both  mature,  separate  actions 
may  be  maintained,  for  each  is  controverted,  some  cases 
holding  that  they  are  maintainable  ;  ^  others  the  opposite.' 
The  better  opinion  sustains  the  right  to  the  separate 
actions. 


^  Chitty  on  Bills  [*537],  609. 

^  Holroyd  v.  Whitehead,  5  Taunt.,  444 ;  3  Camp.,  530. 

'  Nickerson  v.  Rockwell,  90  111.,  460. 

*  Walker  v.  Kimble,  22  111.,  537  ;  Goodman  v.  Goodman,  65  111.,  497. 

*  See  §§  1509,  1 5 10,  et  seq. 

*  Dulaney  v.  Payne,  s.  c.  111.,  Jan'y,  1882;  Albany  L.  J.,  April  I,  1882; 
Andover  S.  B.  v.  Adams,  i  Allen,  28  ;  Sparhawk  v.  Willis,  6  Gray,  163;  Free- 
man on  Judgments,  §  238. 

^  Howe  V.  Bradley,  19  Me.,  31  ;  Parsons  on  Contracts,  vol.  2,  636. 


§   I  187.     WHEN  INSTRUMENT  IS  PAYABLE  TO  AN  AGENT  223 

SECTION    II. 
WHEN   INSTRUMENT   IS   PAYABLE   TO   AN   AGENT. 

§  1 187.  Who  may  sue  upon  instrument  payable  to  an 
agetit. — Upon  the  theory  that  the  party  entitled  to  sue  is 
the  one  in  whom  the  instrument  shows  the  legal  title  to 
exist,  it  has  been  held  that,  when  the  bill  or  note  is  payable 
to  a  certain  person  by  name,  but  describing  him  as  agent  of 
another  person  also  named — as,  for  instance,  "A.  B.,  agent 
for  C.  D." — the  suit  must  be  brought  in  the  name  of  the 
agent,  and  can  not  be  brought  in  the  name  of  the  princi- 
pal ;  ^  and  that  a  fortiori  must  the  suit  be  so  brought 
when  the  instrument  is  simply  payable  to  "  A.  B.,  agent," 
no  principal  being  named.^  But  in  either  case,  the  better 
doctrine,  as  it  seems  to  us,  is  that  either  the  agent  or  the 
principal  might  sue.  If  suit  were  brought  by  the  agent, 
the  possession  conforming  to  the  express  indication  of  the 
paper  would  clearly  sustain  the  action.  If  suit  were  brought 
by  the  principal  whose  name  is  expressed  in  the  instrument, 
possession  by  him  would  be  evidence  that  he  had  received 
from  his  agent  the  instrument  of  which  he  was  entitled  to 
the  beneficial  interest ;  and  there  could  be  no  good  reason 
why  it  should  be  necessary  for  the  principal  to  continue  to 
use  his  agent's  name,  when  it  is  clear  from  the  face  of  the 
paper  that  if  so  used  it  would  be  as  the  representative  of  his 
own.^  And  where  the  principal  is  undisclosed  on  the  face 
of  the  paper,  he  might  also  sue  in  his  own  name  ;  but  in 
such  case  mere  possession  of  the  paper  would  not  he  suffi- 
cient evidence  that  he  was  the  principal  intended,  and  it 
would  be  necessary  for  him  to  supply  that  element  in  his 

-  Cocke  V.  Dickens,  4  Yerg.,  29,  the  note  being  payable  to  C.  E.  McEwing, 
agent  for  the  executors  of  Joseph  Branch  ;  Shepherd  v.  Evans,  9  Ind.,  260  ; 
Rutherford  v.  Mitchell,  Mart.  &  Yerg.,  261  ;  Rose  v.  Laffan,  2  Speers,  424. 

"^  Alston  V.  Hartman,  2  Ala.,  699 ;  Horah  v.  Long,  4  Dev.  &  Bat.,  274. 

'  Binney  v.  Plumley,  5  Vt.,  500  ;  Johnson  v.  Catlin,  27  Vt.,  87  ;  Arlington  v. 
Hinds,  I  D.  Chip.,  431  ;  Fairchild  v.  Adams,  16  Pick.,  383. 


224  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.  §   1 1 88. 

title  to  recover  by  parol  proof.*  In  the  case  of  instruments 
payable  to  bank  cashiers  it  might  be  different.  Delivery 
of  a  note  to  an  agent  without  indorsement  would  not  au- 
thorize him  to  sue.^ 

§  1 1 88.  Official  agents. — Numerous  cases  have  arisen  in 
which  this  question  has  been  presented  upon  bills  and  notes 
payable  to  the  official  agents  of  corporations  or  States ;  and 
the  authorities  now  greatly  preponderate  in  favor  of  the 
doctrine,  that  where  a  bill  or  note  is  made  payable  or  is 
indorsed  to  a  certain  person,  designated  by  his  official  title, 
suit  may  be  brought  in  his  name,  or  it  may  be  brought  in 
the  name  of  the  principal  whom  he  officially  represents, 
when  such  principal  is  named  ;  and  if  the  principal  be  not 
named,  that  evidence  aliunde  is  admissible  to  show  who  the 
principal  is.  Thus,  it  has  been  held  that  a  bill  or  note  pay- 
able or  indorsed  to  "A.  B.  C,  cashier,  or  order,"  may  be 
sued  upon  by  the  bank  of  which  the  payee  is  cashier,  al- 
though it  is  not  named. ^  A  fortiori  such  would  be  the 
case  if  the  bank  were  named.*  But  suit  could  also  be  sus- 
tained by  the  cashier  in  his  own  name,^  So  it  has  been 
held,  that  a  note  payable  to  "J.  R.,  agent  of  the  Southern 
Life  and  Trust  Co.,"  might  be  sued  upon  by  the  corpora- 
tion.® Where  the  payee  "or  his  successor  in  office"  is 
named  it  is  specially  indicated  that  the  corporation  was  in- 
tended ;    ;.nd   it  may  sue  in  its  own   name.'''     And  if  the 

*  See  Rutland,  etc.,  R.R.  Co.  v.  Cole,  24  Vt..  38. 
^  Nicholls  V.  Gross,  26  Ohio  St.,  425. 

'  Baldwin  v.  Bank  of  Newburg,  i  Wall.,  239 ;  Carton  v.  Union  City  Bank,  34 
Mich.,  279;  First  National  Bank  of  Angelica  v.  Hale,  44  N.  Y.,  395  (1871)  ; 
Bank  of  New  York  v.  Bank  of  Ohio,  29  N.  Y.,  619  ;  Bank  of  Genesee  v.  Patchin 
Bank,  19  N.  Y.,  312 ;  Watervliet  Bank  v.  White,  i  Denio,  609  ;  Wright  v.  Boyd 
3  Barb.,  523  ;  Barney  v.  Newcomb,  9  Cush.,  46  ;  Rutland,  etc.,  R.R.  Co.  v. 
Cole,  24  Vt.,  38  ;  see  chapter  xiil,  on  Corporations,  §  417,  vol.  1  ;  Pratt  v.  To- 
peka,  12  Kansas,  570. 

*  Commercial  Bank  v.  French,  21  Pick.,  486. 
'  Fairchild  v.  Adams,  16  Pick.,  381. 

°  Southern  Life  Ins.,  etc.,  Co.  v.  Gray,  3  Fla.,  262. 

''  Trustees,  etc.,  v.  Parks,  10  Me.,  441.  In  Board  of  Supervisors  v.  Hall,  42 
Wise,  59,  the  note  was  made  payable  to  "  the  Supervisors  of  Ocono  County,  or 
their  successors  in  office."     It  was  held  a  good  note  to  the  county,  and  that  the 


§    llSg.       WHEN  INSTRUMENT  IS  PAYABLE  TO  AN  AGENT.       225 

office  is  named  without  mention  of  the  person,  as,  for  in- 
stance, "  payable  to  the  cashier  of  the  First  National  Bank," 
the  same  view  would  apply.^  Where  the  note  was  indorsed 
to  "  C.  J.,  President  M.  P.  F.,"  it  was  held,  the  company 
could  sustain  suit  by  proving  the  note  was  intended  to  be 
transferred  to  it.^ 

§  1 1 89.  The  contrary  doctrine,  that  only  the  agent  can 
sue,  rests  upon  the  view  that  the  official  station  is  merely 
mentioned  to  designate  the  person  intended  ;^  but  the  fact  in 
actual  business  is  generally  otherwise,  and  a  theory  about 
commercial  affairs  opposed  to  commercial  practice  can  not 
be  otherwise  than  injurious  and  impracticable. 

§  iiSga.  Cases  of  agent's  name  used  by  adoptioii  for 
principal's. — It  is  undoubtedly  a  matter  of  daily  practice 

board  of  supervisors  might  sue,  the  court  saying :  "  A  misdescription  of  the 
character  of  the  payee  will  not  vitiate,  provided  it  can  be  collected,  who  was  the 
party  intended." 

'  Commercial  Bank  v.  French,  21  Pick.,  486. 

-  Dupont  V.  Mount  Pleasant  Ferry  Co.,  9  Rich.  (Law),  255. 

^  Bank  United  States  v.  Lyman,  20  Vt.,  666.  The  Bank  of  United  States  sued 
in  the  U.  S.  Circuit  Court  upon  a  note  payable  to  "  Samuel  Jaudon,  Esquire, 
cashier,  or  order."  The  Court  said,  per  Prentiss,  J.  :  "  The  promise  therefore  is 
to  pay  him,  or  the  person  to  whom  he  shall  order  it  to  be  paid  ;  and  it  would  be 
repugnant  to  the  terms  of  the  instrument  to  allow  the  Bank  of  the  United  States, 
or  any  one  else,  without  his  order,  to  demand  and  enforce  payment  of  it  by  suit." 
But  a  different  view  prevails  in  the  State  courts  of  Vermont.  Rutland,  etc.,  R.R. 
Co.  V.  Cole,  24  Vt.,  38.  It  was  held  in  the  following  cases,  that  the  agent  alone 
could  sue  :  Horah  v.  Long,  4  Dev.  &  B.,  274,  where  the  note  was  payable  to  "  W. 
H.  H.,  cashier,  or  order  "  ;  Rose  v.  Laffan,  2  Speers,  424,  the  note  being  payable  to 
"  A.  G.  Rose,  Cashier  "  ;  so  where  the  notes  ran,  "  to  W.  G.,  Treasurer  of  Third 
Parish  in  Dedham,"  Fisher  v.  Ellis,  3  Pick.,  322  ;  to  "  The  Treasurer  of  the  Pro- 
prietors of  the  new  meeting-house  in  N.,  or  his  successor  in  office,"  Clap  v.  Day, 
2  Greenl.,  305.  In  Van  Ness  v.  Forrest,  8  Cranch,  30,  where  a  commercial  com- 
pany, consisting  of  four  or  five  hundred  members,  sold  merchandise,  the  prop- 
erty of  the  company,  and  took  from  the  purchaser  his  note  for  the  purchase 
money,  payable  to  Joseph  Forrest,  president  of  the  company,  it  was  held  that 
suit  should  be  brought  in  the  name  of  the  promisee  against  the  maker  of  the 
note  and  his  dormant  partner,  notwithstanding  such  dormant  partner  was  also  a 
partner  of  the  commercial  company.  And  it  was  said  by  Marshall,  C.  J. :  "  Suit 
can  be  brought  only  in  the  name  of  Joseph  Forrest.  It  can  no  more  be  brought 
in  the  name  of  the  company  than  if  it  had  been  given  to  a  person  not  a  member, 
for  the  benefit  of  the  company.  The  legal  title  is  in  Joseph  Forrest,  who  recov- 
ers the  money,  in  his  own  name,  as  a  trustee  for  the  company.  Upon  the  record, 
and  technically  speaking,  he  is  the  sole  plaintiff,  and  the  court  can  perceive  no 
reasonable  or  legal  objection  to  his  sustaining  an  action  on  the  note."  See  also 
Harrow  v.  Dugan,  6  Dana,  341  ;  McConnel  v.  Thomas,  2  Scam.,  313  ;  Ramsey 
V.  Anderson,  i  McMull.,  300  ;  2  Parsons  N.  &  B.,  451. 

Vol.  II.— 15 


226  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.  §   II 9O. 

to  make  notes,  drafts,  acceptances,  and  indorsements  pay- 
able to  the  cashiers  or  treasurers  of  financial  institutions  by 
such  abbreviations  as,  "  to  J.  Smith,  Cas.,"  or  "  J.  S.,  Cash.," 
or  "  Cashier,"  or  "  Treas."  When  the  corporation  sues  on 
such  a  paper,  it  is  upon  the  theory  and  averment  that  it  was 
made  payable  to  it  by  the  name  of  the  official ;  and  the 
production  of  the  instrument  in  its  possession  is  sufficient 
prima  Jacie  evidence  to  sustain  its  suit. 

A  distinction  has  been  taken  in  some  cases,  to  the  effect 
that  a  bill  or  note  payable  to  an  agent  or  officer  of  a  com- 
pany not  incorporated  may  be  sued  in  his  name  ;  but  if  the 
company  be  incorporated  its  own  name  must  be  used.^ 

The  like  principle  applies  when  the  instrument  is  payable 
to  the  official  agent  of  a  State  or  country  ;  and  the  State  or 
country  may  sue  upon  it  in  its  own  name.  It  has  been  so 
held  where  the  instruments  were  payable  "to  Levi  Wood- 
bury, Secretary  of  the  United  States,  or  his  successors  in 
office 'V  to  "T.  T.  Tucker,  Treasurer  of  the  U.  S.,  or 
order ";^  to  "James  Irish,  Land  Agent  of  Maine."* 


SECTION   III. 

WHO    MAY    SUE   UPON    INSTRUMENTS    PAYABLE    TO   ONE   PARTY 
AND   DISCOUNTED   BY  ANOTHER. 

§  1 190.  A  nice  question  is  presented  when  a  note  made 
to  raise  money  is  expressed  as  payable  to  a  certain  bank, 
and  is  then  discounted  by  another  party,  the  bank  named 
as  payee  never  having  any  interest  in  it.  Thus  suppose  the 
"Cheshire  Bank"  is  named  as  payee,  and  A.  B.  discounts 
the  note,  it  has  been  held  that  in  such  case  the  plaintiff  may 

'  Southern  Life  Ins.,  etc.,  Co.  v.  Gray,  3  Fla.,  262  ;  McConnel  v.  Thomas,  a 
Scam.,  313;  §  1 188. 

''United  States  v.  Boice,  2  McLean,  352. 
^Dugan  V.  United  States,  3  Wheat.,  172. 
*  State  of  Maine  v.  Boies,  2  Fairf.,  474.     See  chapter  XIV,  §  443,  vol.  I. 


§1190.         INSTRUMENTS  PAYABLE  AND  DISCOUNTED.  22/ 

declare  upon  the  note  as  payable  to  him  by  the  name  of 
the  Cheshire  Bank.^  It  has  also  been  held  that  suit  might 
be  brought  in  the  name  of  the  payee  for  the  benefit  of  the 
holder.  Should  the  payee  expressly  consent,  or  impliedly 
by  receiving  the  note  for  the  person  advancing  the  money, 
his  name  might  be  used  ;^  but  otherwise  we  can  not  see  how 
a  mere  stranger  can  be  unwillingly  brought  into  a  contro- 
versy to  which  he  has  no  proper  legal  relation,  and  it  has 
been  held  that  if  the  payee  refuse  the  use  of  his  name,  it 
can  not  be  used.^  Some  cases  utterly  deny  the  right  to  use 
the  payee's  name,  even  with  his  consent.^ 

Where  an  accommodation  note  is  made  payable  and  ne- 
gotiable at  a  particular  bank,  it  has  been  held  that  when 
not  discounted  by  it,  but  by  another  person,  the  latter  ac- 
quires no  right  of  action  against  the  accommodation  party, 
who  must  be  taken  to  have  limited  the  right  of  negotiation 
to  the  particular  bank,  and  he  can  not  sue  even  in  its  name.'* 
But  the  better  opinion  seems  to  be  that  this  would  not  be 
such  a  diversion  of  the  paper  as  to  discharge  the  accommo- 
dation parties.® 

When  a  note  payable  to  a  third  person  has  not  been  ne- 
gotiated by  him,  but  is  in  the  hands  of  another,  who  sues 
in  the  payee's  name,  it  seems  that  it  v^  p7'i7na  facie  evidence 
of  an  equitable  assignment  by  the  payee  to  the  holder, 
which  carries  authority  to  use  his  name.''' 

'Hunt  V.  Aldrich,  7  Fost.,  31  ;  Elliott  v.  Abbott,  12  N.  A.,  549.  Quer>-,  if 
holder  might  not  sue  in  equity  in  his  own  name.  See  Taylor  v.  Reese,  44 
Miss.,  89. 

-  Bank  of  Chenango  v.  Hyde,  4  Cow.,  567  ;  Bank  of  Newbury  v.  Rand,  38  N. 
H.,  169;  Lime  Rock  Bank  v.  Macomber,  29  Me.,  564;  Granite  Bank  v.  Ellis,  43 
Id.,  367  ;  UticaBank  v.  Ganson,  10  Wend.,  314  ;  Farmers'  &  Mechanics'  Bank  v 
Humphrey,  36  Vt.,  557  ;  see  also  Bank  of  Rutland  v.  Buck,  5  Wend.,  66  ;  Powell 
V.  Waters,  17  Johns,  176;  Marvin  v.  McCallum,  23  Johns,  288. 

^  Bank  of  Middlebury  v.  Bingham,  33  Vt.,  623. 

^  Adams  Bank  v.  Jones,  16  Pick.,  574. 

^  Dewey  v.  Cochran,  4  Jones  L.  (N.  C),  184  ;  Clinton  Bank  v.  Ayres,  16  Ohio, 
282.     See  Dixon  v.  Dixon,  31  Vt.,  450 ;  Quinn  v.  Hard,  43  Vt.,  375. 

*  Utica  Bank  v.  Ganson,  10  Wend.,  315;  Commercial  Bank  v.  Claiborne,  5 
How.  (Miss.),  301  ;  Briggs  v.  Boyd,  37  Vt.,  534 ;  Farmers',  etc.,  Bank  v.  Hum- 
phrey, 36  Vt.,  557. 

■'  Harriman  v.  Hill,  14  Me.,  127. 


228  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.  ^   II9I. 


SECTION   IV. 

WHO    MAY    SUE    UPON    INSTRUMENTS    PAYABLE   TO    BEARER    OR 
INDORSED   IN   BLANK. 

§  1 191.  The  law  is  now  too  well  settled  to  admit  of 
longer  controversy  that  an  action  on  a  bill  or  note  payable 
to  bearer,  or  indorsed  in  blank,  may  be  maintained  in  the 
name  of  the  nominal  holder  who  is  not  the  owner  by  the 
owner's  consent  ;  and  that  possession  by  such  nominal 
holder  \s  piHma  facie  sufficient  evidence  of  his  right  to  sue, 
and  can  not  be  rebutted  by  proof  that  he  has  no  beneficial 
interest,  or  by  anything  else  but  proof  of  mala  fides}  And, 
as  has  been  said  in  Maryland,  by  Chambers,  J.  :  "  Courts 
will  never  inquire  whether  a  plaintiff  sues  for  himself  or  as 
trustee  for  another,  nor  into  the  right  of  possession,  unless 
in  an  allegation  of  mala  fides,  and  the  blank  indorsement 
may  be  filled  up  at  the  moment  of  trial."  ^  If  it  were  shown 
that  the  plaintiff,  upon  suing  upon  a  note  payable  to  bearer 
or  indorsed  in  blank,  has  no  interest  in  it,  and  in  addition 
that  he  is  suing  against  the  will  of  the  party  beneficially 
interested,  he  could  not  recover,  as  his  conduct  would  be 
in  bad  faith.^ 

§  1 192.  Nomiiial  holder  may  sue. — It  matters  not  that 
such  nominal  holder  will  receive  the  amount  as  trustee,* 
agent,^  or  pledgee.^     The  suit  by  him  holding  the  paper 

'  Demuth  v.  Cutler,  50  Me.,  300  ;  Patten  v.  Moses,  49  Me.,  255  ;  Manufactu- 
rers' N.  B.  V.  Thompson,  129  Mass.,  438;  Wheeler  v.  Johnson,  97  Mass.,  39; 
Craig  V.  Twomey,  14  Gray,  486  ;  Palmer  v.  Nassau  Bank,  78  111.,  380 ;  Ticonic 
Nat.  Bank  v.  Bagley,  68  Me.,  249  ;  Scionneaux  v.  Wagnerpack,  32  La.  An.,  288  ; 
Klein  v.  Buckner,  30  La.  An.,  680. 

^'Whiteford  v.  Burckmyer,  i  Gill,  127. 

'Tonne  v.  Wason,  128  Mass.,  517.  See  Reynolds  v.  Kent,  38  Mich.,  248; 
Eggan  V.  Briggs,  23  Kan.,  710. 

*  Nicolay  v.  Fritschle,  40  Mo.,  67  ;  Lovell  v.  Evertson,  1 1  Johns,  52  ;  Wells  v. 
Schoonover,  9  Heisk.,  805. 

'  King  V.  Fleece,  7  Heisk.,  274;  Gregory  v.  McNealy,  12  Fla.,  378  ;  Boyd  v. 
Corbitt,  37  Mich.,  52  ;  Klein  v.  Buckner,  30  La.  An.,  part  i,  680,  §  1181. 

'Bowman  v.  Wood,  15  Mass.,  534;  Bank  of  Charleston  v.  Chambers,  1 1 
Rich.,  657  ;  Whitteker  v.  Charleston  Gas  Co.,  16  W.  Va.,  717  ;  Tarbell  v 
Sturtevant,  26  Vt.,  513  ;  Logan  v.  Cassell,  88  Penn.  St.,  288. 


§   1192^.  INSTRUMENTS  PAYABLE  TO  BEARER.  229 

shows  his  title  to  recover ;  and  it  can  not  matter  to  the  de. 
fendant  who  discharges  the  debt  that  the  plaintiff  is  account- 
able over  to  a  third  party.  Thus  where  the  plaintiffs  had 
bought  a  bill  for  a  correspondent,  and  had  been  reimbursed 
the  amount  paid,  Wightman,  J.,  said  :  "They  have  been 
reimbursed,  and  the  beneficial  interest  has  been  transferred, 
but  the  legal  interest  is  in  them,  and  they  may  still  sue  as 
trustees."  *  Evidence,  however,  that  the  plaintiff  has  no  in- 
terest in  the  instrument  will  be  competent  when  foundation 
has  been  laid  for  its  introduction  by  offer  to  prove  offset, 
or  other  defence,  available  against  a  third  person  who  is  its 
true  owner.^  And  if  the  indorsement  be  expressed  "  for 
collection,"  it  has  been  held  that  the  indorsee  is  not  such  a 
holder  as  may  sue.^ 

§  I  i()2a.  In  England  it  has  been  held  that  if  the  plaintiff 
has  neither  an  interest  in  the  bill  or  note,  or  right  of  pos- 
session at  the  time  of  suit  brought,  he  can  not  maintain  the 
suit.^  But  an  agent  being  in  lawful  possession  of  the  bill 
or  note  under  a  blank  indorsement,  may  maintain  suit.^ 

§  1 192^.  In  a  recent  New  York  case,  where  the  holder  of 
a  note  under  a  blank  indorsement  of  the  payee  sued  mak- 

*  Poirier  v.  Morris,  2  Ellis  &  B.,  89. 

^  Logan  V.  Cassell,  88  Penn.  St.,  290 ;  Lenneg  v.  Blummer,  88  Penn.  St.,  515. 

*  Rock  Co.  Nat.  Bank  v.  Hollister,  21  Minn.,  385. 

*  Emmett  v.  Tattenham,  8  Exch.,  884  (1853).  In  this  case  W.  held  a  bill 
under  a  blank  indorsement.  W.'s  executor  requested  E.  to  sue  in  his  own 
name  ;  but  never  delivered  to  him  the  bill  until  after  suit  brought,  although  a 
copy  had  been  taken  for  E.'s  use,  and  it  was  understood  that  E.  could  get  the 
bill  when  he  wanted  it.  It  was  held  that  this  did  not  constitute  a  constructive 
deliver}',  and  Pollock,  C.  B.,  said  :  "  The  case  falls  within  the  simple  proposition 
that  a  person  who  has  no  interest  in,  or  possession  of,  a  bill  of  exchange  can  not 
maintain  an  action  on  the  instrument."  The  American  cases  upholding  this 
doctrine,  and  those  to  the  contrar)',  are  cited  in  i  Ames  B.  &  N.,  319  et  seq.,  to 
which  excellent  work  reference  is  made.  It  may  be  that  holder  may  raiify  so 
as  to  sustain  suit  by  bearer  brought  without  consent.  See  Hovey  v.  Sesring,  24 
Mich.,  232  ;  Ticonic  Bank  v.  Bagley,  68  Me.,  249. 

'  Law  v.  Parnell,  7  C.  B.  N.  S.,  282  (1859),  Erie,  C.  J.  :  "The  bill  being  in- 
dorsed in  blank  the  bank  had  a  right  to  hand  it  over  to  a  third  person  to  sue 
upon  it.  without  indorsing  it  ;  and  therefore  the  plaintiff,  if  he  was  the  lawful 
holder  of  the  bill,  and  had  authority  from  the  bank  to  do  so,  had  a  perfect  right 

to  sue  upon  it In  the  case  of  Emmett  v.  Tattenham  (8  Exch.,  884),  the 

plaintiff  was  not  indorsee,  neither  had  he  possession  of  the  bill.  He  had  no  in- 
terest in  the  bill."     See  cases  cited  in  i  Ames  B.  &.  N.,  323,  324, 


230  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.         §   1 193. 

ers  and  indorser  of  the  note,  and  defendants  pleaded  that 
the  note  was  not  the  property  of  the  plaintiff,  that  the 
same  was  never  transferred  to  him,  that  he  was  not  the 
real  party  in  interest,  and  that  the  note  was  the  prop- 
erty of  the  Saratoga  County  Bank,  who  was  the  real  party 
in  interest,  it  was  held  that  under  the  code  of  New 
York,  which  requires  the  real  party  in  interest  to  sue,  the 
defence  was  admissible  ;  although  production  of  the  note 
indorsed  by  the  payee  made  a  prima  facie  case  for  the 
plaintiff.-^ 

§  1 193.  An  indorsement  in  blank  confers  a  joint  right 
of  action  to  as  many  as  agree  in  suing  on  the  bill.^  And, 
therefore,  where  three  persons  separately  indorsed  a  bill  for 
the  accommodation  of  the  drawer,  which  was  afterward  dis- 
honored and  returned  to  them,  and  they  paid  the  amount 
among  them,  it  was  held  that  they  might  bring  a  joint  action 
against  a  previous  indorser.^     But  where  a  bill  of  exchange 

'Hays  V.  Hathorn,  74  N,  Y.,  486,  reversing  Hays  v.  Southgate,  10  Hun,  511. 
Hand,  J.,  reviewed  the  New  York  decisions,  and  said  :  "  From  this  glance  at 
the  cases  it  appears  that  it  is  ordinarily  no  defence  to  the  party  sued  upon 
commercial  paper,  that  the  transfer  under  which  the  plaintiff  holds  it  is  without 
consideration  or  subject  to  equities  between  him  and  his  assignor,  or  colorable 
and  merely  for  the  purpose  of  collection,  or  to  secure  a  debt  contracted  by  an 
agent  without  sufficient  authority.  It  is  sufficient  to  make  the  plaintiff  the  real 
party  in  interest,  if  he  have  the  legal  title  either  by  written  transfer  or  delivery, 
whatever  may  be  the  equities  between  him  and  his  assignor.  But  to  be  entitled 
to  sue  he  must  now  have  the  right  of  possession,  and  ordinarily  be  the  legal 
owner.  Such  ownership  may  be  as  equitable  trustee  ;  it  may  have  been  acquired 
without  adequate  consideration,  but  must  be  sufficient  to  protect  the  defendant 
upon  a  recovery  against  him  from  a  subsequent  action  by  the  assignee.  As  we 
understand  the  scope  of  the  offer  in  the  present  case  it  went  to  entirely  disprove 
any  ownership  or  interest  whatever,  or  even  right  of  possession  as  owner  in  the 
plaintiff.  It  should  therefore  have  been  admitted.  It  may  be  true  that  the 
plaintiff,  if  this  note  had  been  delivered  to  him  with  the  intent  to  transfer  title, 
might  have  lawfully  overwritten  the  blank  indorsement  with  a  transfer  to  hiin- 
self ;  //  is  also  true  that  the  production  of  the  paper  by  him  was  prima  facie 
evidctice  that  it  had  been  delivered  by  him  to  the  payee  and  that  he  had  title  to 
it ;  but  the  defendant's  offer  was  precisely  to  rebut  this  very  presumption,  and 
for  aught  that  we  can  know  the  evidence  under  it  would  have  done  so."  The 
court  distinguished  and  explained  the  cases  of  Cummings  v.  Morris,  25  N.  Y., 
625;  City  Bank  v.  Perkins,  29  N.  Y.,  554;  Brown  v.  Penfield,  36  N.  Y.,  473; 
Allen  V.  Brown,  44  N.  Y.,  228  ;  Eaton  v.  Alger,  47  N.  Y.,  345,  and  Sheridan  v. 
Mayor,  68  N.  Y.,  30 ;  and  showed  that  Gage  v.  Kendall  1 5  Wend.,  640,  had 
been  affected  and  changed  by  the  code.     See  also  Bell  v.  Tilden,  17  Hun,  346. 

^  Ord  V.  Portal,  3  Camp.,  239,  Lord  Ellenborough. 

*  Low  V.  Copestake,  3  C.  &  P.,  300  (14  E.  C.  L.  R.)  ;  Byles  [*I44],  262. 


^1195-  INSTRUMENTS  PAYABLE  TO  BEARER.  2$l 

was,  by  the  direction  of  the  payee,  indorsed  in  blank,  and 
dehvered  to  A.,  B.  &  Co.,  who  were  bankers,  on  the  account 
of  the  estate  of  an  insolvent,  which  was  vested  in  trustees  for 
the  benefit  of  his  creditors,  Lord  Ellenborough  held  that 
A.  and  B.,  two  of  the  members  of  this  firm,  and  also  trus- 
tees, could  not,  conjointly  with  another  trustee  who  was 
not  a  member  of  the  firm,  maintain  an  action  against  the 
indorser,  without  some  evidence  of  the  transfer  of  the  bill 
to  them  as  trustees  by  the  firm,  by  delivery  or  otherwise.^ 

§  1 194.  T/ie  holder  of  a  note  blank  as  to  the  payee  may 
fill  it  up  with  his  own  name  and  sue  upon  it.^  If  payable 
to  a  fictitious  person,  it  may  be  sued  on  as  payable  to 
bearer.'^  The  holder  of  such  a  paper,  in  transferring  it, 
should  not  use  the  fictitious  name,  but  pass  it  by  delivery 
only,  or  by  indorsement.^ 

§  1 195.  The  holder  tuider  an  indorsement  in  blank  may 
fill  it  in  his  own  name  before  bringing  suit,  or  at  the  trial  ;^ 
and  even  after  the  trial,  where  judgment  has  gone  for  the 
plaintiff  under  the  impression  that  the  indorsement  had 
been  filled  up,  the  correction  being  made  mine  pro  tunc.^ 

But  the  filling  up  of  the  blank  indorsement  is  formal 
merely,  and  it  is  not  necessary  that  it  should  be  filled  up  at 
all,  for  the  mere  act  of  suing  upon  it  by  the  holder  evi- 
dences his  intention  to  treat  the  indorser  as  a  transferrer 
and  indorser  to  himself.^  This  seems  to  us  clearly  the  cor- 
rect doctrine,  and  results  from  the  principle  stated  by  Lord 

'  Machell  v.  Kinnear.  i  Stark.,  499  (2  E.  C.  L.  R.)  ;  Byles  [*I44].  262. 

"Crutchley  v.  Clarence,  2  Maule  &  S.,  90;  see  chapter  V,  sec.  iii,  vol.  I, 
§§  142.  145-  ,     „ 

'  2  Parsons  N.  &  B.,  448.  *  Maniort  v.  Roberts,  4  E.  D.  Smith,  83. 

'Lovell  V.  Evertson,  1 1  Johns,  52;  Hance  v.  Miller,  21  111.,  636;  Edwards  v. 
Scull,  8  Eng.  (Ark.),  325  ;  Olcott  v.  Rathbone,  5  Wend.,  490;  Kennon  v.  McRea, 
7  Port.  (Ala.),  175  ;  Kiersted  v.  Rogers,  6  Har.  &  J.,  282  ;  Fairfield  v.  Adams, 
16  Pick.,  381  ;  Croskey  v.  Skinner,  44  HI-  321  ;  Lucas  v.  Marsh,  Barnes,  453; 
Cope  V.  Daniel,  9  Dana,  415  ;  Norris  v.  Badger,  6  Cowen,  449  ;  Pickett  v.  Stew- 
art, 12  Ala.,  202. 

*  Whittier  v.  Hayden,  9  Allen,  408. 

'Rees  V.  Conococheague  Bank,  5  Rand.,  329  ;  Poorman  v.  Mills,  35  Cal.,  118 
Habersham  v.  Lehman,  63  Geo.,  383. 


232  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.         §   II 96. 

Ellenborough,  that  the  exercise  of  the  power  to  fill  up  a 
blank  indorsement  so  as  to  make  it  payable  to  the  holder  is 
only  expressio  eorum  quce  tacite  insunt} 

But  it  has  been  held  absolutely  necessary  that  the  in- 
dorsement should  be  filled  up  before  judgment,  and  that 
otherwise  judgment  would  be  bad.^ 

§  1 196,  Sti^iking  out  intervenhig  indorsements. — If  the 
plaintiff  omit  to  state  in  his  declaration  all  the  indorse- 
ments after  the  first  indorsement  in  blank,  he  may  strike 
out  the  intervening  indorsements,  and  aver  that  the  first 
blank  indorser  indorsed  immediately  to  himself.^  Abbott, 
C.  J.,  has  said  on  this  subject:  "All  the  indorsements 
must  be  proved  or  struck  out,  although  not  stated  in  the 
declaration.  I  remember  Bailey,  J.,  so  ruling,  and  striking 
them  out  himself  on  the  trial ;  and  this  need  not  be  done 
before  the  trial  ;*  but  may  be  done  after  the  plaintiff  has 
finished  his  case."^  So  where  the  action  is  against  an  in- 
dorser, and  there  are  several  indorsements  between  the 
payee's  indorsement  and  the  defendant's,  the  plaintiff  may 
state  in  his  declaration  that  the  payee  indorsed  to  the  de- 
fendant.^ It  seems  doubtful,  however,  whether  the  plain- 
tiff can  avail  himself  of  the  title  of  an  indorser  whose 
name  he  has  struck  out.''' 

§  1 197.  If  the  bill  or  note  be  not  payable  to  bearer  or  iu' 
dorsed  in  blank,  or  indorsed  specially  to  himself,  the  holder 
can  not  (unless  authorized  by  statute)  sue  in  his  own  name, 
for  although  he  may  possess  the  entire  beneficial  interest,  the 
legal  title  is  still  outstanding  in  his  transferrer,  and  he  must 


'Vincent  v.  Horlock,    i    Camp.,   442.     In  this  case   the  indorsement  was 
filled  up. 

*  Hudson  V.  Goodwin,  5  Har.  &  J.,  115. 

'Byles  on  Bills  [*I49],  268  ;  Rand  v.  Dovey,  83  Penn.  St.,  281  ;  Mayer  v.  Jadis, 
I  M.  &  Rob.,  247  ;  Merz  v.  Kaiser,  20  La.  Ann.,  379. 

*  Cocks  V.  Borradale,  MS. ;  Chitty  on  Bills  [*462],  719  ;  Byles  [*I49].  268. 
'Mayer  v.  Jadis,  i  M.  &  Rob.,  247.  'Chaters  v.  Bell,  4  Esp.,  210. 
'  Davies  v.  Dodd,  i  Wils.  Exch.,  no;  4  Price,  176  ;  Byles  [*I49],  269. 


§1198.  INSTRUMENTS  PAYABLE  TO  BEARER.  233 

use  his  name  in  order  to  maintain  the  suit.^  By  leaving  the 
instrument  unindorsed,  the  transferrer  necessitates  and  au- 
thorizes the  use  of  his  name  to  the  recovery  of  the  amount ; 
and  he  can  not  object  to  its  use,  or  release  the  action  when 
instituted.^  If  the  transferrer  indorses  the  paper,  then 
his  name  can  not  be  used  save  by  his  own  consent ;  for 
then  the  legal  title  and  right  to  sue  is  vested  in  his  indorsee/ 
But  if  suit  is  commenced  without  his  consent,  he  may  sub- 
sequently assent  to  it.^ 

§  1 198.  Striking  out  subsequejit  indorsements. — When 
there  appears  upon  a  bill  or  note  an  indorsement  by  the 
plaintiff,  and  subsequent' indorsements  to  his,  the  question 
has  been  raised  whether  or  not  he  could  sustain  the  suit 
without  showing  a  re-transfer  of  the  paper  to  himself.  The 
better  opinion  is  that  he  can.  The  Supreme  Court  of  the 
United  States  took  an  opposite  view  in  an  early  case,^  and 
there  are  cases  concurring  with  it.®  But  the  Supreme 
Court  subsequently  affirmed  the  doctrine  of  the  text,'^  and 
it  has  also  the  authority  of  a  number  of  State  decisions.^ 
And  the  holder  may  always  strike  out  a  special  indorse- 
ment,  and   bring  suit  under   any  indorsement  in   blank.^ 

'  Allen  V.  Newbury,  8  Iowa,  65  ;  Farwell  v.  Tyler,  5  Iowa,  535  ;  Tutile  v. 
Becker,  47  Iowa,  486  ;  Robinson  v.  Wilkinson,  38  Mich.,  301  ;  Parham  v.  Mur- 
phee,  16  Mart.  (La.),  355;  Allen  v.  Ayres,  3  Pick.,  289 ;  Hull  v.  Conover,  35  Ind., 
372.  It  is  held  in  Alabama,  that  if  the  transfer  is  by  a  separate  instrument,  the 
assig-nee  may  sue  in  his  own  name.  Morris  v.  Poillon,  50  Ala.,  403.  In  New 
York  the  transferee  without  indorsement  may  sue  in  his  own  name  by  statute. 
Van  Riper  v.  Baldwin,  19  Hun,  344. 

"Paese  v.  Hirst,  10  Barn.  &  C,  123;  Amherst  Academy  v.  Cowles,  6  Pick., 
427  ;  Royce  v.  Nye,  52  Vt.,  372. 

'  Bowie  V.  Duval,  i  Gill  &  J.,  175  ;  Bragg  v.  Greenleaf,  14  Me.,  395  ;  Mosher 
V.  Allen,  16  Mass.,  451  ;  Skowhegan  Bank  v.  Baker,  36  Me.,  154;  Coleman  v. 
Biedman,  7  C.  B.,  871. 

*  Colder  v.  Foss,  43  Me.,  364.  '  Welch  v.  Lindo,  7  Cranch,  1 59. 

•  Robson  V.  Earley,  13  Mart.  (La.),  373;  Sprigg  v.  Cuny,  19  Mart.  (La.),  253  ; 
Southern  Bank  v.  Mechanics'  Savings  Bank,  27  Ga.,  253. 

'  Dugan  V.  United  States,  3  Wheat.,  172. 

*  Dollfuss  V.  Frosch,  i   Denio,  367;  Whittenhall  v.  Korber,  12  Kansas,  618, 
Bank  of  Kansas  City  v.  Mills,  24  Kansas,  610;  Wickersham  v.  Jarvis,  2  Mo.  Ap., 
280 ;  see  cases  cited  in  chapter  xx,  on  Presentment  for  Payment,  §  576,  vol.  i 
also  Caldwell  v.  Evans,  5  Bush  (Ky.),  380  ;  Canton,  etc.,  Assn.  v.  Weber,  34 
Md.,  669  ;  stQ  post,  §  1229. 

•  Wetherell  v.  Ela,  42  N.  H.,  295. 


234  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.  §    1 1 99* 

Where  there  appears  on  the  paper  the  plaintiff's  own  in^ 
dorsement,  it  will  be  presumed  either  that  he  had  not  per- 
fected his  indorsement  by  delivery,  on  that  the  paper  has 
been  returned  to  him  as  his  own  property,  and  in  either 
case  he  has  the  right  to  sue  upon  it ;  ^  and  clearly,  if  his  in- 
dorsement be  to  another  "  for  collection,"  he  would  have 
the  right  to  sue,  for  if  paid  the  proceeds  would  belong  to 
him.^ 


SECTION  V. 

WHAT  CONSTITUTES    THE    RIGHT    TO    SUE,   AND    THE   EVIDENCE 

THEREOF. 

§  1 1 99.  The  right  to  sue  in  ones  own  name  mtist  exist 
at  time  of  suit  brought,  if  it  be  in  that  form  ;  ^  and  if  a 
holder  of  a  note  delivered  to  him  without  indorsement,  sue 
before  obtaining  an  indorsement,  in  his  own  name,  an  in- 
dorsement made  afterward,  but  before  trial,  will  not  avaiU 
And  so  the  right  to  sue  must  continue  during  the  suit  ; 
and  if  the  plaintiff  transfers  the  instrument  pending  the  ac- 
tion, it  has  been  held  that  it  operates  as  a  discontinuance  ; 
and  that  although  he  may  repurchase  the  paper,  he  can  not 
restore  the  right  to  prosecute  an  action  which  he  has  once 
abated  by  his  own  act.^  But  to  lay  an  embargo  upon  a 
negotiable  instrument  merely  because  it  is  in  suit;  would 
greatly  impair  its  value,  and  embarrass  the  holder  ;  and  the 
better  opinion  is  that  the  transfer  may  be  made  with  the 
agreement  that  the  action  should  continue  for  the  benefit 


^  See  ante,  §  1181 ;  Royce  v.  Nye,  52  Vt.,  375  ;  Beeson  v.  Lippman,  52  Ala., 
296;  Pitts  V.  Keyser,  I  Stew.,  154;  Evans  v.  Gordon,  8  Porter,  142;  Wicker- 
sham  V.  Jarvis,  2  Mo.  App.,  280  ;  Humphreyville  v.  Culver,  73  111.,  435  I  Brady 
V.  White,  4  Baxter,  382. 

'  Locke  V.  Leonard  Silk  Co.,  37  Mich.,  479  ;  Best  v.  Nakomis  National  Bank, 
76  111.,  608  ;  Reading  v.  Beardsley,  41  Mich.,  123. 

«  Emmett  v.  Tattenham,  8  Exch.,  884;  see  ante,  §  1192. 

*  Dowell  v.  Brown,  13  Sm.  &  M.,  43. 

'•  Vila  v.  Weston,  33  Conn.,  49  ;  Curtis  v,  Bemis,  26  Conn.,  i  ;  Lee  v,  Jilson,  9 
Conn.,  94. 


^    I200.  THE  EVIDENCE  OF  THE  RIGHT  TO  SUE.  235 

of  the  transferee  ;  and  that  in  the  absence  of  evidence  it 
would  be  presumed.^  Where  principal  and  surety  are  sued, 
and  the  latter  pays  the  amount  pending  suit,  it  may  be 
continued  against  the  principal  as  commenced  for  his  ben- 
efit.^ 

§  1200.  Possession  is  in  itself  prima  facie  evidence  of  the 
right  of  the  party  to  sue  and  receive  the  money  when  he 
holds  under  a  legal  title,  and  also  that  the  title,  although 
not  expressly,  is  actually  vested  in  him.  And  therefore  in 
order  to  defeat  his  suit,  it  must  be  shown  that  he  is  a  mala, 
fide  holder.^  As  said  in  a  Maryland  case  by  Chambers,  J.: 
"  A  bill  payable  to  bearer,  or  a  bill  payable  to  order  and 
indorsed  in  blank,  will  pass  by  delivery,  and  bare  possession 
is  prima  facie  evidence  of  title  ;  and  for  that  reason  pos- 
session of  such  a  bill  would  entitle  the  holder  to  sue."* 


'  2  Parsons  N.  &  B.,  454.  In  Alabama  it  is  held  that  the  effect  of  the  trans- 
fer of  a  note  pending  suit  "  is  to  make  the  transferee  the  beneficiary  of  the 
nominal  plaintiff,"  and  that  such  transfer  "  does  not  violate  the  rights  of  the 
parties."  Penn  v.  Edwards,  50  Ala.,  63.  See  Ober  v.  Goodridge,  27  Gratt., 
888,  where  no  exception  was  taken  to  transfer  pending  suit,  and  §  728. 

^  Low  V.  Blodgett,  i  Fost.,  121.  Clearly  a  second  action  is  not  barred.  Deu- 
ters  V.  Townsend,  5  Best  &  S.,  117  ;  E.  C.  L.  R.,  618  (1864J,  Crompton,  J.: 
"  Byles  on  Bills,  p.  159,  8th  ed.,  and  Chitty  on  Bills,  p.  157,  loth  ed.,  are  cited  to 
show  that  if  an  indorscr  takes  a  bill  with  notice  that  an  action  is  pending,  it  is  a 
defence  for  the  acceptor.  If  this  means  that  that  fact  can  be  pleaded  in  bar 
against  the  maintenance  of  the  second  action,  it  is  contrary  to  principle,  and  the 
authorities  cited  for  it  do  not  bear  it  out.  In  Marsh  v.  Newell,  i  Taunt.,  109, 
the  question  was  whether  the  court  could  under  those  circumstances  stay  the 
action  ;  which  was  entirely  a  matter  for  their  equitable  jurisdiction.  In  Colom- 
bies  V.  Slim,  2  Chit.,  637,  the  court  decided  that  a  plea  of  this  sort  was  bad  for 
want  of  an  averment  of  notice  of  the  bill  being  overdue.  But  they  proceed  to 
say  that  if  there  had  been  notice  of  indorsement,  and  the  second  action  w-ere 
brought  to  oppress  the  defendant,  it  would  be  otherwise.  That  very  expression 
shows  that  that  is  not  the  substance  of  a  plea  in  bar,  for  you  could  not  introduce 
an  averment  that  the  action  was  brought  with  a  view  to  oppress.  But  it  is  very 
good  ground  for  an  application  to  stay  the  proceedings  on  the  first  action. 
The  only  other  authority  is  Jones  v.  Lane,  3  Y.  &  C,  281.  All  that  amounts  to 
is,  that  Alderson,  B.,  threw  out  obiter,  there  might  be  a  difference  in  conse- 
quence of  an  indorsee  having  notice  of  the  former  action  ;  but  he  expressly  says 
that  it  was  not  necessary  to  decide  upon  it,  and  that  he  should  like  to  hear  fur- 
ther argument." 

'  Wheeler  v.  Johnson,  97  Mass.,  39 ;  Pettee  v.  Prout,  3  Gray,  502  ;  and  see 
cases  cited  in  chapter  xxiv,  sec.  vi,  §  812,  vol.  I,  and  also  chapter  XX,  §  573, 
vol.  I. 

*  Whiteford  v.  Burckmyer,  i  Gill,  127  ;  Crosthwait  v.  Misener,  13  Bush  (Ky.). 
543  ;  Wells  v.  Schoonover,  9  Heisk.,  805. 


236  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.         §   I20I. 

Therefore,  where  a  note  was  indorsed  to  "  C.  B.  Austin, 
agent  of  the  Union  Glass  Works,"  it  was  held  that  the  suit 
might  be  brought  in  the  agent's  name,  and  the  court  said  ; 
"  Here  there  is  no  allegation  of  mala  fides,  so  that  the  case 
stands  clear  of  that  objection.  The  suit  is  brought  by  Aus- 
tin, who  is  a  trustee  or  agent  for  the  Company.  Stating 
that  he  is  the  agent  of  the  Union  Glass  Works,  is  equiva- 
lent to  saying  that  the  suit  is  for  their  use."  ^  But  if  a  note 
were  payable  "  to  the  Stansbury  Oyster  Co.,"  possession  by 
one  Stansbury  would  not  be  evidence  of  title.^ 

§  1 201.  When  actual  possession  not  necessary  to  suit. — 
Possession  of  the  instrument  is  not  always  necessary  in 
order  to  institute  a  suit.  If  the  holder  has  indorsed  a  note 
in  blank  and  pledged  it  as  collateral  security,  he  may  nego- 
tiate it  to  a  third  person,  while  still  pledged,  and  such  per- 
son may  sue  as  indorsee  while  it  is  still  in  pledge,  and 
maintain  an  action  by  discharging  the  lien  and  producing 
the  note  at  the  trial.^ 

The  holder  of  a  bill  or  note  as  collateral  security  for  an 
indorsement  by  him  of  another  bill  or  note,  can  not  recover 
if  he  gratuitously  pays  the  paper  indorsed  by  him,  not  be- 
ing duly  charged  thereon.* 


SECTION   VI. 

WHO   MAY   BE   SUED. 

§  1202.  As  a  general  rule,  the  holder  may  sue  all  the 
prior  parties  on  the  bill  or  note,  but  not  any  subsequent 
party.  Thus  a  payee  may  sue  the  acceptor  or  maker.  An 
indorsee  may  sue  the  acceptor  or  maker,  and  all  prior  in- 
dorsers. 

*  Pearce  v.  Austin,  4  Whart.,  489. 

'  Redmond  v.  Stansbury,  24  Mich.,  406. 

»  Fisher  v.  Bradford,  7  Greenl.,  28 ;  see  Richardson  v.  Lincoln,  5  Mete,  20l  ; 
Marsh  v.  Newell,  i  Taunt..  109. 

*  IJachellor  v.  Priest,  13  Pick.,  399. 


§  1203.  WHO  MAY  BE  SUED.  237 

§  1202^.  When  subsequent  parties  may  be  sucd--Ox' 
dinarily  an  action  can  not  be  maintained  against  a  party- 
subsequent  to  the  plaintiff  ;  for  if  it  were  otherwise,  the  de- 
fendant in  such  action  might  as  indorsee  recover  back  from 
the  plaintiff  the  very  amount  recovered  of  him.^  But  if  the 
plaintiff  had  originally  indorsed  the  instrument  to  the  de- 
fendant without  recourse  or  without  consideration,  and  the 
latter  had  indorsed  back  to  him  absolutely  and  for  value, 
this  view  would  not  apply.^  And  there  may  be  other  spe- 
cial circumstances,  which,  w^hen  shown,  would  entitle  the 
holder  to  recover  against  a  subsequent  party — as,  for  in- 
stance, w^here  such  party  originally  agreed  to  indorse  the 
paper  as  security  to  him.^  Where  the  payee  of  a  bill  in- 
dorsed it  specially  to  the  plaintiff,  and  then  the  defendant, 
and  after  him  the  plaintiff  indorsed  it,  it  was  held  that  the 
plaintiff  might  sue  him,  as  his  indorsement  was  equivalent 
to  a  new  drawing.* 

§  1203.  At  common  law,  the  holder  of  a  bill  or  note 
might  commence  and  prosecute  several  actions  against  each 
of  the  prior  parties  at  the  same  time  ;  and  an  action  insti- 
tuted against  one  would  not  preclude  any  other  remedy 
against  the  others.^  But  satisfaction  by  any  one  would  dis- 
charge all  to  the  plaintiff  from  liability  as  to  the  principal 
sum.*  Where  a  party  was  liable  in  the.  two  characters  of 
joint  drawer  and  of  acceptor,  he  might  be  sued  jointly 
with  the  other  drawers  and  separately  as  acceptor.'^ 

But  by  statute  in  many  of  the  States  an  action  may  be 
maintained  and  judgment  given  jointly  against  all  the  par- 
ties to  a  negotiable  instrument,  whether  drawers,  indorsers, 

'  Bishop  V.  Hayward,  4  T.  R.,  470  ;  Britton  v.  Webb,  2  B.  &  C,  483. 
'  Bishop  V.  Hayward,  4  T.  R.,  470 ;  2  Parsons  N.  &.  B.,  459. 
'  Wilders  v.  Stevens,  15  M.  &  W.,  208. 

*  Penny  v.  Innes,  i  Cro.  M.  &  R.,  439 ;  see  Chitty  on  Bills,  [*242],  276-7 
note^. 

'Chitty  on  Bills  [*538-9],  610,  611. 

''  Ex  parte  Wildman,  2  Ves.,  Sr.,  115  ;  Farwell  v.  Hilliard,  3  N.  H.,  318. 

^  Wise  V.  Provvse,  9  Price,  393. 


238  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.         §   I204. 

or  acceptors,  or  against  any  one,  or  any  intermediate  num- 
ber of  them.^ 

§  1 204.  The  indorser  of  a  bill  or  note  can  not  sue  the  ac- 
ceptor or  maker  until  he  has  paid  or  satisfied  it*^  But  as 
soon  as  he  does  this  he  may  sue  the  acceptor  or  maker.^ 
And  if  one  indorser  sues  a  prior  party,  it  is  not  necessary 
for  him  to  show  that  he  had  received  notice,  provided  it 
was  duly  received  by  such  prior  party.^  Where  there  are  a 
number  of  indorsers,  any  one  may  sue,  by  arrangement  be- 
tween them,  all  indorsements  subsequent  to  his  being 
stricken  out.^ 

§  1205.  The  right  of  draiver  to  sue  acceptor. — "The 
drawer,"  says  Mr.  Chitty,  "  may  maintain  an  action  on  the 
bill  against  the  acceptor,  in  case  of  a  refusal  to  pay  a  bill 
already  accepted,  but  not  on  a  refusal  to  accept,  in  which 
latter  case  the  action  must  be  special  on  the  contract  to  ac- 
cept." ^  Certainly  the  drawer  may  sue  the  acceptor  if  he 
has  had  to  pay  the  bill,  '^  or  may  leave  it  in  the  hands  of 
the  indorsee  to  sue  for  his  benefit ;  ^  but  it  has  been  held 
that  he  can  not  recover  without  evidence  that  he  has  paid 
the  bill.« 

A  receipt  on  the  back  of  the  bill,  not  stating  who 
made  payment,  does  not  create  the  presumption  that  it  was 
paid  by  the  drawer,  but  rather  that  it  was  paid  by  the  ac- 
ceptor.^" 

§  1 206.  Where  the  accepta^tce  is  for  the  drawer  s  accom- 
modation, and  the  acceptor  pays  the  bill,  he  can  not  sue  the 

•  Code  of  Virginia  (1873),  chap.  141,  §  11.      ^  Hoyt  v.  Wilkinson,  10  Pick.,  31. 

°  M'Donald  v.  Magruder,  3  Pet.,  470.         *  Ellsworth  v.  Brewer,  11  Pick.,  316. 

^Walwyn  v.  St.  Quintin,  i  Bos.  &  Pul.,  652. 

« Chitty  on  Bills  (13  Am.  ed.),  L*537].  608.     See  chapter  XIX,  vol.  r. 

'  Louviere  v.  Laubray,  10  Mod.,  36;  Symonds  v.  Parminter,  i  Wils.,  185;  4 
Bro.  P.  C,  604;  Thurman  v.  Van  Brunt,  19  Barb.,  410;  Chitty  [*537]. 

« Williams  v.  James,  15  Ad.  &  El.  N.  S.,  69;  E.  C.  L.  R.,  498  (1850). 

'Thompson  v.  Flower,  13  Hart.  (La.),  301  ;  2  Parsons  N.  &  B.,  453. 

"  Taylor  v.  Higgins,  3  East.,  169  ;  Bullock  v.  Lloyd,  2  Car.  &  P.,  119 ;  Chilton 
V.  Whippin,  3  Wils.,  13. 


$   1207.  WHEN    RIGHT    OF   ACTION    ACCRUES.  239 

drawer  upon  the  bill,  for  it  imports  no  liability  to  him,  but 
he  may  sue  for  money  paid  at  his  request.^  But  an  accept- 
or for  honor  of  the  drawer  or  indorser  may  sue  such  drawer 
or  indorser  upon  the  bill  itself.^  Production  of  a  bill  by 
the  acceptor  is  woX.  prima  face  evidence  of  his  having  paid 
it,  unless  it  is  shown  that  it  was  in  circulation  after  accept- 
ance ;  ^  and  if  there  be  a  receipt  on  the  back  of  the  bill,  it 
must  be  shown  to  be  in  the  handwriting  of  a  person  au- 
thorized to  receive  payment.* 


SECTION  VII. 

WHEN   RIGHT   OF  ACTION  ACCRUES. 

§  1207.  Whether  or  not  sint  may  be  instituted  against 
the  maker  and  i^tdorsers  of  a  note  upoii  the  last  day  of 
grace  is  a  question  upon  which  the  authorities  "  are  like 
Swiss  troops,  fighting  on  both  sides,"  it  being  contended  by 
some  that  the  maker  has  the  whole  of  the  last  day  of  grace 
to  make  payment,  and  that,  as  the  law  knows  no  frac- 
tion of  a  day,  suit  can  not  be  instituted  against  him  until 
the  last  day  of  grace  has  entirely  elapsed.  In  respect  to  the 
indorser,  it  has  also  been  held  that  suit  can  not  be  instituted 
against  him  until  sufficient  time  has  elapsed  for  him  to  be  in 
actual  receipt  of  notice.  While,  on  the  other  hand,  it  is  confi- 
dently, and,  as  we  think,  justly,  asserted  that  after  demand 
and  refusal  on  the  last  day  of  grace,  action  may  be  commenced 
against  the  maker ;  and  after  notice  has  been  put  in  train 
to  reach  the  indorser,  it  may  also  be  commenced  against 
him,  whether  he  has  actually  received  it  or  not. 


'  Bell  V.  Norwood,  7  La.,  95  ;  Chitty  on  Bills  [*S37],  note.  Stark  v.  Alford,. 
49  Texas,  260,  §  1 181.  But  see  Bacchus  v.  Richmond,  5  Yerff.,  109  ;  2  Parsons 
N.  &B.,  460.  " 

'  2  Parsons  N.  &  B.,  455.  'Jewell  v.  Parr,  13  C.  &  B.,  909. 

*■  Pfiel  V.  Vanbatenberg,  2  Camp.,  439. 


240  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.         §   1 2o8. 

§  1208.  Action  lies  against  maker  on  day  of  maturity, 
after  demand  and  refusal. — In  the  case  of  ordinary  con- 
tracts to  be  performed  upon  a  certain  day,  they  are  really 
solvable  within  that  day  ;  and  as  the  promisor  has  the 
whole  of  the  day  for  their  performance,  suit  can  not  be 
commenced  until  that  day  has  passed.^  But  when  the 
maker  of  a  note,  or  the  drawer  or  acceptor  of  a  bill,  makes 
it  payable  on  a  day  certain,  his  contract  is  to  pay  it  on  de- 
mand on  any  part  of  that  day,  if  made  within  reasonable 
hours.^  The  protest  must  be  made  on  that  day,  which  pre- 
supposes a  default  already  made  ;  and  whether  it  be  the  last 
day  of  grace,  or  the  day  of  maturity,  when  there  is  no 
grace,  it  is  clear,  upon  principle,  that  as  soon  as  payment  is 
refused,  the  action  may  be  commenced. 

§  1209.  We  are  not  aware  of  any  decision  which  deter- 
mines that  the  maker  may  be  sued  on  the  day  of  maturity, 
if  the  note  is  payable  without  grace,  though  the  affirmative 
opinion  has  been  expressed  ;  but  if  payment  has  been  de- 
manded and  refused,  we  should  say  that  the  action  would 
lie,  for  the  contract  to  pay  on  demand  within  reasonable 
hours  is  then  broken,  and,  in  the  language  of  Parsons  : 
"  He  has  declared  he  will  not  pay,  and  can  want  further  de- 
lay only  to  arrange  the  means  of  avoiding  payment."^     But 

'Webb  V.  Fairmaner,  3  Mees.  &  W.,  473  ;  Coleman  v.  Ewing,  4  Humph.,  241. 

''Leftly  V.  Mills,  4  Term  R.,  170  (1791),  Buller,  J.,  said  :  "  If  the  party  has  till 
the  last  moment  of  the  day  to  pay  the  bill,  the  protest  can  not  be  made  on  that 
day.  Therefore,  the  usage  on  bills  of  exchange  is  established  :  they  are  payable 
at  any  time  on  the  last  day  of  grace,  provided  that  demand  be  made  within  rea- 
sonable hours.  A  demand  at  a  very  early  hour  of  the  day,  at  two  or  three 
o'clock  in  the  morning,  would  be  at  an  unreasonable  hour ;  but,  on  the  other 
hand,  to  say  that  demand  should  be  postponed  until  midnight,  would  be  to  es- 
tablish a  rule  attended  with  mischievous  consequences.  If  this  case  were  to  be 
governed  by  any  analogy  to  the  demand  of  rent,  payment  of  a  bill  of  exchange 
could  not  be  demanded  until  sunset ;  and,  if  so,  the  situation  of  bankers  would 
be  extremely  hazardous  ;  for  they  would  then  be  obliged  to  send  out  their  clerks 
at  night  with  bills  to  a  very  considerable  amount,  all  of  which  must  be  presented 
within  a  short  space  of  time,  though  to  houses  in  different  parts  of  the  town." 
See  also  Greeley  v,  Thurston,  4  Greenl.,  479 ;  i  Robinson's  Practice  (N.  ed.), 
442  ;  Chitty  on  Bills  (13  Am.  ed.)  [*48i],  544- 

'2  Parsons  N.  &  B.,  461,462.  This  is  said  by  Shaw,  C.  J.,  in  Staples  v. 
Franklin  Bank,  i  Mete,  43  ;  Veazie  Bank  v.  Winn,  40  Maine,  62,  Tenney,  J. : 
"  A  suit  may  be  properly  brought  against  the  maker  upon  a  negotiable  promis- 


b 


§   I2IO.  WHEN    RIGHT    OF   ACTION    ACCRUES.  24I 

there  is  still  stronger  reason  to  hold  that  the  action  may  be 
commenced  after  demand  and  refusal  on  the  last  day  of 
grace,  for  grace  was  originally  matter  of  indulgence  and 
courtesy,  and  not  of  contract,  and  it  would  seem  unreason- 
able to  extend  indulgence  after  the  maker  has  expressly  re- 
fused to  make  the  payment  on  the  last  day  allowed  him.^ 
The  weight  of  authority  supports  the  view  that  suit  may  be 
commenced  on  the  last  day  of  grace  against  the  maker ;  "^ 
but  there  are  decisions  of  most  respectable  character  to  the 
contrary  effect — that  suit  can  not  be  brought  on  the  last  day 
of  grace,^  nor  on  the  last  day  of  maturity,  when  there  is  no 
grace.* 

§  1 2 10.  It  must  be  observed  that  when  a  demand  is  neces- 
sary, it  must  be  made  upon  the  maker  prior  to  institution  of 
the  suit  on  the  day  of  maturity,  or  last  day  of  grace.^  In 
Massachusetts  it  was  said  by  Shaw,  C.  J.  :  "  The  rule  in  re- 


sory  note  on  the  last  day  of  g^ace  after  a  demand  of  payment,  made  at  a  reason- 
able hour  of  that  day,  and  a  refusal."  See  Ames  on  B.  &  N.,  vol.  2,  96.  See 
also  Crenshaw  v.  M'Kieman,  Minor,  295. 

'  Staples  V.  Franklin  Bank,  i  Mete.  (Mass.),  43. 

^  Staples  V.  Frankhn  Bank,  i  Mete.  (Mass.),  43  ;  Shed  v.  Brett,  i  Pick.,  401  ; 
N.  E.  Bank  v.  Lewis,  2  Pick.,  125  ;  Greeley  v.  Thurston,  4  Greenl.,  479  ;  Flint 
V.  Rogers,  3  Shepl.,  67  ;  Estes  v.  Tower,  102  Mass.,  66 ;  Veazie  Bank  v.  Winn, 
40  Maine,  62  ;  Vandesande  v.  Chapman,  48  Me.,  262  ;  Dennie  v.  Walker,  7 
N.  H.,  201  ;  Wilson  v.  Williman,  i  Nott  &  McC,  440;  McKenzie  v.  Durant,  9 
Rich.,  6l  ;  Ammidown  v.  Woodman,  31  Me.,  580  ;  Coleman  v.  Ewing.4  Humph., 
241. 

'Osbom  V.  Moncure,  3  Wend.,  170  (1829).  Suit  commenced  at  3  P.M. 
against  the  maker  held  premature.  Reaffirmed  in  Smith  v.  Aylesworth,  40  Barb., 
104,  the  only  difference  between  the  cases  being,  that,  in  the  first,  the  note  was 
payable  generally,  and  in  the  latter,  at  a  bank.  The  principle  of  Osbom  v.  Moncure 
was  affirmed  in  the  following  cases,  which  are  distinguishable,  however,  inasmuch 
as  it  does  not  appear  that  the  notes  were  presented  to  the  makers  for  payment 
before  action  was  brought.  Wells  v.  Giles,  2  Gale,  209  ;  Walter  v.  Kirk,  18  Cal., 
381  (semble) ;  Cox  v.  Reinhardt,4i  Tex.  591  (semble)  ;  Randolph  v.  Cook,  2  Port., 
286;  Wiggle  V.  Thomasson,  19  Miss.,  452;  Hopping  v.  Quin.  12  Wend.,  517; 
Thomas  v.  Shoemaker,  6  W.  &  S.,  179;  Taylor  v.  Jacoby,  2  Barr.,  495  ;  Hinton 
v.  Duff,  II  C.  B.  N.  S.,  724 ;  Coleman  v.  Carpenter,  9  Barr.,  198  (semble) ;  Ben- 
son V.  Adams,  69  Ind.,  353.  No  demand  was  made,  but  suit  was  brought  on 
last  day  of  grace.  Held  that  maker  had  all  day  in  which  to  pay  the  note  ;  and 
that  action  was  not  maintainable.  See  Ames  on  Bills  and  Notes,  vol.  2,  86  ;  35 
Am.  Rep.,  220. 

*  Davis  V.  Eppinger,  18  Cal,  381;  see  Moore  v.  Holloman,  25  Tex.  Supple- 
ment, 81. 

'Greeley  v.  Thurston,  4  Greenl.,  479;  Veazie  Bank  v.  Winn,  40  Me.,  62. 

Vol.  II.— 16 


242  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.  §>   I  2  1 1 

gard  to  notes  like  the  one  in  question  is,  that  the  note  is 
payable  at  any  time,  on  actual  demand,  on  the  last  day  of 
grace  ;  and  if  such  actual  presentment  and  demand  is  so 
made,  and  payment  is  not  made,  the  maker  is  in  default,  and 
notice  of  dishonor  may  forthwith  be  given  to  the  indorser. 
But  if  no  presentment  or  demand  is  made  by  the  holder 
upon  the  maker,  the  latter  is  not  in  default  to  the  end  of 
the  business  day."^  The  demand  must  be  made  within 
reasonable  hours  on  the  day  of  maturity  (or  last  day  of 
grace,  when  there  is  grace),  to  authorize  suit  on  that  day  ; 
and,  accordingly,  where  suit  was  brought  immediately  after 
a  demand  made  at  8  a.m.,  it  was  held  premature.^ 

When  the  note  is  payable  at  a  bank,  the  maker  has  until 
the  expiration  of  business  hours  to  pay  it  in  ;  and  suit 
should  not  be  commenced  until  their  expiration.  But  right 
of  action  accrues  as  soon  as  they  have  expired,  if  payment 
were  demanded  and  refused.^ 

§  121 1.  Due-bills  are  payable  immediately. — A  due-bill, 
which  is  regarded  in  many  States  as  a  promissory  note,  is 
payable  immediately,  and  upon  principle  there  is  no  doubt, 
we  think,  that  in  such  States  action  may  be  brought  imme- 
diately on  the  very  day  of  its  date.  The  due-bill  is  predi- 
cated upon,  and  evidences  the  fact  that  the  debt  is  then 
d  le — not  to  be  due  on  that  day  (which  in  ordinary  con- 
tracts means  the  same  as  within  that  day),  nor  to  be  due  in 
business  hours  of  that  day  if  demanded,  as  is  the  case  with 
respect  to  negotiable  paper  which  has  a  period  of  time  to 
mature.  It  is  true  that  the  due-bill  could  not  be  sued  upon 
during  that  fractional  part  of  the  day  preceding  its  making ; 
b>it  it  does  not  follow  that  during  the  remainder  of  the  day 
it  is  not  mature  for  suit.  For  its  very  language  and  nature 
purport  that  it  is  instantly  due ;  and  as  a  breach  of  contract 

'Pierce  v.  Gate,  12  Cush.,  190;  Estes  v.  Tower,  102  Mass.,  66,  Corey,  J.,  ex- 
plaining Butler  V.  Kimball,  5  Mete,  94,  where  the  writ  was  issued  after  sunset 
nn  the  last  day  of  grace,  but  not  delivered  to  the  officer  until  the  next  day. 

^  Lunt  V.  Adams,  5  Shepl,  230.  ^  See  ante,  §  1209. 


^    12 1 2.  WHEN    RIGHT    OF    ACTION    ACCRUES.  243 

occurs  by  failure  to  pay  it  instantly,  the  creditor  may  sue 
instantly,  indulgence  for  any  time  being  mere  matter  of 
his  discretion  and  pleasure.  This  view  is  sustained  by  well- 
considered  authorities,^  though  not  without  dissent. 

§  1 2 1 2.  Action  lies  against  indorser  as  soon  as  notice  is 
put  in  train  of  ti'ansmission. — In  respect  to  the  indorser, 
it  has  been  held  in  a  number  of  cases  that  suit  against  him 
can  not  be  commenced  until  time  has  elapsed  for  notice  to 
be  actually  received  by  him,  upon  the  theory  that  the  hold- 
er's title  is  not  complete  until  the  indorser  is  actually  noti- 
fied that  he  is  looked  to  for  payment,  or  at  least  that  time 
for  him  to  receive  such  notice  has  transpired.^  But  this  is 
a  misconception,  as  we  think,  of  the  law  of  notice.  The 
holder  must  exercise  due  diligence  to  give  the  indorser 
notice.  That  duty  is  fulfilled  when  he  puts  it  in  train  to 
reach  him,  by  sending  it  to  his  business  or  dwelling-house, 
or  depositing  it  in  the  post-office,  as  the  case  may  be.  And 
for  him  to  be  delayed  until  time  for  its  actual  reception 
had  gone  by  would  subject  him  to  the  hazards,  vexations, 
and  uncertainties  of  various  circumstances  which  do  not 
legitimately  enter  into  the  consideration  of  the  indorscr's 
liability.^ 

'  Cammer  v,  Harrison,  2  McCord  (S.  C),  246  ;  Dews  v.  Eastham,  2  Yerg., 
403;  Hill  V.  Henry,  17  Ohio,  9;  see  Fields  v.  Nickerson,  13  Mass.,  130;  3  Par- 
sons on  Contracts,  91  ;  Andress'  Appeal,  S.  C.  Penn.,  March,  1882;  Central  L. 
J.,  April  14,  1882,  p.  298,  Vol.  14,  No.  15. 

'  Smith  V.  Bank  of  Washington,  5  Serg.  &  R.,  318  (18 19),  where  notice  to  an 
indorser  of  a  note  was  put  in  the  post-office  on  the  13th,  and  by  due  course  of 
mail  could  not  reach  him  before  the  19th.  Held,  that  suit  commenced  on  the 
i6th  was  premature.  Bevan  v.  Eldridge,  2  Miles,  353  (1S40) ;  Wiggle  v.  Thom- 
asson,  II  Sm.  &  M.,  452  ;  McFarland  v.  Pico,  8  Cal.,626;  Castrique  v.  Bernabo. 
6Q.  B.,498(i844). 

='  Bayley  on  Bills,  chap.  IX,  sec.  i,  217  ;  Shed  v.  Brett,  i  Pick..  401,  Shaw,  C.  J., 
saying :  "  It  would  be  mischievous  to  decide  otherwise ;  for  every  plaintifl"'s 
right  of  action  would  commence  at  different  times  according  to  the  distance  of 
the  party  sued  ;  and  the  time  of  suing  must  be  conjectured,  as  it  can  not  be 
known  when  the  notice  will  be  actually  received.  Besides,  if  the  object  of  wait- 
ing be  to  give  the  party  opportunity  to  take  up  the  note,  there  must  be  a  sort  of 
double  usance  ;  for  the  holder  must  wait  until  his  letter  is  received,  and  for  a 
reasonable  time  afterward  '  for  the  party  to  come  and  pay  the  money.'  Who 
would  take  a  bill  or  note  remitted  from  New  Orleans  if  this  doctrine  be  correct  ? 
And  if  the  parties  liable  be  beyond  the  sea,  such  instruments  would  be  mere 
waste  paper."  N.  E.  Bank  v.  Lewis,  2  Pick.,  125;  Greeley  v.  Thurston,  4 
Greenl.,  479;  City  Bank  v.  Cutter,  3  Pick.,  414;  Boston  Bank  v.  Hoc(ges,  9 
Pick.,  420 ;  Dennie  v.  Walker,  7  N.  H.,  201  ;  Manchester  Bank  v.  Fellows.  8 
Fost.,  302. 


244  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.         §   I213. 

But  in  suits  commenced  on  the  last  day  of  grace  against 
an  indorser,  the  plaintiff  must  prove  that  before  the  writ 
was  sued  out  notice  was  deposited  in  the  post-office,  when  he 
lives  in  a  different  place,  or  sent  to  his  residence  or  place  of 
business  when  he  lives  in  the  same.^  If  the  notice  precedes 
the  suit  ever  so  short  a  time,  it  suffices ;  ^  but  if  it  does  not, 
it  seems  the  irregularity  can  not  be  cured  by  the  sending 
and  reception  of  notice  afterward.^ 

§  1 2 13.  Actio7t  up07i  dishonor f 07"  no7i-acceptance. — When 
a  bill  is  dishonored  for  non-acceptance,  right  of  action  ac- 
crues at  once  against  the  drawer,*  and  also  against  the  indors- 
ers  ®  as  soon  as  the  protest  is  made  and  notice  put  in  train  to 
reach  the  party,  without  waiting  for  the  maturity  of  the 
bill.  And  if  a  note  be  payable  in  respect  to  principal  or 
interest,  in  instalments,  action  will  lie  for  each  instalment 
as  it  falls  due.^ 


SECTION  VIII. 

WHEN   RIGHT   OF  ACTION   EXPIRES. 

§  1 2 14.  At  common  law,  when  once  a  right  of  action 
accrued,  it  was  immortal.  But  the  disadvantages  of  per- 
mitting remedies  to  be  sought  at  remote  periods  from  the 
time  the  transactions  occurred,  and  the  desirability  of  hav- 
ing settlements  while  evidence  was  readily  obtainable,  led 
at  an  early  date  to  the  adoption  of  statutes  fixing  a  limita- 
tion to  actions.     As  early  as  a.d.   1270,  an  act  was  passed 

■  Manchester  Bank  v.  Fellows,  8  Fost.,  302. 

^  N.  E.  Bank  v.  Lewis,  2  Pick.,  125. 

'  Ibid.;  New  England  Bank  v.  Lewis,  8  Pick.,  113,  where  it  is  held  that  if  the  first 
action,  commenced  without  first  sending  notice,  be  prosecuted  to  judgment,  it  is 
no  bar  to  a  second  action.  In  an  earlier  case  it  was  not  thought  objectionable 
that  the  action  was  commenced  before  notice  was  sent.  Stanton  v.  Blossom, 
14  Mass.,  116  ;  Bayley  on  Bills,  chap,  ix,  sec.  i. 

*  Robinson  v.  Ames,  20  Johns,  146. 

'  Lenox  v.  Cook,  8  Mass.,  460 ;  Ballingalls  v.  Gloster,  3  East.,  481. 

'  Tucker  y.  Randall,  2  Mass.,  283 ;  Cooley  v.  Rose,  3  Mass.,  221. 


§   I  2  15-  WHEN  RIGHT  OF  ACTION  EXPIRES.  245 

relating  to  limitation  of  actions  concerning  real  estate  ;  but 
personal  property,  and  especially  choses  in  action,  were  at 
that  time  of  so  little  consequence,  that  no  limitation  ol 
personal  actions  was  prescribed  until  1623.  In  this  modern 
period,  choses  in  action  constitute  a  vast  portion  of  the 
property  of  the  country ;  and  the  time  at  which  the  right 
to  reduce  them  into  possession  expires  is  a  matter  of  prime 
importance.  It  is  to  be  observed,  in  the  first  place,  that 
statutes  of  limitation  do  not  destroy  the  debt,  but  only  bar 
the  remedy.  Therefore  they  must  be  specially  pleaded, 
and  can  not  be  given  in  evidence  under  a  general  issue ' 
And  as  they  do  not  enter  into  the  essence  of  the  contract, 
they  must  be  regulated  entirely  by  the  laws  of  the  country 
where  suit  is  brought.^ 

§  1 2 1 5.  When  statutes  of  limitation  begin  to  ru7i. — The 
statute  of  limitations  begins  to  run  from  the  very  day  the 
right  of  action  accrues.  Thus  upon  a  bill  or  note  payable 
at  so  many  days  from  the  date,  it  begins  to  run  from  the 
day  of  payment,  and  not  from  the  day  of  date,  but  the 
day  of  maturity  is  excluded  in  the  computation  of  time. 
If  payable  at  sight,  the  statute  runs  from  sight.  If  so 
many  days  after  sight,  or  after  certain  events,  then  from 
the  time  named  after  sight,  or  after  the  events  have  hap- 
pened.^ If  the  instrument  be  payable  on  demand,  the 
statute  begins  to  run  immediately  as  payment  might  be 
immediately  demanded,  or  suit  brought  without  any  pre- 
vious demand.*  But  if  payable  at  a  certain  time  after  de- 
mand,^ or  after  notice,*  an  actual  demand  must  be  made, 
or  notice  given,  in  order  to  fix  the  period  of  maturity  when 
the  statute  commences.     When  right  of  action  on  the  in- 


'  Chappie  V.  Durston,  i  C.  &  J.,  i.  '  See  ante,  §  884,  vol.  i. 

'Byles  (Sharsvvood's  ed.)  [*33i],  499;  i  Robinson's  Practice  (new  ed.),  425. 

*  Wheeler  v.  Warner,  47  N.  Y.,  519;  Herrick  v.  Woolverton,  41  N.  Y.,  581. 

*  Little  V.  Blunt,  9  Pick.,  488;  Wenman  v.  Mohawk  Ins.  Co.,  13  Wend.,  267. 
'  Clayton  v.  Gosling,  5  B.  &  C,  360  (i  i  E.  C.  L.  R.) 


246  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.         §   12X6. 

strument  secured  expires,  all  claim  to  enforce  the  security, 
which  is  a  mere  incident  of  the  principal  obligation,  ex- 
pires with  it.* 


SECTION    IX. 

EVIDENCE. 

§  1 2 1 6.  Under  the  various  titles  which  have  been  already 
discussed,  the  general  principles  of  evidence  touching  them 
respectively  have  been  stated.  And  within  the  scope  of 
this  volume,  which  confines  itself  more  particularly  to  the 
questions  which  peculiarly  concern  negotiable  instruments, 
but  little  more  remains  to  be  said.  The  rule  of  the  common 
law  that  a  party  interested  should  not  testify  in  his  own  be- 
half has  been  generally  abrogated  in  the  United  States  by 
statute  ;  and  the  question  of  competency  of  witnesses  must 
be  solved  in  the  several  States  where  it  arises  accordiagly 
as  they  have  continued  or  modified  the  common  law  rule. 

§  1217.  Whether  pa^'ty  to  instrument  may  be  witness  to 
impeach  it. — At  one  time  there  prevailed  in  England  a  pe- 
culiar rule  of  evidence  respecting  written  instruments,  that 
no  party  thereto  should  be  permitted  to  impeach  their 
validity.  And  in  a  leading  case,  where  the  indorser  of  a 
note  was  offered  to  prove  it  usurious,  his  testimony  was 
held  illegal,  Lord  Mansfield  saying  :  "  It  is  of  consequence 
to  mankind  that  no  person  shall  hang  out  false  colors  to 
deceive  them  by  first  affixing  his  signature  to  a  paper  and 
afterward  giving  testimony  to  invalidate  it."*  But  it  was 
subsequently  overruled.^  The  United  States  Supreme  Court 
has,  however,  adopted  it  in  so  far  as  it  applies  to  negotiable 


*  City  of  Fort  Scott  v.  Schulenberg,  22  Kansas,  658 ;  Schmucker  v.  Sibert,  18 
Kansas,  176. 

*  Walton  V.  Shelly,  i  Term  R.,  296. 

*  Jordaine  v.  Lasbrooke,  7  T.  R..  601  ;  Rich  v.  Topping,  3  T.  R.,  27. 


J   121  7.  EVIDENCE.  247 

instruments/  and  so  also  have  some  of  the  State  courts. 
But  the  better  opinion  is,  that  negotiable  instruments  enjoy 
no  immunity  from  the  general  doctrines  of  evidence,  and 
that  any  party  to  a  written  contract,  negotiable  or  other- 
wise, is  competent  to  testify  as  to  its  invalidity.^ 

The  rule  of  exclusion,  where  applied,  is  generally  limited 
to  negotiable  securities  indorsed  and  put  in  circulation  be- 
fore maturity  or  dishonor.''  In  a  recent  decision,  the  United 
States  Supreme  Court  has  given  its  concurrence  in  the  doc- 
trine that  the  rule  of  exclusion  applies  "  only  to  a  case 
where  a  man,  by  putting  his  name  to  a  negotiable  security, 
had  given  currency  and  credit  to  it  ;  and  does  not  apply  to 
a  case  between  the  original  parties,  where  the  paper  has  not 
been  put  into  circulation,  and  each  of  the  parties  was  cog- 
nizant of  all  the  facts."  ^ 

'  Scott  V.  Lloyd,  12  Pet.,  145  ;  U.  S.  v.  Leffler,  11  Pet.,  86 ;  Bank  of  Metropo- 
lis V.  Jones,  8  Pet.,  12  ;  Bank  U.  S.  v.  Dunn,  6  Pet.,  51  ;  Saltmarsh  v.  Tuthill,  13 
How.,  229  ;  Henderson  v.  Anderson,  ^  Id.,  73.  The  United  States  Supreme 
Court  held,  in  Bank  U.  S.  v.  Dunn,  6  P'et.,  57,  that  "  it  is  a  well-settled  principle 
that  no  man  who  is  a  party  to  a  ne^^otiable  note  shall  be  permitted,  by  his  own 
testimony,  to  invalidate,"  applying  (t  to  the  case  of  an  indorser.  In  Bank  of  Me- 
tropolis V.  Jones,  8  Pet.,  12,  it  was  held  that  the  drawer  of  a  note  is  equally  in- 
competent to  prove  facts  which  tend  to  discharge  the  indorser.  In  Henderson 
V.  Anderson,  3  How.,  73,  an  effort  to  overthrow  these  decisions  proved  unavail- 
ing ;  and  in  Saltmarsh  v.  Tuthill,  13  How.,  229,  it  was  held  that  a  party  to  ne- 
gotiable paper  was  as  incompetent  to  prove  facts  which,  taken  in  connection 
with  others,  would  invalidate  it,  as  to  prove  such  as  would  of  themselves  invali- 
date it.  The  rule  of  exclusion,  however,  is  limited  by  the  Supreme  Court  to 
negotiable  paper,  and  is  not  applied  to  other  securities.  U.  S.  v.  Leffler,  11  Pet., 
86. 

*  Gaul  V.Willis,  26  Penn.  St.,  259,  but  now  abolished  in  Pennsylvania  by  stat- 
ute ;  State  Bank  v.  Rhoads,  89  Penn.  St..  353  ;  Lincoln  v.  Fitch,  42  Me.,  456  ; 
Webster  v.  Vickers,  2  Scam.,  295  ;  Drake  v.  Henly,  Walk.,  541  ;  Rohrer  v.  Morn- 
ingstar,  18  Ohio,  579  ;  Strang  v.  Wilson,  i  Mor.  (Iowa),  84;  Smith  wick  v.  An- 
derson, 2  Swan,  573  (overruling  Stump  v.  Napier,  2  Yerg.,  35)  ;  Shamburgh  v. 
Commagere,  10  Mart.,  139  ;  Dewey  v.  Warrimer,  71   111.,  198. 

'  Taylor  v.  Beck,  3  Rand.,  316 ;  Baring  v.  Reeder,  4  Hen.  &  M.,  424  ;  Orr  v. 
Lacey,  2  Doug.  (iNIich.),  230  ;  Ringgold  v.  Tyson,  3  Har.  &  J.,  172  ;  Jackson  v. 
Packer,  13  Conn.,  342  ;  Gorham  v.  Carroll,  3  Littell,  221  ;  Haines  v.  Dennett,  il 
N.  Hamp..  180;  Freeman  v.  Britton,  2  Har.,  191  ;  St.  John  v.  McConnell,  19 
Mo.,  38  ;  Stafford  v.  Rice,  5  Cow.,  23  ;  Bank  of  Utica  v.  Hillard,  Id.,  153  (over- 
ruling Winton  v.  Saidler,  3  Johns'  Cas.,  185)  ;  Griffin  v.  Harris,  9  Port.  (Ala.), 
225  ;  Parsons  v.  Phipps,  4  Tex.,  341  ;  Pecker  v.  Sawyer,  24  Vt.,  459 ;  Guy  v. 
Hull,  3  Murph.,  150  ;  Bank  of  Mo.  v.  Hull,  7  Mo.,  273;  Knight  v.  Packard,  3 
McCord,  71. 

*  Parke  v.  Smith,  4  Watts  &  S.,  287  ;  Thayer  v.  Grossman,  i  Mete,  46,  Shaw 
C.  J. ;  Smithwick  v.  Anderson,  2  Swan,  573. 

'  Davis  V.  Brown,  94  U.  S.  (4  Otto),  427,  Field,  J. ;  see  Fox  v.  Whitney,  16 
Mass..  118. 


248  ACTION  OR  SUIT  UPON  BILLS  AND  NOTES.  §   I2l8. 

§  1 2 1 8.  The  identity  of  each  party  to  the  instrument 
must  be  proved,  and  this  requisition  is  satisfied  by  proof 
that  the  party  has  the  same  christian  and  surname.^  The 
inconvenience  of  the  contrary  doctrine,  which  obtained  in 
some  cases,  led  to  its  being  overruled.  "  The  transactions 
of  the  world  could  not  go  on  if  such  an  objection  were  to 
prevail,"  is  the  language  of  Lord  Denman,  in  answer  to 
objection  to  the  sufficiency  of  such  proof.^  Further  evi- 
dence of  identity  may  be  required  when  the  name  is  a  very 
common  one  in  the  country  ;  ^  and  so,  perhaps,  if  the  party 
be  a  marksman.*  Where  the  difference  between  the  name  of 
the  payee  and  indorser  consists  only  in  the  insertion  of  a  mid- 
dle initial,  it  will  be  presumed  that  they  are  the  same  person.® 
But  the  same  presumption  does  not  apply  as  to  the  identity 
of  the  maker  and  indorser,  although  the  names  be  identical.^ 
Where  a  party  signs  by  initials,  it  must  be  shown  who  they 
intended  to  signify.''' 

§  1 2 19.  Proof  of  signature. — In  many  of  the  States  proof 
of  the  signature  of  any  party  sued  upon  a  bond,  bill,  note, 
or  other  evidence  of  debt  is  dispensed  with  by  statute,  un- 
less put  in  issue  by  denial  supported  by  affidavit,  or  in  some 
other  manner  prescribed.  Where  no  such  statute  applies, 
evidence  of  handwriting  is  the  most  usual  mode  of  proof. 
Persons  familiar  with  the  party's  handwriting  may  testify 
as  to  their  opinion  of  its  genuineness.  The  witness  is  per- 
mitted in  some  jurisdictions  to  compare  the  signature  with 
known  genuine  specimens  of  the  party's  handwriting,  intro- 
duced for  that  purpose  in  order  to  form  an  opinion  ;  ®  in 

'  Greenshields  v.  Crawford,  9  M.  &  W.,  314  ;  Harrington  v.  Fry,  Ryan  &  M., 
90 ;  Sewell  v.  Evans,  4  Q.  B.,  626  ;  Roden  v.  Ryde,  4  Q.  B.,  629  ;  Hamber  v 
Roberts,  7  C.  B.,  861  ;  2  Parsons  N.  &  B.,  479. 

'  Sewell  V.  Evans,  4  O.  B.,  626.  '  Jones  v.  Jones,  9  M.  &  W.,  75. 

*  Whitelock  v.  Musgrove,  i  Cromp,  &  M.,  511  ;  3  Tyrw.,  541 ;  2  Parsons  N, 
&  B.,  479. 

'  Hunt  V.  Stewart,  7  Ala.,  525. 

'  Curry  v.  Bank  of  Mobile,  8  Port.  (Ala.),  360. 

'  Jones  V.  Turnour,'  4  Car.  &  P.,  204. 

'  Farmers'  Bank  v.  Whitehill,  10  Serg.  &  R.,  no;  Lyon  v.  Lyman,  9  Conn. 
55  ;  Moody  v.  Rowell,  17  Pick.,  490;  Hammond's  Case,  2  Greenl.,  33. 


§    I2  20.  EVIDENCE.  24O 

Others  he  is  not.^  In  England,  an  expert  was  not  by  com- 
mon law  permitted  to  testify  from  comparison  of  signatures 
merely,^  but  by  statute  such  evidence  is  now  admissible.^ 
Where  genuine  signatures  are  contained  in  papers  which 
are  in  evidence,  the  jury  is  permitted  to  compare  the  con- 
tested signature  with  them.'* 

§  1220.  Admissions. — The  admission  of  the  party  dis- 
penses with  further  proof  of  his  signature.*  So  a  payment, 
or  promise  to  pay,  dispenses  with  proof  of  signature®  or  of 
agent's  authority.'''  And  as  a  general  rule,  the  admission 
of  a  fact  obviates  the  necessity  of  other  proof  thereof,  or  of 
any  fact  which  is  necessary  to  the  existence  of  the  fact  ad- 
mitted. 

But  an  admission  may  be  explained  and  shown  to  have 
been  made  under  a  mistake,  it  hcmg  prima  facie,  but  not 
conclusive  evidence.  A  written  admission  by  an  indorser 
that  he  received  notice  of  dishonor,  has  been  held  not  to 
estop  him  from  showing  that  he  made  it  under  misappre- 
hension or  mistake  as  to  the  bill  referred  to,  and  that  no 
notice  had  in  fact  been  received.^  The  principle  was  well 
stated  in  an  English  case  by  Bayley,  J.  :  "There  is  no  doubt 
but  that  the  express  admissions  of  a  party  to  the  suit,  or 
admissions  implied  from  his  conduct,  are  evidence,  and 
strong  evidence  against  him  ;  but  we  think  that  he  is  at 
liberty  to  prove  that  such  admissions  were  mistaken  or  un- 
true, and  that  he  is  not  estopped  or  concluded  by  them, 
unless  another  person  has  been  induced  to  alter  his  condi- 
tion by  them."^ 
, 1 

'  Rowt  V.  Kyle,  i  Leigh,  216  ;  Jackson  v.  Phillips,  9  Cow.,  94 ;  Pope  v.  Askew, 
I  Ired.,  16.  This  is  the  English  rule.  Macferson  v.  Thoytes,  Peake,  20  ;  Brook- 
hard  V.  Woodley,  Id.,  20  ;  overruling  Allesbrook  v.  Roach,  i  Esp.,  351. 

"  Gurney  v.  Langlands,  5  B.  &  Aid.,  330;  Rex  v.  Cator,  4  Esp.,  117. 

M7  &  18  Vict.,  1854. 

•  Doe  V,  Suckermore,  5  A.  &  E.,  703  ;  Doe  v.  Newton,  Id.,  514. 
'  Hall  V.  Phelps,  2  Johns,  451. 

"  Helmsley  v.  Loader,  2  Camp.,  450  ;  Shaver  v.  Ehle,  16  Johns,  20I. 
'  Linders  v.  Bradwell,  5  C.  B.,  583. 

•  Commercial  Bank  v.  Clark,  28  Vt.,  325. 

•  Heane  v,  Rogers,  9  Barn.  &  Cres.,  577. 


CHAPTER  XXXVIII. 

THE    DISCHARGE    OF    BILLS    AND    NOTES    BY    PAYMENT. 


SECTION    I. 
NATURE   OF   PAYMENT. 

§  1 22 1.  By  payment  is  meant  the  discharge  of  a  contract 
to  pay  money  by  giving  to  the  party  entitled  to  receive  it, 
the  amount  agreed  to  be  paid  by  one  of  the  parties  who 
entered  into  the  agreement.  Payment  is  not  a  contract. 
It  is  the  discharge  of  a  contract  in  which  the  party  of  the 
first  part  has  a  right  to  demand  payment,  and  the  party  of 
the  second  part  has  a  right  to  make  payment.  A  sale  is 
altogether  different.  It  is  a  contract  which  does  not  extin- 
guish a  bill  or  note,  but  continues  it  in  circulation  as  a  valid 
security  against  all  parties.  And  it  is  necessary  to  consti- 
tute a  transaction  a  sale  that  both  parties  should  then  ex- 
pressly or  impliedly  agree,  the  one  to  sell,  and  the  other  to 
purchase  the  paper.^     Whether  the  transaction  is  a  pur- 

>  Lancev  v.  Clark,  64  N.  Y.,  209 ;  affi'g  S.  C.  8  N.  Y,  S.  C.  (3  Hun),  575  ;  East- 
man V.  Plumer,  32  N.  H.,  238.  In  this  case  the  defendant  signed  a  note  as 
surety  for  the  maker.  The  note  was  indorsed  in  blank,  and  the  indorsee  called 
on  the  maker  for  payment.  The  latter  paid  and  received  it.  In  fact  the  money 
used  in  payment  had  been  placed  in  the  hands  of  the  principal  by  a  third  party, 
who  sent  it  to  purchase  the  note  through  him  as  agent,  which  fact,  however, 
was  unknown  to  the  holder.  This  third  party  sued  the  surety  ;  but  it  was  held 
that  he  could  not  recover,  the  transaction  being  regarded  as  a  payment  by  the 
maker  which  extinguished  the  instrument.  Perley,  C.  J.,  saying:  "The  con- 
tract of  the  defendant  was  to  pay  the  note  to  Roby,  the  payee  or  order.  By  his 
indorsement  in  blank,  Roby  ordered  the  note  to  be  paid  to  the  indorsee,  or  to 
such  other  person  as  should  become  the  holder  of  the  note  by  transfer  of  the 
note  from  Roby.  But  the  holder  under  Roby's  indorsement  has  made  no  trans- 
fer of  the  note  as  an  existing  security.  He  has  received  the  amount  due  on  the 
note  from  the  principal  debtor,  and  given  up  the  note  to  him  as  paid  and  dis- 
charged. Looking  at  the  case,  then,  as  a  mere  matter  of  contract,  according  to 
his  original  undertaking  on  the  note,  the  defendant  has  hot  bound  hirrtself  to 
pay  it  to  this  plaintiff,  because  Roby,  the  payee,  has  never  ordered  the  contents 
(250) 


§   1222.  NATJRE    OF    PAYiMENT.  25 1 

chase  or  a  payment,  is  a  question  for  the  jury  where  the 
facts  are  in  dispute,^  to  be  resolved  according  to  the  inten- 
tion of  the  parties,  and  looking  to  the  substance  of  the 
matter  rather  than  its  form.* 

Credit  given  by  the  drawee  of  a  bill,  or  by  a  party  to  a 
bill  or  note,  who  is  liable  for  its  payment  to  the  holder  at 
his  request,  is  equivalent  to  payment.^  But  if  a  bill  ac- 
cepted for  the  drawer's  accommodation  be  sent  to  bank  for 
collection,  and  be  credited  to  the  holder  at  maturity,  it  has 
been  held  that  the  bank,  as  its  holder,  may  sue  the  ac- 
ceptor.* "  Payment  of  a  debt  is  not  necessarily  a  payment 
of  money  ;  but  that  is  payment  which  the  parties  contract 
shall  be  accepted  as  payment."  ° 

§  1222.  Payment  can  not  be  converted  into purcJiase. — ■ 
When  a  party  to  the  instrument  produces  the  money  and 
takes  it  in,  he  can  not  show  that  he  was  acting  as  the  secret 
agent  of  another,  and  convert  that  other  into  a  purchaser.* 
And  when  a  stranger  calls  upon  the  holder  of  an  overdue 
note,  inquires  for  it,  asks  if  he  is  willing  to  receive  the 
money  upon   it,  and   pays  the  amount  due,   and  receives 

to  be  paid  to  him.  The  holder  of  the  note  was  not  bound  to  assign  it.  He 
might  insist  that  the  note  should  be  paid  and  discharged  before  he  delivered  it 
out  of  his  hand.  If  he  transferred  the  note  by  delivery,  his  assignment  would 
still  be  a  contract   involving   certain    liabilities   on  his    part.      He  would,  for 

instance,  be  held  to  warrant  that  the  note  was  genuine This  defendant 

was  surety,  and  was  interested  that  the  note  should  be  paid  by  the  principal. 
The  holder  called  on  the  principal  to  pay,  and  he  came  with  the  money,  paid  it 
over,  and  the  note  was  given  up  to  him  by  the  holder,  with  the  understanding 
on  his  part  that  it  was  paid  and  discharged.  So  far  as  the  holder  of  the  note 
and  the  surety  had  any  information,  the  note  was  paid,  and  the  surety  was  dis- 
charged, and  had  a  right  to  rely  on  the  transaction  as  a  payment.  But  if  the 
plaintiff  can  maintain  this  action,  the  surety  might  be  called  on  to  pay  the  debt 
at  any  time  within  six  years  after  it  fell  due,  in  virtue  of  a  secret  arrangement 
between  the  plaintiff  and  the  principal  debtor,  by  which  the  principal  would  be 
enabled  to  deceive  his  surety  with  every  appearance  of  having  paid  the  debt, 
and  so  relieved  the  surety  from  his  liability."  Approved  in  Greening  v.  Patten, 
51  Wise,  150. 

'  Dougherty  v.  Ueeriey,  45  Iowa,  443.  '  Swope  v.  Leffingwell,  72  Mo.,  348. 

^  Savage  v.  Merle,  5  Pick.,  83. 

*  Pacific  Bank  v.  Mitchell,  9  Mete,  297.  But  see  chapter  XI,  vol.  I,  §§  325 
et  seq. 

'  Hufifmans  v.  Walker,  26  Gratt.,  315,  Christian,  J. 

'  Eastman  v.  Plumer,  32  N.  H.,  238. 


252  DISCHARGE    BY    PAYMENT.  §    1 223. 

the  paper,  but  declines  to  have  it  cancelled,  and  says  noth- 
ing about  a  purchase — the  transaction  amounts  to  a  pay- 
ment, and  can  not  be  regarded  as  a  sale,  though  the  paper 
be  payable  to  bearer.  In  such  a  case  it  was  said  in  New 
York,  by  Welles,  J.  :  "  It  is  true  he  (the  stranger)  declined 
liaving  it  cancelled  ;  but  that  circumstance  was  not  enough 
to  overcome  the  presumption  arising  from  the  facts  proved, 
that  it  was  paid  and  extinguished.  It  does  not  prove  a 
purchase,  and  unless  it  was  purchased  by  Riley  (the  stranger), 
it  was  satisfied."^  An  action  for  money  had  and  received 
lies  against  a  party  who  fraudulently  procures  surrender  of 
his  note  without  payment ;  and  limitation  only  commences 
when  the  fraud  is  discovered.* 

In  treating  the  subject  of  payment,  we  shall  consider : 
(i)  By  whom  and  to  whom  payment  may  be  made.  (2) 
When  payment  may  be  made,  and  the  effect  of  payment. 
(3)  In  what  medium  payment  may  be  made.  (4)  Condi- 
tional and  absolute  payment ;  taking  bill  or  note  for  or  on 
account  of  debt.  (5)  Application  of  payment.  (6)  Pay- 
ment S7ipra  protest,  or  for  honor.  And  shall  also  consider 
(7)  other  discharges. 


SECTION    II. 

WHO   MAY   MAKE   PAYMENT. 

§  1223.  Any  party  to  a  bill  or  note  may  pay  it ;  and  an 
indorser  who  has  been  discharged  by  failure  of  notice  may 
still  sue  a  prior  indorser  or  other  parties  who  were  not  dis- 
charged, because,  although  not  compelled  to  pay  it,  he  ac- 
quires the  right  of  the  holder  from  whom  he  took  the 
instrument,  or  is  remitted  to  his  own  rights  as  indorsee.^ 
But  it  seems  that  if  the  indorser  has  another  note  given 

'  Burr  V.  Smith,  21  Barb,,  262. 

'  Penobscot  R.R.  Co,  v.  Mayo,  67  Me.,  470. 

•  Ellsworth  V.  Brewer,  11  Pick,,  316. 


§   1225-  WHO    MAY    MAKE    PAYMENT.  253 

him  to  secure  and  indemnify  him  for  his  indorsement,  and, 
not  being  notified,  waives  the  defence,  and  voluntarily  pays 
the  bill  or  note,  he  can  not  enforce  the  note  given  him  as 
indemnity.^  And  a  stranger  has  no  right  to  pay  or  dis- 
charge the  contract  of  another,  and  can  not  pay  a  bill  or 
note  so  as  to  acquire  the  rights  of  a  holder,  except  sicp7'a 
protest,  as  hereinafter  indicated.*  But  a  stranger  may 
always  purchase  a  bill  or  note  with  the  consent  of  the 
holder. 

And  if  a  stranger  takes  up  a  bill  payable  at  a  banker's,  it 
is  not  necessarily  a  payment  by  the  acceptor,  for  it  may  be 
a  purchase  of  the  bill  which  gives  him  a  right  to  require 
payment  of  the  acceptor  and  others  liable.^  A  personal 
representative  of  an  indorser  can  not  purchase — he  can  only 
pay  the  note — as  the  policy  of  the  law  forbids  his  speculat- 
ing on  the  subject  of  his  trust,  for  his  own  benefit.'* 

§  1224.  The  indorser  should  assure  himself  before  he 
■makes  pay77tent  that  there  were  no  laches  in  respect  to  pre- 
sentment, protest,  or  notice,  which  operated  a  discharge  of 
prior  parties,  as  well  as  himself  ;  for  if  the  holder  had  no 
right  to  enforce  payment  against  him  or  his  antecedents, 
his  unnecessary  payment  could  not  revive  their  liability,  and, 
unless  made  under  circumstances  of  fraud  or  mistake,  which 
entitled  him  to  recover  the  amount  back  from  the  holder, 
the  loss  would  fall  upon  him.^  If  he  pays  under  mistake 
of  fact  when  there  were  laches  he  may  recover  back  the 
amount.^ 

§  1225.  Payor  should  see  that  holder  traces  legal  title. — 
The  maker  of  a  note  or  the  acceptor  of  a  bill  must  satisfy 

'  Bachellor  v.  Priest,  12  Pick.,  399. 

"^  Edwards  on  Bills,  535  ;  see  §§  1222,  1254;  Burton  v.  Slaughter,  26  Grat., 
919. 

'  Deacon  v,  Strodhart,  2  Man.  &  G.,  317  ;  Byles  on  Bills  (Sharswood's  ed.), 

r2i6],  354. 

*  Burton  v.  Slaughter,  26  Grat.,  919. 

^  Roscoe  V.  Hardy,  12  East.,  434 ;  Turner  v.  Leech,  4  Bam.  &  Aid.,  451. 

•  rosi,  §  1226. 


254  DISCHARGE    BY    PAYMENT.  §   1226. 

himself,  when  it  is  presented  for  payment,  that  the  holder 
traces  his  title  through  genuine  indorsements ;  for  if  there 
is  a  forged  indorsement,  it  is  a  nullity,  and  no  right  passes 
by  it.  And  payment  to  a  holder  under  a  forged  indorse- 
ment would  be  invalid  as  against  the  true  owner,  who  might 
require  it  to  be  paid  again.^  But  the  maker  or  acceptor 
might  recover  back  the  money  as  paid  under  a  mistake  of 
fact.^  When,  however,  the  signature  of  the  drawer  is  forged, 
should  the  drawee  accept  or  pay  the  bill,  he  becomes  abso- 
lutely bound,  because  it  is  his  duty  to  know  the  drawer's 
handwriting ;  and  if  he  pays  the  money  he  can  not  recover 
it  back.^  But  acceptance  does  not  admit  the  signature  of 
the  drawer  as  indorser  also  ;  ^  nor  the  authority  of  an  agent 
to  indorse  a  bill  drawn  by  him  as  agent  of  the  drawer.^  If 
an  indorser  pays  a  bill  or  note  upon  which  there  is  a  prior 
forged  indorsement,  he  can  not  recover  back  the  amount, 
because  his  indorsement  was  in  itself  a  warranty  that  the 
prior  indorsements  were  genuine.®  The  payor  should  also 
satisfy  himself  of  the  identity  of  the  holder ;  for  he  can 
not  defend  himself  against  the  real  payee  by  showing  that 
he  paid  the  amount  of  the  bill  or  note  to  another  per- 
son of  the  same  name,  in  good  faith  and  in  the  usual  course 
of  business.' 

§  1226.  Payments  under  mistake  of  law  or  fact. — It  is  a 
general  principle  that  money  paid  with  knowledge  of  facts, 
but  under  a  mistake  of  law,  can  not  be  recovered  back. 
But  a  party  paying  money  under  a  mistake  of  the  real  facts 
may  recover  it  back.    Therefore,  where  a  bank  paid  a  post- 

^  Smith  V.  Chester,  i  Term  R.,  654 ;  Canal  Bank  v.  Bank  of  Albany,  i  Hill, 
287  ;  Goddard  v.  Merchants'  Bank,  2  Sandf.,  247. 

^  See  chapter  XLil,  on  Forgery,  section  iv. 

'Smith  V.  Mercer,  6  Taunt.,  76;  Price  v.  Neal,  3  Burr.,  1354;  Bank  U.  S.  v. 
Bank  of  Georgia,  10  Wheat.,  333. 

*  Robinson  v.  Yarrow,  7  Taunt.,  455.     See  ante,  vol.  I,  §  538  et  seq. 
^  Story  on  Bills,  §  412  ;  ante,  vol.  i,  §  539. 

°  See  chapter  xxr,  vol.  i,  §  672. 

'Graves  v.  American  Exchange  Bank,  17  N.  Y.,  205. 

*  Adams  v.  Reeves,  68  N.  C,  134. 


^    1227.  WHO    MAY    MAKE    PAYMENT.  255 

dated  check  to  a  holder  who  knew  that  the  drawer  was  in- 
solvent, and  that  the  drawee  had  no  funds,  but  was  in  ex- 
pectation of  them  that  day,  and  none  were  received  by  the 
bank,  it  was  held  that  the  amount  might  be  recovered 
back.^  So  an  indorser,  discharged  by  laches,  who  pays  a 
bill  to  the  holder  under  a  misrepresentation  of  facts  may 
recover  back  the  amount,*^  and  so  if  such  indorser  pays  the 
bill,  relying  on  the  notarial  certificate  of  due  presentment, 
when  in  fact  no  such  presentment  was  made.^ 

§  1227.  Vouchers  of  payment. — The  party  making  pay- 
ment should  insist  on  the  presentment  of  the  paper  by  the 
party  demanding  payment,  in  order  to  make  sure  that  it  is 
at  the  time  in  his  possession,  and  not  outstanding  in  an- 
other. And  if  at  the  time  he  makes  payment  it  is  out- 
standing, and  held  by  a  bona  fide  holder  for  value,  he  will  be 
liable  to  pay  it  again,  and  a  receipt  taken  will  be  no  pro- 
tection.^ The  party  making  payment  of  the  bill  or  note 
should  also  not  fail  to  insist  upon  its  being  surrendered  up, 
as  a  voucher  that  the  party  receiving  the  money  was  entitled 
to  do  so,  and  also  that  he  has  paid  it  to  him.^  The  posses- 
sion of  the  note  by  the  maker  is  presumptive  evidence  that 
he  has  paid  it ;  ^  and  so,  likewise,  is  the  possession  of  the  bill 

'  Martin  v.  Morgan,  3  Moore,  635  ;  see  Adams  v.  Reeves,  j«^r<z. 

""  Milnes  v.  Duncan,  6  B.  &  C,  671.  'Talbot  v.  Nat.  Bank,  129  Mass.,  67. 

*  Wheeler  v.  Guild,  20  Pick.,  545  ;  Davis  v.  Miller,  14  Grat.,  i  ;  Wilcox  v. 
Aultman,  64  Geo.,  544. 

^S&&post,  §  1228,  Otisfield  v,  Mayberry,  63  Me.,  197  (1874),  Appleton,  C.  J., 
saying :  "  The  maker  of  a  note  has  a  right  to  its  possession  upon  payment.  In 
his  hands  it  is  evidence  of  such  payment.  In  the  hands  of  a  stranger  it  \s prima 
facie  evidence  of  indebtedness.  If  a  suit  is  brought  it  imposes  upon  the  maker 
the  necessity  of  a  defence — the  procurement  of  testimony — the  employment  ot 
counsel,  and  the  delay,  expense,  and  vexation  of  litigation.  The  possession  of  it 
by  the  maker  is  of  importance  to  him.  The  conversion  of  it  by  another  may 
become  a  source  of  indchnite  injury.  Accordingly  it  has  been  held  in  this  State 
in  Neal  v.  Hanson,  60  Me.,  84;  in  Vermont  in  Buck  v.  Kent,  3  Vt.,  99  ;  Pierce  v. 
Gilson,  9  Vt.,  216  ;  and  in  Spencer  v.  Dearth,  43  Vt.,  98  ;  and  in  New  Hampshire 
in  Stone  v.  Clough,  41  N.  H.,  290,  that  trover  may  be  maintained  by  the  maker 
against  the  payee  for  the  conversion  or  wrongful  withholding  of  his  paid  prom- 
issory note." 

*  Dugan  v.  U.  S.,  3  Wheat.,  172  (overruling  Welch  v.  Lindo,  7  Cranch,  159); 
Norris  v.  Badger,  6  Cow.,  449 ;  Brinkley  v.  Going,  i  Breese,  2S8  ;  Story  on 
Notes,  §  452  ;  z  Parsons  N.  &  B.,  220. 


256  DISCHARGE    BY    PAYMENT.  §   15^28. 

by  the  acceptor,  provided  it  can  be  shown  that  it  passed 
out  of  his  hands  after  he  accepted  it,  though  otherwise  it 
would  seem  not.^ 

§  1228.  Receipts  for  payment. — It  is  better  also  for  the 
acceptor  or  maker  to  take  a  receipt  for  the  money  written 
upon  the  back  of  the  bill  or  note,  which  at  once  advertises 
payment  to  every  person  who  might  subsequently  come 
into  possession  of  the  instrument  by  accident  or  fraud  ; 
and  as  almost  incontestable  proof  of  the  fact.  And  it 
seems  that  such  a  receipt  may '  be  claimed  by  the  party 
making  payment  ;^  and  he  is  certainly  entitled  to  demand 
the  surrender  of  the  instrument.^  "  The  acceptor  paying 
the  bill,"  says  LordTenterden,"  has  a  right  to  the  possession 
of  the  instrument  for  his  own  security,  and  as  his  voucher 
and  discharge  pro  tanto,  in  his  account  with  the  drawer."* 
If  it  remain  in  the  hands  of  the  holder  it  may  prove  fatal 
to  the  defendant,  as  in  a  doubtful  case  its  possession  by  the 
plaintiff  would  turn  the  scale  in  his  favor.^  But  the  debtor 
can  impose  no  condition  to  his  payment.  And  therefore 
Vv^here  under  the  English  stamp  act  it  was  provided  that 
the  person  from  whom  the  money  is  due  may  provide  the 
stamp,  and  on  payment  require  the  receiver  to  give  him  a 

'  Pfiel  V.  Vanbatenberg,  2  Camp.,  439,  Lord  Ellenborough  saying :  "  Show 
that  the  bills  were  once  in  circulation  after  being  accepted,  and  I  will  presume 
that  they  got  back  to  the  acceptor's  hands  by  his  having  paid  them.  But  when 
he  merely  produces  them,  how  do  I  know  that  they  were  ever  in  the  hands  of 
the  payee,  or  any  indorsee  with  his  name  upon  them  as  acceptor.  Prove  the  bills 
out  of  the  plaintiff's  possession  accepted,  and  I  will  presume  that  they  got  back 
again  by  payment."  Barring  v.  Clark,  19  Pick.,  220  ;  Chitty  (13  Am.  ed.)  [*424]. 
478. 

'Chitty  on  Bills  (13  Am.  ed.)  [*423],  477  :  Story  on  Notes,  §  422  ;  Edwards 
on  Bills,  576  ;  Thomson,  265. 

=  Crandall  v.  Schroeppel,  i  Hun,  558  (8  N.  Y.  S.  C.  R.)  ;  4  Thomp.,  etc.,  78  ; 
Davis  v.  Miller,  14  Grat.,  i  ;  Moses  v.  True,  21  Grat.,  556;  Hansard  v.  Robin- 
son, 7  B.  &  C,  90  ;  Otistield  v.  Mayberry,  63  Me.,  197  ;  ante,  §  1227  ;  Wheeler 
V.  Guild,  20  Pick.,  545  ;  Freeman  v.  Boynton,  7  Mass.,  486  ;  Best  v.  Crall,  23 
Kansas,  482;  i  Parsons  N.  &  B.,  230,  note;  2  Parsons  N.  &  B.,  215;  Byles 
(Sharswood's  ed.)  [*2i7,  218],  357,  364;  Story  on  Notes,  §422;  Thomson  on 
Bills,  265  ;  Edwards,  576.  [It  has  been  said  otherwise  in  Massachusetts  ;  a 
doubt  has  been  intimated.     Baker  v.  Wheaton,  5  Mass.,  509.] 

*  Hansard  v.  Robinson,  7  B.  &  C,  90. 

*  Brombridge  v.  Osborne,  i  Stark.,  374. 


§   1229-  WHO    MAY    MAKE    PAYMENT.  257 

receipt,  and  pay  him  the  amount  of  the  stamp  duty,  and  if 
the  receiver  refuses  he  becomes  liable  to  a  penalty  of  ten 
pounds,  it  was  held,  that  under  this  statute  a  plea  of  tender 
was  not  sustained  by  proof  that  the  defendant  took  a  sum 
of  money  out  of  his  pocket,  and  said  to  the  plaintiff  :  "  If 
you  will  give  me  a  stamped  receipt,  I  will  pay  you  the 
money."  ^ 

§  1229.  Indo7'ser  should  take  receipt. — When  an  indorser 
makes  payment  it  is  especially  desirable  that  he  should  take 
a  receipt,  as  well  as  require  delivery  of  the  instrument;'' 
and  in  England  an  indorser,  whose  name  was  on  a  bill 
which  had  passed  to  several  subsequent  indorsees,  was  non- 
suited in  an  action  upon  the  bill  which  he  claimed  to  have 
paid  because  he  produced  no  receipt  and  no  extraneous 
proof  of  payment.^  But  now  the  mere  possession  of  the 
instrument  would  be,  in  such  a  case,  sufficient  evidence  of 
payment  and  ground  of  recovery.^  And  the  presumption 
of  payment  arising  from  possession  of  the  instrument  may 
in  any  case  be  rebutted.^  If  there  be  a  general  receipt  of 
payment  on  the  back  of  the  instrument,  it  will  be  presumed 
that  it  was  made,  by  the  maker  or  acceptor,  who  was  pri- 
marily liable  ;  ^  and  this  presumption  would  exist  even  when 
the  drawer  had  possession  and  sued  the  acceptor  upon  a  bill 
indorsed  with  such  a  receipt."^  But  a  receipt,  while  it  is  an 
admission,  is  not  so  conclusive  between  the  parties  (though 
it  is  as  to  a  third  party  who  has  acted  on  the  faith  of  it)  as 


'  Laing  v.  Meader,  i  Car.  &  P.,  257,  Abbott,  C.  J.,  said :  "  This  is  no  proof  of 
a  tender;  the  offer  of  the  money  must  be  unconditional." 

°Storj^  on  Notes,  §  452. 

'Mendez  v.  Carreroon,  i  Ld.  Raym.,  742  (1701). 

*  Dugan  V.  U.  S.,  3  Wheat.,  172 ;  Warren  v.  Oilman,  15  Me.,  70 ;  Bowie  v.  Du- 
vall,  I  Gill  &  J.,  175  ;  Bank  of  Kansas  City  v.  Mills,  24  Kansas,  610;  Wicker- 
sham  V.  Jarvis,  2  Mo.  Ap.,  280;  Bond  v.  Storrs,  13  Conn.,  412;  Campbell  v. 
Humphreys,  2  Scam.,  478;  Brinkley  v.  Going,  i  Breese,  228;  Story  on  Notes, 
§  452.     See  vol.  I,  §  576,  and  vol.  2,  §§  1 198,  1230. 

'  Fellows  V.  Cress,  5  Blackf.,  536. 

'Scholey  v.  Walsby,  Peake  Cas.,  24;  Jones  v.  Fort,  9  B.  &  C,  764.        ''  Ibid, 

Vol.  II.— 17 


258  DISCHARGE    BY   PAYMENT.  §   I23O. 

to  exclude  explanation  by  parol  evidence.*  Evidence  of  a 
party's  pecuniary. ability  to  pay  for  many  years  after  judg- 
ment against  him,  does  not  tend  to  show  that  he  has  paid, 
and  is  considered  immaterial  ;^  and  even  when  coupled  with 
proof  of  the  pecuniary  distress  of  the  holder  of  a  note, 
the  pecuniary  ability  of  the  party  sued  has  been  held  irrele- 
vant, and  inadmissible  as  tending  to  prove  payment.^  But 
similar  circumstances  have  been  deemed  sufficient  to  require 
proof  of  the  holder  that  he  gave  value.* 


SECTION   III. 

TO   WHOM   PAYMENT   MAY   BE   MADE. 

§  1230.  Payment  of  a  bill  or  note  should  be  made  to  the 
legal  owner  or  holder  thereof,  or  some  one  authorized  by 
him  to  receive  it.  If  it  be  payable  to  bearer  or  indorsed  in 
blank,  any  person  having  it  in  possession  may  be  presumed 
to  be  entitled  to  receive  payment,  unless  the  payor  have 
notice  to  the  contrary  ;  and  a  payment  to  such  person  will 
be  valid,  although  he  may  be  a  thief,  finder,  or  fraudulent 
holder.^ 

§  122,0a.  Whether  pay me7it  may  be  made  to  party  in  pos- 
session of  instrument  payable  to  order  and  unindorsed. — 
If  the  instrument  be  payable  to  a  particular  party  or  order, 
and  unindorsed  by  him,  it  has  been  held  that  a  payment  to 
any  person  in  actual  possession  will  still  be  valid,  because, 

'Scholey  v.  Walsby,  supra  ;  Chitty  on  Bills  (13  Am.  ed.),  478. 

'  Daby  v.  Ericsson,  45  N.  Y.,  786. 

'Alexander  v.  Dutcher,  14  N.  Y.  S.  C.  (7  Hun),  440. 

^  Duerson  v.  Alsop,  27  Grat.,  229. 

^  Mauran  v.  Lamh,  7  Cow.,  174  ;  Bachellor  v.  Priest,  12  Pick.,  406  ;  Bank  U. 
S.  V,  U.  S.,  2  How.,  711  ;  Dugan  v.  U.  S.,  2  Wheat.,  172;  Bank  of  Utica  v. 
Smith,  18  Johns,  230;  Adams  v.  Oakes,  6  Car.  &  P.,  70;  Owen  v.  Barrow,  4 
Bos.  &  P.,  loi  ;  Goodman  v.  Harvey,  4  Ad.  &  E.,  870;  Story  on  Bills,  §  415  ; 
Story  on  Notes,  §  454;  Edwards  on  Bills,  537:  Merritt  v.  N.  Y,,etc„  R.R.,  2T 
N.  Y.  S.  C.  (14  Hun),  324. 


<5    1230.  TO  WHOM  PAYMENT  MAY  BE  MADE.  259 

although  he  may  have  no  legal  title,  he  may  be  the  agent 
of  the  actual  owner.^  But  this  doctrine,  it  seems  to  us, 
goes  too  far.  Such  person  in  actual  possession  may  perhaps 
be  presumed  to  be  agent  of  the  holder,  prima  facie.  Bui 
even  this  is  doubtful,  and  to  us  seems  wrong,  for  nothing 
is  more  common  than  to  indorse  negotiable  instruments  to 
agents  for  collection ;  and  if  the  bill  or  note  be  unindorsed 
in  blank,  or  specially  to  the  party  having  it  in  possession, 
it  might  be  that  the  owner  had  withheld  his  indorsement 
for  the  very  purpose  of  preventing  its  collection  by  a  person 
not  entitled  to  receive  the  money  ;  and  if  this  were  so,  the 
presumption  of  agency  (if,  indeed,  it  be  at  all  admitted) 
would  be  rebutted.^ 

The  contrary  doctrine  destroys  a  great  and  salutary 
safeguard  to  the  rights  of  proprietors  of  negotiable  instru- 
ments, and  to  a  large  degree  breaks  down  the  distinction 
between  those  payable  to  order  and  those  payable  to 
bearer.  Payment  may  be  safely  made  to  one  who  is  a 
special  indorsee,  although  there  may  be  subsequent  uncan- 
celled indorsements  of  himself  and  others  on  the  paper.' 
If  the  holder  held  and  exhibited  extraneous  evidence  of  his 
right  to  receive  payment,  it  would  suffice,  without  special 
indorsement  to  him,  or  indorsement  in  blank.'*  Payment 
clearly  should  not  be  made  save  to  a  party  in  possession  ; 
and  if  made  to  the  payee  it  is  no  discharge  if  he  had  parted 
with  the  instrument.^ 

'  Bachellor  v.  Priest,  12  Pick.,  406.  The  instrument  was  indorsed  :  "Pay  to 
J.  Flewelling-,  Esq.,  Treasurer."  Presentment  was  made  by  Dunscombe,  and 
payment  to  him  held  good. 

'Porter  v.  Cushman,  19  111.,  572;  Doubleday  v.  Kress,  50 N.  Y.,  413,  over- 
ruling S.  C,  60  Barb.,  181.     See  chapter  xx,  vol.  i,  §§  573,  574. 

*  Dugan  V.  U.  S.,  3  Wheat.,  172  ;  see  chapter  xx,  on  Presentment  for  Pay- 
ment, vol.  I,  §  576.  In  the  case  of  Mendez  v.  Carreroon,  i  Ld.  Raym.,  747,  G., 
the  fourth  indorsee  of  a  bill,  brought  suit  and  recovered  of  the  first  indorser,  D. 
D.  then  sued  B.,  the  drawer,  and  though  he  produced  the  bill  and  protest,  yet 
because  he  could  not  produce  a  receipt  for  the  money  paid  by  him  to  G.,  upon 
the  protest,  as  was  the  custom  according  to  the  testimony  of  several  merchants, 
he  was  nonsuited.  This  is  no  longer  law.  Chitty,  Jr.,  216.  See,  also,  ante 
§  1 198. 

*  Pease  v.  Warren,  29  Mich.,  9.  '  Paris  v.  Moe,  60  Ga.,  90. 


26o  DISCHARGE    BY    PAYMENT.  §   1 23 1 

§  1 23 1.  Payment  may  be  made  to  the  assignee  of  a 
bankrupt;^  the  representative  of  a  dead  owner;'*  to  the 
guardian  of  an  infant  or  insane  person  ;  ^  or  the  husband 
whose  wife  is  payee/  And  if  the  payor  should  pay  the 
bankrupt,  with  knowledge  that  the  amount  was  due  his  as- 
signee ;^  or  the  ward  in  person,  instead  of  his  guardian  ;  ^ 
or  the  married  woman,  after  knowledge  of  her  marriage, 
without  concurrence  of  her  husband,  it  would  be  invalid.' 
If  the  instrument  be  payable  to  A.  for  the  use  of  B.,  pay- 
ment must  be  made  to  A.® 

Payment  must  also  be  made  to  a  member  of  a  firm  ;  the 
duly  constituted  officer  of  a  corporation  ;  the  receiver  of  a 
court,  or  any  ministerial  officer  authorized  by  law  to  collect 
the  money. 

§  1232.  It  seems  that  if  a  single  woman  who  holds  a  bill 
or  note,  marries,  payment  to  her  after  marriage  will  not  ex- 
onerate the  acceptor,  even  if  he  does  not  know  of  her  mar- 
riage ;  ^  and  that,  if  the  holder  make  payment  to  his  former 
agent,  without  knowledge  of  revocation  by  death  of  the 
principal,  it  will  not  be  valid, ^"^ 


SECTION    IV. 

WHEN    PAYMENT    MAY   BE    MADE. 

§  1233.  Payment  can  only  be  made  before  maturity  by 
consent  of  both  debtor  and  creditor."  And  it  can  only  be 
made  with  perfect  safety  at  or  after  the  maturity  of  the  in- 
strument, unless  the  payor  receives  it  in  his  hands  and  can- 

'  Bayley  on  Bills  (2  Am,  ed.),  320;  2  Parsons  N.  &  B.,  211. 

^  Ibid. ;  Chitty  [*393],  444.  '  Ibid.  "  Chitty  [*393-4].  444- 

"  Chitty  on  Bills,  447  ;  Story  on  Bills,  §  413  ".  Kitchen  v.  Bartsch,  7  East.,  53. 

'  Leonard  v.  Leonard,  14  Pick.,  280  ;  White  v.  Palmer,  4  Mass.,  147. 

'  Barlow  v.  Bishop,  i  East.,  432.  « Cramlington  v.  Evans,  2  Vent.,  307. 

«  Story  on  Bills,  §  413.  "  Story  on  Bills,  §  413. 

-'  Ebersole  v.  Ridding,  22  Ind.,  232. 


§    I233<^'  WHEN  PAYMENT  MAY  BE  MADE.  26 1 

eels  it  ;  for  a  payment  before  maturity  is  not  in  the  usual 
course  of  business  ;  and  should  the  bill  or  note  afterward, 
and  before  maturity,  reach  the  hands  of  a  bona  fide  holder 
for  value,  without  notice,  such  holder  could  enforce  a  sec- 
ond payment.^ 

§  1233^.  Payment  at  or  after  maturity  to  legal  holder 
extinguishes  the  instrumeiit. — If,  however,  the  instrument 
be  paid  at  or  after  maturity  to  the  holder,  the  case  is  dif- 
ferent. The  instrument  is  not  only  extinguished,  but  should 
the  holder  fail  to  deliver  it  up,  and  transfer  it  to  another 
party,  such  party  would  receive  it  with  notice  upon  its  face 
that  it  was  overdue,  and  he  could  acquire  no  better  right 
or  title  than  his  transferrer  ;  and  the  plea  that  it  was  paid 
before  the  transfer  would  be  available  against  him.  Still, 
the  payor,  in  making  payment  after  maturity,  must  be  sure 
that  it  is  made  to  the  then  holder.  For,  if  it  should  have 
been  transferred  after  maturity,  and  before  payment,  to  a 
third  party,  a  payment  to  the  transferrer  would  be  invalid, 
and  the  transferee  holdinof  the  instrument  could  himself  en- 
force payment.^ 


% 


'  Burbridge  v.  Manners,  2  Camp.,  193  ;  Morley  v.  Culverwell,  7  M.  &  W.,  174; 
Da  Silva  v.  Fuller,  Chitty  [*395],  446  ;  Wheeler  v.  Guild,  20  Pick.,  545.  In  this 
case  it  appeared  W.,  the  indorsee  in  blank  of  a  note,  delivered  it  to  B.  &  G.,  at- 
torneys in  partnerships,  as  collateral  security  for  certain  debts  due  them  and 
others,  and  the  note  was  placed  among  the  private  papers  of  G.,  by  whom  the 
business  was  transacted.  The  debts  for  which  the  note  was  transferred  as  col- 
lateral security  were  paid,  and  afterward,  but  before  the  note  matured,  the  maker 
paid  the  amount  to  B.,  and  took  a  receipt  from  him  in  his  own  name  alone. 
The  note  was  not  delivered  to  the  maker,  being  with  the  private  papers  of  G. 
It  was  held  that,  as  the  note  was  not  delivered  up,  and  as  the  right  of  B.  &  G. 
to  transfer  and  collect  it  ceased  upon  payment  of  the  debts  for  which  it  was 
pledged,  and  as  the  note  was  paid  before  maturity,  the  payment  to  B.  did  not 
operate  as  a  discharge  of  the  note,  and  that  the  plaintiff  could  recover  of  the 
maker.  Ayer  v.  Hutchinson,  4  Mass.,  372  ;  Griswold  v.  Davis,  31  Vt.,  390  ; 
Story  on  Bills,  §  415  ;  Thomson  on  Bills,  246  ;  Byles  (Sharswood's  ed.)  [*2i7], 
356;  Chitty  (13  Am.  ed.)  [*395,  397],  446-8.  But  the  holder  must  be  without 
notice  of  payment.  White  v.  Kebling,  11  Johns,  128  ;  Edwards  on  Bills,  *548, 
*549.  If  a  party  lose  a  draft,  and  it  be  paid  by  the  bank  before  due,  the  loser 
may  require  it  to  be  paid  again.     Da  Silva  v.  Fuller,  supra. 

^  In  Davis  v.  Miller,  14  Gratt.,  i,  it  appeared  that  suit  was  brought  by  Miller 
&  Mayhew  against  Davis  on  his  promissor>-  note  to  E.  L.  Fant  &  Co.,  who  had 
indorsed  it  to  them  on  August  6th,  1S50,  after  it  had  fallen  due  and  been  pro- 
tested for  non-payment.  Miller  &  Mayhew  sent  Davis  notice  of  the  transfer  to 
them  on  the  9th  of  August,  but  he  did  not  receive  it  until  afterward  ;  and 


262  DISCHARGE    BY    PAYMENT.  §   1 234. 

§  1234.  Debtor  can  not  compel  payment  before  maturity. 
— The  debtor  may,  of  course,  pay  the  bill  or  note  to  any 
one  who  is  the  holder  under  an  indorsement  to  himself 
personally,  or  an  indorsement  in  blank,  at  any  time  before 
maturity,  provided  the  holder  consents  to  receive  payment. 
But  if  the  debtor,  from  the  prospect  of  some  benefit  by  the 
rate  of  exchange,  or  otherwise,  should  offer  payment  before 
the  term  arrives,  the  creditor  is  not  bound  to  take  it,  since 
the  term  of  payment  is  a  condition  of  the  bill  or  note  fixed 
equally  for  behoof  of  both  parties.^ 

§  1235.  Time  of  day  for  payme7it. — Payment  may  be 
demanded  at  any  time  after  the  commencement  of  bus- 
iness hours  on  the  day  of  maturity  of  the  bill  or 
note.  And  if  payment  be  then  refused,^  or  if  the 
house  at  which  the  instrument  is  payable  be  shut  up, 
and  no  one  is  there  to  answer,^  it  may  be  treated  as  dis- 
honored, notice  given,  and  resort  taken   upon  the  drawer 

he  had  already  on  that  day  paid  the  note  and  taken  the  receipt  of  Fant  &  Co. 
for  the  money.  This  payment  was  held  no  defence  to  the  action,  Moncure,  J., 
rendering  an  elaborate  and  able  opinion,  in  the  course  of  which  he  cited  with 
approval  the  obiter  dictum  of  Shaw,  C.  J.,  in  Baxter  v.  Little,  6  Mete.  R.,  7,  and 
advening  to  the  circumstance  that  no  decision  had  been  referred  to' holding  that 
it  was  not  a  good  defence,  he  added  :  "  On  the  other  hand,  however,  it  may  be 
answered  that  no  case  can  be  found  in  which  it  has  been  decided,  or  even  said 
that  payment  to  an  indorser  after  an  indorsement  is  a  good  defence  against  the 
indorsee.  That  no  decision  can  be  found  the  other  way  is  well  accounted  for 
by  the  fact  that  payment  of  a  negotiable  note  is  very  rarely  made  without  taking 
in  the  note,  or  having  the  payment,  if  partial,  indorsed  thereon,  and  no  occasion 
has  therefore  occurred  for  a  decision  of  the  question.     That  no  such  occasion 

has  occurred  is  itself  an  argument  in  favor  of  the  defendants  in  error 

There  is,  at  least,  as  much  reason  in  holding  the  maker  of  a  note  responsible  for 
want  of  caution  in  making  a  payment  as  for  holding  a  purchaser  responsible  for 
want  of  caution  in  making  a  purchase.  Indeed,  there  is  more.  For  due  cau- 
tion will  always  protect  the  former  against  an  improper  payment ;  while  the 
greatest  caution  may  not  protect  the  latter  against  an  improper  purchase.  The 
former  is  always  safe  in  making  payment  to  the  legal  holder  of  the  note,  which 
he  may  thereupon  require  to  be  produced  and  surrendered  to  him  ;  while  the 
latter  is  often  deceived  by  a  false  possession,  and  must  at  his  peril  look  to  the 
title,  which  may  be  separate  from  the  possession."  See,  also,  Coppman  v.  Bank 
of  Kentucky,  41  Miss.,  212  ;  Elgin  v.  Hill,  27  Cal.,  373. 

'  Forbes,  108  ;  Thomson  on  Bills,  247. 

"  Ex parte'^oWv^^,  i  Rose,  303  ;  Burbridge  v.  Manners,  i  Camp.,  193  ;  Haynes 
V.  Birks,  3  B.  &  P.,  599;  Chitty  on  Bills  (13  Am.  ed.)  [*397],  448  ;  Edwards  on 
Bills,  549;  Byles  (Sharswood's  ed.)  [*2i6],  355. 

'  Hine  v.  AUely,  4  B.  &  Ad.,  624. 


^   1236.  THE    EFFECT    OF    PAYMENT.  263 

and  indorsers.  But  the  maker  or  acceptor  has  the  whole 
day  in  which  he  is  privileged  to  make  payment,  and  though 
he  should  in  the  course  of  the  day  refuse  payment,  yet  if 
he  subsequently  on  the  same  day  makes  payment,  it  is  good, 
and  the  notice  of  dishonor  becomes  of  no  avail.^ 

A  payment  after  action  brought  will  not  prevent  the 
holder  from  proceeding  for  his  costs,  unless  they  be  in- 
cluded or  released.* 

Payment  to  a  wrong  party  of  a  bill  or  note  long  dis- 
honored, or  of  a  check  long  after  it  was  drawn,  or  of  a 
check  which  had  been  torn  into  pieces  and  pasted  together, 
does  not  discharge  the  payor,'^  for  the  circumstances  convey 
reasonable  notice  that  the  instrument  has  been  cancelled/ 


SECTION  V. 

THE   EFFECT   OF   PAYMENT,  AND  WHO   MAY   REISSUE  A   BILL   OR 

NOTE. 

§  1236.  The  maker  of  a  note  and  the  acceptor  of  a  bill 
are  the  principal  parties  bound  for  its  payment,  the  drawer 
and  indorsers  being  liable  as  sureties  ;  and  hence  a  payment 
by  the  maker  or  acceptor  discharges  the  drawer  or  indorsers 
and  cancels  the  instrument  and  the  obligation.^  When  the 
bill  is  accepted  for  accommodation  of  the  drawer,  the  latter 
is  bound  to  refund  the  amount,  should  it  be  paid  by  the 
acceptor,  and  satisfy  him  for  all  damages.^  But  the  ac- 
ceptor can  not  sue  him  on  the  bill  which  is  his  own  obliga- 


>  Hartley  v.  Case,  i  C.  &  P.,  555  ;  4  B.  &  C,  339. 

«  Toms  V.  Powell,  6  Esp.,  40 ;  Goodwin  v.  Creamer,  16  E.  L.  &  Eq.,  90 ;  Kemp 
V.  Balls,  28  Id.,  498  ;  10  Exch.,  607  ;  Tarin  v.  Morris,  2  Dall.,  115  ;  Thame  v. 
Boast,  12  Ad.  &  El.  N.  S.,  808  ;  Story  on  Bills  (Bennett's  ed.),  §423^. 

'  Scholey  v.  Ramsbottom,  2  Camp.,  485. 

*  Byles  on  Bills  (Sharswood's  ed.),  [*2i4],  352. 

'  Suydam  v.  Westfall,  2  Den.,  205  ;  Eastman  v.  Plumer,  32  N.  H.,  238. 

•  Baker  v.  Martin,  3  Barb.,  634. 


264  DISCHARGE    BY    PAYMENT.  §   1 237. 

tion,  cancelled  by  his  payment,^  though  it  is  an  item  of  evi- 
dence to  show  the  amount  on  settlement  with  the  drawer.' 
It  has  been  been  held  that  where  a  bill  was  drawn  by  one 
person  as  principal,  and  another  as  surety,  the  undertaking 
of  the  latter  is  with  the  payee  or  subsequent  holder  that  the 
bill  shall  be  accepted  and  paid,  but  that  he  incurs  no  obli- 
gation to  the  drawee  who  accepts  and  pays  it  for  accommo- 
dation.^ But  this  doctrine  has  been  overruled  on  the  ground 
that  all  the  parties  signing  a  bill  are  responsible  as  for  money 
paid  at  their  request.^ 

§  1237.  Effect  of  payment  by  drawer. — If  the  drawer  of 
a  bill  pay  part  of  it  to  the  holder,  the  better  opinion  is  that 
the  holder  may  nevertheless  sue  and  recover  of  the  acceptor 
the  whole  amount,  in  which  case  he  would  receive  that 
portion  already  paid  by  the  drawer  or  trustee  for  him,  and 
would  be  liable  to  him,  pro  tanto,  for  money  had  and  re- 
ceived to  his  use.^  Even  if  the  drawer  has  paid  the  whole 
amount  to  the  holder,  yet  if  he  have  left  the  bill  in  his  pos- 
session, and  he  should  sue  the  acceptor,  it  would  be  no 
defence  as  to  him.^  For  while  on  the  one  hand  it  may  be 
contended  that  payment  by  the  drawer,  \yho  is  a  surety  for 
the  acceptor,  is  an  entire  extinguishment  of  the  instrument, 
yet  if  this  w^ere  so,  the  drawer  himself  could  not  sue  the 
acceptor  upon  it,  but  would  have  to  sue  him  for  money 
paid  at  his  request."^     It  is  more  correct  to  regard  the  pay- 

*  See  chapter  xxxvil,  on  Action,  §§  1181,  1206  ;  Griffith  v.  Reed,  21  Wend., 
502. 

*  Bank  of  Vergennes  v.  Cameron,  7  Barb.,  143. 
^  Griffith  V.  Reed,  21  Wend,,  502. 

*  Suydam  v.  Westfall,  4  Hill,  211  ;  2  Den.,  205  ;  Edwards  on  Bills,  534,  535  ; 
Story  on  Bills,  §  420. 

^  Johnson  v.  Kennion,  2  Wils.,  262  ;  Walwyn  v.  St.  Quintin,  i  Bos.  &  Pul., 
652  ;  Jones  v.  Broadhurst,  9  C.  B.,  173,  in  which  case  the  whole  subject  is  elab- 
orately and  ably  discussed  ;  Callow  v.  Lawrence,  3  M.  &  S.,  95  ;  Hubbard  v. 
Jackson,  i  M.  &  P.,  11  (17  E.  C.  L.  R.)  ;  Byles  on  Bills  (Sharswood's  ed.),  354 
2  Parsons  N.  &  B.,  218;  Story  on  Bills,  §422  ;  contra.  Bacon  v.  Searles,  i  H. 
Bl.,  88,  now  overruled. 

^  Jones  V.  Broadhurst,  9  C.  B.,  173  ;  Thornton  v.  Maynard,  10  Com.  PI.  L.  R., 
69s  ;  Moak's  Eng.  R.,  522. 

'  2  Parsons  N.  &  B.,  218,  note  ^;  Byles  (Sharswood's  ed.),  [*2i4],  353,  note  k 


§  1238.  THE  EFFECT  OF  PAYMENT.  265 

ment  as  a  mere  extinguishment  of  the  drawer's  liability. 
And  it  can  not  matter,  nor  be  good  ground  of  defence  to 
the  acceptor  who  is  bound  to  pay  the  bill,  and  may  discharge 
that  obligation  by  payment  to  any  holder  who  sues.  It 
seems,  however,  that  if  the  acceptance  were  for  accommo- 
dation, and  the  drawer  accommodated  were  to  pay  the  bill, 
it  would  operate  as  an  absolute  extinguishment,  there  being 
no  person  in  existence  entitled  to  receive  the  money  of  the 
acceptor.^  In  England,  where  the  drawer  paid  part  of  a 
bill  and  went  into  bankruptcy,  the  acceptor  on  being  sued 
for  the  whole  amount  by  the  holder  was  sustained  to  the 
extent  of  the  partial  payment  made  in  an  equitable  plea  as 
set-off  of  an  amount  due  him  by  the  drawer, — the  holder 
being  regarded  as  suing  as  trustee  for  the  drawer  as  to  the 
part  paid  by  him.* 

§  1238.  PV/io  may  reissice  a  bill  or  note. — As  a  bill  oi 
note  when  paid  at  maturity  by  the  acceptor  or  maker  is 
thereby  utterly  extinguished,  it  is  clear  that  if  he  were  to 
reissue  it,  and  it  were  to  pass  into  the  hands  of  even  a 
bona  fide  holder,  he  could  not  hold  the  drawer  or  indorsers 
liable,  for  its  being  overdue  would  in  itself  be  sufficient  no- 
lice  of  payment.^  It  is  equally  clear  that  if  the  last  of 
several  successive  indorsers  were  to  pay  the  bill  or  note  to 
his  indorsee,  he  could  reissue  the  instrument  with  or  with- 
out his  own  indorsement  remaining  upon  it,  and  that  all 
parties  claiming  under  his  second  transfer  could  sue  and 
recover  from  all  prior  parties  who  remain  liable  to  him ; 
and  from  him  also  if  his  indorsement  were  upon  the  instru- 
ment.* 


'  Lazarus  v.  Cowie,  3  Q.  B.,  459  (43  E.  C.  L.  R.);  see  Wahv)-n  v.  St.  Quintin, 
1  Bos.  &  P.,  652  ;  Bacon  v.  Searles,  i  H.  Bl.,  88  ;  see  Redfield  &  Bis^elow's  Lead. 
Cas.,  350,  351  ;  Story  on  Bills,  §  422;  Byles  on  Bills  (Sharswood's  ed.)  [*2I5], 
354. 

"Thornton  v.  Maynard,  10  Com.  PI.  L.  R.,  695  (1875). 

'  Gordon  v.  Wansey,  21  Cal.,  ^^  ;  Gardner  v.  Maynard,  7  Allen,  456. 

*  St.  John  V.  Roberts,  31  N.  Y.,  441  ;  French  v.  Jarvis,  29  Conn.,  348 ;  Kirksey 
V.  Bates,  I  Ala.,  303  ;  Montgomery  R.R.  Co.  v.  Trebles,  44  Ala.,  258.  See  Fenn 
V.  Dugdale,  40  Mo.,  63. 


266  DISCHARGE    BY    PAYMENT.  §   1 239. 

§  1238^.  Whether  drawer  may  reissue  bill. — Differences 
of  opinion  have  arisen  as  to  the  right  of  a  drawer  to  re- 
issue a  bill.  Thus,  if  A.  were  to  draw  a  bill  upon  B.,  pay- 
able to  the  order  of  C,  and  C.  were  to  indorse  it  to  D. 
after  its  acceptance,  and  then  A.  were  to  pay  it  to  D. — 
query  arises  whether  or  not  A.  could  reissue  the  bill  to  E., 
so  as  to  give  him  the  right  to  sue  the  acceptor  upon  it. 
Clearly  E.  could  not  sue  C,  for  C.  was  the  surety  of  the 
drawer,  and  was  discharged  by  the  payment  made  by  him. 

§  1239.  Cases  in  which  drawer  can  not  reissue  bill — • 
Acceptajice  for  drawer  s  acco7nmodatio7i. — There  are  two 
cases  in  which  the  drawer  who  has  taken  up  a  bill  at  matu- 
rity can  not  sue  the  acceptor,  and  in  which  he  can  not, 
consequently,  so  reissue  the  bill  as  to  enable  the  holder  to 
sue  the  acceptor. 

First:  When  the  acceptance  was  for  the  drawer's  accom- 
modation ;  for  in  that  case  the  acceptor  was  under  no  lia- 
bility to  the  drawer  when  the  latter  reissued  the  bill.  And, 
as  after  the  bill  became  due,  the  drawer  could  only  negoti- 
ate it  subject  to  equitable  defences,  the  acceptor  could  de- 
fend himself  on  this  ground.^  An  early  case  may  be  re- 
ferred to  as  authority  for  this  view.  Brown  drew  the  bill 
upon  Robley,  payable  to  Hodson  or  order,  and  it  was  ac- 
cepted by  Robley  and  indorsed  by  Hodson.  Not  being 
paid  by  the  acceptor  at  maturity,  Brown,  the  drawer,  paid  it 
and  took  it  up  with  Hodson's  indorsement  remaining 
thereon.  And  then  Brown  gave  the  bill  to  Beck  as  secu- 
rity for  money,  not  telling  him  whether  or  not  there  w^ere 
effects  in  Robley's  hands ;  and  Beck  sued  Robley  as  ac- 
ceptor. It  was  held  that  the  action  could  not  be  main- 
tained, on  the  ground,  as  found  by  the  jury,  that  "  the  ac- 
ceptor was  discharged  by  Brown's  taking  up  the  bill,  and 
that  there  was  an  end  of  its  negotiabihty,"  from  which  it 
would  seem  that  the  bill  was  made  for  accommodation  of 

'Jones  V.  Broadhurst,  9  Com.  B.,  173. 


^   1 241.  THE    EFFECT    OF    PAYMENT.  267 

the  drawer.^  So  understood,  this  case  is  unassailable  ;  and 
so  it  has  been  construed  and  approved.^  It  has  been  said 
to  be  "no  longer  law"  by  an  English  compiler,^  but  with- 
out assignment  of  reason  or  authority  for  the  statement. 
And  in  Massachusetts  it  has  been  said  that  "  it  has  never 
been  overruled  or  denied."* 

§  1240.  Second:  When  drawer  is  liable  to  anindorser. 
— The  drawer  could  not  reissue  the  bill  if  the  name  of  any 
indorser  to  whom  he  himself  was  liable  remained  upon  it. 
For  in  that  event  the  holder  could  not  trace  title  against 
the  acceptor,  the  indorsements  having  been  discharged. 
Besides,  the  indorser,  whose  name  remains  upon  the  bill, 
would  be  exposed  to  liability  to  a  holder,  and  therefore 
such  a  bill  is  held  to  be  not  negotiable.^  The  same  prin- 
ciple would  apply  to  forbid  the  reissue  of  a  bill  or  note  by 
an  intermediate  indorser,  when  the  names  of  subsequent  in- 
dorsers  remained  upon  it,  the  general  doctrine  being  that  a 
bill  or  note  can  not  be  indorsed  or  negotiated  after  it  has 
once  been  paid,  if  such  indorsement  or  negotiation  would 
make  any  of  the  parties  liable  apparently  who  have  been 
already  discharged.^ 

§  1 241.  Cases  in  which  drawer  or  indorser  may  reissue 
bill  or  note. — In  all  other  cases  a  drawer  or  indorser  may 
reissue  the  bill  or  note.'''  Thus,  where  A.  drew  a  bill  upon 
B,,  who  accepted  it,  and  it  was  payable  to  the  draw^er's 
order,  and  by  him  indorsed  to  C,  and  by  C.  to  D.,  and  on 

'Beck  V.  Robley,  i  H.  Bl.,  89  n.  (1774) ;  approved  in  Gardner  v,  Maynard,  7 
Allen,  456  (1863). 

"Jones  V.  Broadhurst,  9  Com.  B.,  173;  see  opinion  of  Cressvvell,  J.  But  the 
fact  that  it  was  an  accommodation  bill  is  not  noticed  in  Gardner  v.  Maynard, 
7  Allen,  456.     See  Byles  on  Bills  [*i66],  290. 

'Chitty,  Jr.,  on  Bills,  vol.  i,  p.  390. 

*  Gardner  v.  Maynard,  7  Allen,  457,  Metcalf,  J. 

'Gardner  v.  Maynard,  7  Allen,  456  (1863)  ;  see  also  Beck  v.  Robley,  I  H.Bl., 
89;  Jones  V.  Broadhurst,  9  Com.  B.,  173. 

'Gardner  v.  Maynard,  7  Allen, 457  ;  Chitty  on  Bills  (13  Am.  ed.)  [*224],  255  | 
Story  on  Notes,  §  180. 

'  French  v.  Jarvis,  29  Conn.,  348. 


268  DISCHARGE    BY    PAYMENT.  §   1 242. 

being  dishonored  by  the  acceptor  was  paid  by  the  drawer 
to  D.,  who  struck  out  his  own  and  C.'s  indorsements,  it  was 
held  that  A.  might  reissue  the  bill,  and  the  holder  could  re- 
cover against  the  acceptor.^  In  the  event  that  the  bill  were 
drawn  by  A.  payable  to  C.'s  order,  and  C.'s  indorsement 
were  cancelled,  it  might  be  contended  that  a  holder  could 
not  trace  title  against  the  acceptor.  But  if  the  bill  were 
paid  by  the  drawer  upon  C.'s  order,  the  title  would  then  be 
in  him  ;  and  by  virtue  of  his  position,  any  holder  under 
him,  we  should  say,  could  recover.  The  payee  and  indors- 
er  of  a  note  to  whom  it  is  afterward  transferred  before 
maturity,  in  the  usual  course  of  business  may  negotiate  it 
again,  and  all  parties  to  it  at  the  time  it  is  re-negotiated 
would  be  liable  to  the  holder.^ 

§  1242.  Parties  negotiating  instrument  after  payment 
are  bound. — It  is  to  be  observed  that  while  after  payment 
the  parties  thereby  discharged  can  not  be  bound  by  its  re- 
issue, still  bills  and  notes  may  remain  negotiable  after  pay- 
ment, so  far  as  respects  the  parties  who  shall  knowingly  ne- 
gotiate the  same  afterward,  for  in  such  a  case  the  negoti- 
ation can  not  prejudice  any  other  persons,  and  will  only 
charge  themselves.^  But  the  indorsement  of  a  negotiable 
bill  after  its  dishonor  has  been  held  to  be  a  new  and  inde- 
pendent contract,  and  in  its  effect  between  indorser  and  in- 
dorsee distinct  from  the  negotiable  character  of  such  a  bill ; 
so  that  if  indorsed  to  a  particular  person  by  name,  without 

'Callow  V.  Lawrence,  3  Maule  &  Sel.,  95  (1814),  Lord  Ellenborough  saying: 
«'  It  does  not  prejudice  anv  of  the  other  parties  who  have  indorsed  the  bill  that 
the  holder  should  be  at  liberty  to  sue  the  acceptor.  The  case  would  be  different 
if  the  circulation  of  the  bill  would  have  the  effect  of  prejudicing  any  of  the  in- 
dorsers.  In  Beck  v.  Robley,  if  the  bill  had  been  negotiable  it  would  have  had 
the  effect  of  rendering  Hodson  liable  on  his  indorsement,  which,  in  point  of  hw, 
was  discharged  by  Brown's  taking  up  the  bill.  That,  I  think,  is  the  distinction, 
and  disposes  of  that  case."  The  drawer  of  a  bill  who  pays  it  to  an  indorsee 
may  leave  it  in  his  hands  to  be  sued  upon  by  him  for  the  drawer's  benefit. 
Williams  v.  James,  15  Ad.  &  El.  N.  S.,  499. 

=■  West  Boston  Sav.  Inst.  v.  Thompson,  124  Mass.,  506. 

'  Hubbard  v.  Jackson,  4  Bing.,  390  ;  Callow   v.    Lawrence,    3  M.  &  S.,  95 
Guild  V.  Eager,  17  Mass.,  615  ;  Mead  v.  Small,  2  Greenl.,  207 ;  Story  on  Bills, 
§223. 


5   I243«  THE    EFFECT    OF    PAYMENT.  269 

adding  the  words  "  or  order,"  or  equivalent  words  of  nego- 
tiability, he  can  not  transfer  it  by  indorsement  so  as  to 
enable  his  indorsee  to  sue  upon  it  in  his  own  name.^ 

It  has  been  held  that  if  an  indorser  who  pays  a  bill  re- 
issues it,  he  is  bound  by  his  first  or  second  indorsement  ac- 
cording to  intention  ;  if  as  one  already  fixed  he  need  not 
have  notice.* 

§  1243.  Agreeme7it  to  retire  bill. — Sometimes  an  agree- 
ment is  made  to  "retire"  a  bill.  It  should  be  construed 
according  to  the  circumstances  of  the  case.  The  word 
"retire"  is  susceptible  of  various  meanings  according 
as  it  applies  in  various  circumstances.  "  If  the  acceptor 
retires  a  bill,  he  takes  it  out  of  circulation — then  the  bill 
is  paid ;  but  if  an  indorser  retires  it,  he  only  withdraws  it 
from  circulation  so  far  as  he  himself  is  concerned,  and 
may  hold  the  bill  with  the  same  remedies  as  he  would 
have  had,  had  he  been  called  upon  in  due  course,  and 
paid  the  amount  to  his  immediate  indorsee.  This  is  the 
ordinary  meaning  of  the  word  ;  and  we  think  it  was  used 
in  that  sense  in  the  letter  in  question."^ 

If  a  note  be  surrendered  by  mistake,  the  whole  amount 
being  supposed  to  have  been  paid,  whereas  only  a  part  had 
been,  the  balance  may  be  recovered.''  But  in  the  absence 
of  fraud,  illegality,  or  mistake,  it  could  not  be.^ 


'Leavitt  v.  Putnam,  i  Sandf.,  199;  Story  on  Bills  (Bennett's  ecL),  199. 

»  Montgomery  R.R.  Co.  v.  Trebles,  44  Ala.,  258.     See  ante,  %  997. 

» Elsom  V.  Denny,  25  E.  L.  &  Eq.,  423,  Jervis,  C.  J. 

*  Banks  v.  Marshall,  23  Cal.,  223. 

'  Kent  V.  Reynolds,  15  N.  Y.  S.  C.  (8  Hun),  559. 


270  DISCHARGE    BY    PAYMENT.  J   1 244, 


SECTION   VI. 

IN     WHAT     MEDIUM     PAYMENT     MAY     BE     MADE. — THE     LEGAL 

TENDER    CASES. 

§  1 244.  The  7noney  to  be  paid  is  that  which  is  current 
at  the  place  where  payment  is  to  be  inade} — But  in  constru- 
ing the  terms  of  the  bill  or  note,  it  is  to  be  interpreted 
according  to  the  meaning  of  the  words  used  at  the  time 
when,  and  the  place  where,  the  instrument  was  drawn  or 
made.  And  accordingly,  if  the  coin  which  is  expressly 
agreed  to  be  paid  be  alloyed  by  the  government  between 
the  time  of  contract  and  the  time  of  payment,  the  debtor 
should  be  required  to  make  good  the  full  value  of  the  coin 
at  the  time  of  the  contract.  And  so,  if  the  name  of  the 
coin  be  changed  so  as  to  apply  to  a  lesser  value,  the  amount 
to  be  paid  should  be  estimated  according  to  the  value  at  the 
time  of  the  drawing  of  the  instrument,  for  payment  in  that 
coin  then  of  higher  value  was  contemplated.^  On  this  sub- 
ject the  authorities  exhibit  great  contrariety  of  opinion.^ 
We  have  simply  stated  the  conclusions  which  seem  to  us 
just  and  right.* 


'  Chitty  on  Bills  (13  Am.  ed.)  [*399],  450;  Story  on  Bills,  §  418  ;  Williamson 
V.  Smith,  I  Cold.,  i. 

^  In  the  case  of  "  The  Mixed  Monies,"  Sir  John  Davies'  Reports,  a  different 
view  was  taken.  In  a  subsequent  case.  Da  Costa  v.  Cole,  Holt,  465  ;  Skin.,  272 
(1688),  it  was  held  that  a  bill  drawn  in  England,  on  Portugal,  for  1,000  mille 
rees,  could  not  be  satisfied  by  tender  of  mille  rees  which  had  been  depreciated 
twenty  per  cent,  by  the  King  of  Portugal  eight  days  after  the  bill  was  drawn. 
Holt,  C.  J.,  said  :  "  This  case  differs  from  the  case  of  Mixed  Monies,  for  there 
the  alteration  was  by  the  King  of  England,  who  has  such  a  prerogative,  and  this 
shall  bind  his  own  subjects." 

^  See  Story's  Conflict  of  Laws,  §§  313,  313a,  et  seq. 

^  Sir  William  Grant,  in  the  case  of  Pilkinton  v.  Commissioners  of  Claims,  2 
Knapp,  17,  states  the  view  which  we  have  adopted  very  clearly.  In  the  course 
of  his  opinion,  he  said  :  "  Vinnius,  whose  authority  was  quoted  the  other  day, 
certainly  comes  to  a  conclusion  directly  at  variance  with  the  decision  in  Sir  John 
Davies'  Reports.  [The  case  of  the  '  Mixed  Monies  '  above  cited.]  He  takes  the 
distinction  that,  if,  between  the  time  of  contracting  the  debt  and  the  time  of  its 
payment,  the  currency  of  the  country  is  depreciated  by  the  State,  that  is  to  say, 
lowered  in  its  intrinsic  goodness,  as  if  there  were  a  greater  proportion  of  alloy 
put  into  a  guinea  or  a  shilling,  the  debtor  should  not  liberate  himself  by  paying 


§   I245«  I^    WHAT    MEDIUM    PAYMENT    MADE.  27I 

§  1245.  Party  bound  rrnist  pay  in  money. — The  party 
bound  to  make  payment  has  no  right  to  do  so  in  any  other 
medium  than  that  expressed  on  the  face  of  the  instrument- 
that  is,  he  must  make  payment  in  money.*  And  an  agent, 
holding  the  instrument  for  payment,  can  take  nothing  else 
but  money.^  Sometimes  checks  or  drafts  are  offered  by 
the  debtor  in  discharge  of  the  debt,  and  the  effect  of  giving 
and  receiving  them  is  elsewhere  considered.^ 

But  where  a  bill  or  note  is  expressed  to  be  payable  "  in 
currency "  (in  which  case,  however,  it  would  not  be  nego- 
tiable), there  is  no  specification  of  a  particular  value  which 
is  to  be  paid  ;  but  only  a  designation  of  quantity  in  nominal 
value.  "  One  hundred  dollars  in  currency  "  does  not  mean 
the  value  of  one  hundred  gold  dollars  to  be  paid  by  as  much 
currency  as  will  amount  to  that  value ;  but  means  "  one 
hundred  dollars  of  currency  " — that  is,  one  hundred  currency 
dollars.  Any  currency  in  circulation  at  the  time  of  payrnent 
would  then  satisfy  the  terms  of  the  contract — would  be  the 
identical  thing  contracted  to  be  paid — and,-  however  much 
depreciated,  would  be  a  good  tender  in  discharge  of  the 
debt.* 

the  nominal  amount  of  his  debt  in  the  debased  money ;  that  is,  he  may  pay  in 
the  debased  money,  being  the  current  coin,  but  he  must  pay  so  much  more  as 
would  make  it  equal  to  the  sum  he  borrowed.  But,  he  says,  if  the  nominal  value 
of  the  currency,  leaving  it  unadulterated,  were  to  be  increased,  as  if  they  were  to 
make  the  guinea  pass  for  thirty  shillings,  the  debtor  may  liberate  himself  from 
a  debt  of  one  pound  ten  shillings  by  paying  a  guinea,  although  he  had  borrowed 
the  guinea  when  it  was  worth  but  twenty-one  shillings." 

'Story  on  Bills,  §  419;  Edwards  on  Bills,  550. 

"^  Ibid.  See  chapter  xi,  §  335,  ^-01.  i  ;  Herrimon  v.  Shomon,  24  Kansas, 
387  ;  Bank  of  Kansas  City  v.  Mills,  24  Kansas,  610;  Chapman  v.  Cowles,  41 
Ala.,  103  ;  De  Mets  v.  Dagson,  53  N.  Y.,  635  ;  Maddur  v.  Bevan,  39  iMd.,  485  ; 
Speurs  v.  Lederbergcr,  56  Mo.,  465  ;  Davis  v.  Lee,  20  La.  An.,  248  ;  Moye  v. 
Cogdell,  69  N.  C,  93. 

'  See  chapter  XLix,  on  Checks,  §  7. 

■•  Rucker  v.  Dearing,  18  Gratt.,  438,  Joynes,  J. :  "A  contract  for  the  payment 
of  so  many  dollars  in  Confederate  notes  was  a  contract  to  pay  so  many  dollars  of 
Confederate  notes,  or  so  many  Confederate  dollars.  The  specification  of  dollars 
served  only  to  measure  the  quantity  of  the  notes,  so  that,  in  ever)'  such  contract, 
the  quantity  of  notes  to  be  delivered  was  ascertained,  though  their  value  was 
uncertain.  The  contract  was  for  quantity  only,  and  not  for  value."  Huston  v. 
Noble,  4  J.  J.  Marsh,  130;  David  v.  Phillips,  7  Mon.,  632;  McCord  v.  Ford,  3 
Mon.,  166;  Chambers  v.  George,  5  Litt.,  335;  Diilard  v.  Evans,  4  Ark.,  175, 
Trebilock  v.  Wilson,  12  Wall,  694;  Taup  v.  Drew,  10  How.,  218. 


272  DISCHARGE    BY    PAYMENT.  §   1 246. 

§  1246.  The  legal  tender  cases. — It  is  provided  by  the 
Constitution  of  the  United  States  (art.  I,  sec.  IX),  that  "  No 
State  shall  coin  money,  emit  bills  of  credit,  or  shall  make 
anything  but  gold  and  silver  coin  a  tender  in  payment  of 
debts  ";  and  thus  any  interference  of  the  State  governments 
with  the  money  of  the  country  is  forestalled  and  prevented. 
It  is  also  provided  that  Congress  shall  have  power  "  to  coin 
money  and  regulate  the  value  thereof,"  but  no  power  is  con- 
ferred upon  it  to  make  anything  but  coined  money  "legal 
tender  "  in  discharge  of  debts,  nor  is  anything  said  on  that 
subject.  The  Constitution,  however,  declares  by  art.  X  of 
its  amendments,  that  "  The  powers  not  delegated  to  the 
United  States  by  the  Constitution,  nor  prohibited  by  it  to 
the  States,  are  reserved  to  the  States  respectively  or  to  the 
people."  During  the  war  between  the  Confederate  States 
and  the  United  States,  and  as  a  means  of  raising  revenues  for 
its  prosecution,  Congress,  on  the  25th  day  of  February,  1863, 
passed  an  act  providing  for  the  issue  of  treasury  notes,  and 
declaring  that  they  "  should  be  receivable  in  payment  of  all 
taxes,  internal  duties,  excises,  debts,  and  demands  of  every 
kind  due  to  the  United  States,  except  duties  on  imports, 
and  of  all  claims  and  demands  against  the  United  States,  of 
every  kind  whatsoever,  except  for  interest  upon  bonds  and 
notes,  which  shall  be  paid  in  coin  ;  and  shall  also  be  lawful 
money  and  a  legal  tender  in  payment  of  all  debts,  public  and 
private,  within  the  United  States,  except  duties  on  imports 
and  interest  as  aforesaid." 

§  1247.  Effect  of  legal  tender  act  and  decisions  respect- 
ing it. — The  United  States  Supreme  Court  has  decided 
that  where  contracts  were  made  before  the  passage  of  this 
act  to  pay  certain  amounts  "  in  gold  or  silver  coin,"  they 
were  not  affected  by  it ;  and  according  to  its  opinion  and 
reasoning  no  contract,  whether  made  before  or  after  the  pas- 
sage of  the  act,  expressed  to  be  payable  in  coin  or  specie,  can 
be  satisfied  by  the  tender  of  treasury  notes.  The  result  of 
the  legal  tender  act  is  that  there  are  now  two  descriptions  of 


§   1247-  IN    WHAT    MEDIUM    PAYMENT    MADE.  273 

lawful  money  in  use,  both  of  which  are  legal  tender  in  pay- 
ment of  debts.  The  statute  denomination  of  both  descrip- 
tions is  dollars,  but  they  are  essentially  unlike  in  nature. 
The  one  is  coined  out  of  a  precious  metal,  and  possesses  an 
intrinsic  value.  The  other  is  a  promise  of  the  United  States 
to  pay  a  coined  dollar,  and  is  without  intrinsic  value  ;  and 
the  two  dollars  differ  in  their  purchasing  value.  When 
bills,  notes,  checks,  or  other  contracts  payable  in  coin  are 
sued  upon,  judgments  should  be  entered  for  coined  dollars 
and  parts  of  dollars  ;  and  when  payable  in  dollars  generally, 
without  specifying  in  what  description  of  currency  payment 
is  to  be  made,  judgments  may  be  entered  generally  without 
such  specification.-^  No  distinction  is  made  as  to  the  time 
when  such  contracts  to  pay  gold  may  have  been   entered 

'  Bronson  v.  Rhodes,  7  Wall.,  245  (1868)  ;  Butler  v.  Horwitz,  Id.,  259  (1868), 
contract  to  pay";£i5  current  money  in  Maryland,  payable  in  Enfjlish  golden 
guineas,  weighing  five  pennyweights  and  six  grains,  at  thirty-five  shillings  each." 
Dewing  v.  Scars,  11  Wall.,  379  (1870).  Lease  bearing  yearly  rent  "of  four 
ounces,  two  pennyweights,  and  twelve  grains  of  pure  gold  in  coined  money." 
Strong,  J.,  said :  "  Judgment  should  have  been  entered  for  coined  dollars  and 
parts  of  dollars,  instead  of  treasury  notes  equivalent  in  market  value  to  the 
value  in  coined  money  of  the  stipulated  weight  of  pure  gold."  Trebilock  v. 
Wilson,  12  Wall.,  687  (1871),  Field,  J.,  saying:  "The  note  of  the  plaintiff  is 
made  payable,  as  already  stated,  in  specie.  The  use  of  these  terms  in  specie 
does  not  assimilate  the  note  to  an  instrument  in  which  the  amount  stated  is 
payable  in  chattels  ;  as,  for  example,  to  a  contract  to  pay  a  specified  sum  in 
lumber,  or  in  fruit,  or  grain.  Such  contracts  are  generally  made  because  it  is 
more  convenient  for  the  maker  to  furnish  the  articles  desigTiated  than  to  pay 
the  money.  He  has  his  option  of  doing  either  at  the  maturity  of  the  contract ; 
but  if  he  is  then  unable  to  furnish  the  articles,  or  neglects  to  do  so,  the  number 
of  dollars  specified  is  the  measure  of  recovery.  But  here  the  terms  in  specie  are 
merely  descriptive  of  the  kind  of  dollars  in  which  the  note  is  payable,  there 
being  different  kinds  in  circulation  recognized  by  law.  They  mean  that  the 
designated  number  of  dollars  in  the  note  shall  be  paid  in  so  many  gold  or  silver 
dollars  of  the  coinage  of  the  United  States.  They  have  acquired  this  meaning 
by  general  usage  among  traders,  merchants,  and  bankers,  and  are  the  opposite 
of  the  terms  in  currency,  which  are  used  when  it  is  desired  to  make  a  note  pay- 
able in  paper  money.  These  latter  terms,  in  currency,  mean  that  the  designated 
number  of  dollars  is  payable  in  an  equal  number  of  notes  which  are  current  in 
the  community  as  dollars.  This  being  the  meaning  of  the  terms  in  specie, 
the  case  is  brought  directly  within  the  decision  of  Bronson  v.  Rhodes,  where  it 
was  held  that  express  contracts,  payable  in  gold  or  silver  dollars,  could  only  be 
satisfied  by  the  payment  of  coined  dollars,  and  could  not  be  discharged  by 
notes  of  the  United  States,  declared  to  be  a  legal  tender  in  payment  of  debts." 
To  same  effect,  see  Luck  v.  Faulkner,  25  Cal.,  404. ;  Higgins  v.  B.  R.  &  Aw.  &  M. 
Co.,  27  Cal.,  158  ;  Smith  v.  Wood,  37  Tex.,  620  ;  Phillips  v.  Dugan,  21  Ohio  H.  S., 
466  ;  McGoon  v.  Shirk,  54  III.,  408  (overruling  Humphrey  v.  Clement,  44  III..  299 ; 
and  Whetstone  v.  Colley,  36  111.,  328)  ;  but  see  Wood  v.  Bullens,  6  Allen,  518  ; 
Killongh  V.  Alford,  32  Tex.,  457. 

Vol.  II.— 18 


274  DISCHARGE    BY    PAYMENT.  §   1 248. 

into,  and  the  above  views  apply  to  contracts  made  payable 
in  gold,  entered  into  after  the  legal  tender  acts  were  passed, 
as  well  as  those  entered  into  before.^  If  the  paper  be  pay- 
able "  in  gold  coin  or  the  equivalent  thereof  in  United 
States  legal  tender  notes,"  it  has  been  held  that  a  payment 
in  legal  tender  notes,  dollar  for  dollar,  discharges  it.^ 

§  1248.  Constitutionality  of  legal  tender  act. — In  the 
first  case  that  came  before  the  United  States  Supreme 
Court  in  which  the  question  of  the  constitutionality  of  the 
legal  tender  act  was  raised,  it  was  declared  that  Congress 
had  no  power  to  make  anything  but  coined  money  a  legal 
tender  in  payment  of  debts,  and  that  accordingly  the  note 
in  suit,  dated  June  20th,  i860,  and  which  was  expressed 
to  be  payable  in  "dollars"  on  February  20th,  1862, 
could  not  be  discharged  by  a  tender  of  treasury  notes.^  This 
decision,  however,  was  subsequently  overruled,  the  court 
in  the  meantime  having  been  changed  by  the  resignation 
of  one  member  and  the  appointment  of  two  new  ones.'* 
But  this  reversal  of  what  was  deemed  a  just  judgment  was 
made  under  circumstances  which  divested  it  of  that  sanc- 
tion and  acquiescence  which  have  usually  attended  the  de- 
cisions of  that  high  tribunal.  And  it  may  be  well  said  of 
it  (in  the  language  used  by  Lord  Brougham  on  an  occasion 
which  excited  his  indignation)  that  it  was  a  "  decision  which 
went  forth  without  authority,  and  will  go  back  without  re- 
spect."^ 

§  1 249.  Creditor  s  acceptance  of  depreciated  ctirrency  is 
absolute. — If  the  debtor  tenders  a  depreciated  currency  in 
full  satisfaction  of  his  debt,  or  any  other  currency  than 
gold   when  it  is  specifically  payable   in  gold,  the  creditor 

'  McGoon  V.  Shirk,  54  111.,  408.  '  Killough  v.  Alford,  32  Tex.,  457. 

'  Hepburn  v.  Griswold,  8  Wall.,  604  (1869),  Chase,  C.  J. 

*  The  Legal  Tender  Cases,  noted  in  1 1  Wall.,  682  (Knox  v.  Lee  and  Parker  v. 
Davis),  and  reported  in  full  in  ij  Wall,  457  (1870);  reaffirmed  in  Dooley  v. 
Smith,  13  Wall.,  605  (1871)  ;  Bigler  v.  Waller,  14  Wall.,  298  (1871)  ;  Railroad 
Co.  V.  Johnson,  15  Wall.,  195  (1872). 

^  When  judgment  was  reversed  in  the  case  of  O'Connell  v.  McQueen. 


^    1250.  APPROPRIATION    OF    PAYMENT.  2/5 

can  not  by  protest  accept  the  medium  tendered,  and  then 
recover  the  amount  that  gold  exceeded  it  in  value.  He 
must  refuse  the  tender  or  accept  it ;  and  if  he  accepts  it 
without  special  agreement,  he  will  be  considered  to  have 
taken  it  as  offered  in  full  satisfaction.^  And  the  same  rule 
applies  in  all  cases  where  bank  bills  are  tendered  in  discharge 
of  debts  payable  in  moncy.^  In  like  manner,  though  the 
instrument  be  payable  in  bank  notes,  legal  tender  notes,  or 
other  medium  less  valuable  than  coin,  yet,  if  the  creditor 
tender  gold  or  silver  coin,  without  there  being  any  contract 
as  to  the  rate  at  which  it  is  to  be  taken,  and  it  be  received, 
he  can  not  require  it  afterward  to  be  applied  otherwise  than 
a  dollar  of  coin  for  each  dollar  of  the  amount  due,  nor 
make  any  counter-claim  for  the  value  of  the  coin  in  excess 
of  the  value  of  the  medium  of  payment  expressed  in  the 
contract.^ 


SECTION  VII. 

APPROPRIATION   OF   PAYMENT. 

§  1250.  When  a  debtor  is  indebted  to  the  same  creditor 
in  several  items  of  account,  and  pays  him  a  sum  of  money 
in  part  liquidation  of  his  entire  indebtedness,  it  often  be- 
comes a  nice  and  important  question,  not  only  between 
debtor  and  creditor,  but  also  as  to  third  parties,  to  what 
item  the  credit  shall  be  applied.  With  certain  limitations 
and  exceptions,  the  following  general  principles  apply  in 
such  cases  : 

( I )  First :  The  debtor  making  payment  may  appropriate 
it  to  zvhatcver  ite^n  he  pleases  when  the  payment  is  not  tinder 
compulsion  of  law. '^ — And  this  right  on  the  part  of  the  cred- 

'  Gilman  v.  County  of  Douglas,  6  Nev.,  27. 

'■'  See  chapter  L,  on  Bank  Notes.  '  Bush  v.  Baldrey,  1 1  Allen,  367. 

*  Chitty  (13  Am.  ed),  [*402],  453  ;  Edwards,  554  ;  2  Parsons  N.  &  B.,  222  ; 
Taylor  v.  Sandford,  7  Wheat.,  13  ;  U.  S.  v.  January',  7  Cranch,  572  ;  Pindall  v. 
Bank  of  Marietta,  10  Leigh,  484,  Cabell,  J.  ;  Miller  v.  Trevillian,  2  Rob ,  i  • 


276  DISCHARGE    BY    PAYMENT.  §   1 25 1. 

itor  continues  as  between  him  and  his  debtor  until  suit  is 
brought  or  a  dispute  arisen  ;  though  in  respect  of  third  par- 
ties who  are  concerned  by  the  time  of  application,  he  must 
not  delay  an  unreasonable  time.*  And  after  he  has  once 
made  it  he  is  bound  by  it,  and  can  not  change  it.^  He  may 
even  apply  it  in  prejudice  of  the  rights  of  a  party  who  is 
security  for  one  of  the  debts.^ 

There  can  be  no  election  as  to  application  of  payment 
when  there  was  but  one  debt  in  existence  at  the  time  of 
payment,*  nor  can  there  be  any  election  after  the  contro- 
versy as  to  the  application  has  begun.^ 

§  1 25 1.  (2)  Second :  If  the  debtor  do  not  make  appli- 
cation 0/ paymeftt,  the  creditor  may  apply  it  as  he  pleases!' — 
In  such  case  the  silence  of  the  debtor  is  construed  as  leav- 
ing the  matter  to  the  payee,  provided  it  is  not  an  applica- 
tion peculiarly  injurious  to  him,  or  against  his  implied  in- 
tention.''' The  creditor  could  not  apply  it  to  debts  not  due, 
if  there  were  debts  already  due.^  The  privilege  does  not 
apply  to  compulsory  payments ;  ^  and  if  appropriation  is 

Simson  v.  Ingham,  2  B.  &  C,  72  ;  Hooper  v.  Keay,  i  Q.  B.  Div.,  178  (1875)  ; 
Howard  v.  McCall,  21  Grat.,  205  ;  Lingle  v.  Cook,  32  Grat.,  272;  Harding  v. 
Wormley,  8  Baxter,  578  ;  Chapman  v.  Com.,  25  Grat.,  721  ;  Whittaker  v.  Pope, 
48  Ga.,  13  ;  Sprinkile  v.  Martin,  72  N.  C,  92  ;  Clarke  v.  Scott,  45  Cal.,  86. 

'  Mayor  of  Alexandria  v.  Patten,  4  Cranch,  317;  U.  S.  v.  Kirkpatrick,  9 
Wheat.,  720  ;  Pattison  v.  Hull,  9  Cow.,  747  ;  Johnson  v.  Johnson,  30  Ga.,  857  • 
Philpott  V.  Jones,  2  A.  &  E.,  41  ;  Chitty  on  Bills  (13  Am.  ed.),  [*404j,  456. 

-Mayor,  etc.,  v.  Patten,  supra;  Hill  v.  Southerland,  i  Wash.  (Va.),  128. 
Even  though  he  has  applied  it  to  an  illegal  claim.  Hubbell  v.  Flint,  1 5  Gray, 
550. 

^  Goddard  v.  Cox,  2  Stra.,  1194 ;  Kirby  v.  Duke  of  Marlborough,  2  Maule  & 
S.,  18  ;  Chitty  [*402],  454. 

"  Donally  v.  Wilson,  5  Leigh,  329. 

°  U.  S.  V.  Kirkpatrick,  9  Wheat.,  720. 

*,  Pattison  v.  Hull,  9  Cow.,  747  ;  Chapman  v.  Com.,  25  Grat.,  721  ;  Lingle  v. 
Cook,  32  Grat.,  272  ;  Harding  v.  Wormley,  8  Baxter,  578  ;  Bennell  v.  Wilder,  67 
111.,  327  ;  Allen  v.  Culver,  3  Den.,  284 ;  Bean  v.  Brown,  54  N.  H.,  395  ;  Woods 
V.  Sherman,  71  Penn.  St.,  100. 

'  Smith  V.  Screven,  i  McC,  368.  "  If  he  (the  debtor)  does  not  make  a  specific 
application  at  the  time  of  payment,  then  the  right  of  application  generally  de- 
volves on  the  party  who  receives  the  money."  Hooper  v.  Keay,  i  Q.  B.  Div., 
178,  Blackburn,  J. 

"  Bobe  v.  Stickney,  36  Ala.,  482. 

'  Blackstone  Bank  v.  Hill,  10  Pick.,  129. 


§   1252.  APPROPRIATION    OF    PAYMENT.  2/7 

once  made  by  the  creditor,  he  can  not  change  it.^  If  the 
debtor  deny  one  of  the  debts,  the  creditor  can  not  apply 
payment  to  it  in  exclusion  of  one  acknowledged.^  And 
though  the  creditor  refuse,  yet  if  he  receive  the  money,  he 
must  apply  it  as  directed.^ 

§  1252.  (3)  Third:  Wheji  neither  party  appropriates 
the  payment,  the  law  will  apply  it  according  to  equitable 
principles,  and  with  regard  to  the  probable  intention  of  the 
parties} — It  will  impute  the  payment  to  interest  before 
principal ;  ^  and  where  the  interest  itself  bears  interest,  it 
will  impute  it,  first,  to  interest  on  interest  ;  secondly,  to 
interest  on  principal  ;  and  thirdly,  to  the  principal.^  It 
will  also  impute  payment  to  those  debts  which  are  prior  in 
date;'^  and  to  unsecured  in  preference  to  secured  debts,* 
unless  the  latter  are  secured  by  a  surety,  in  which  case  the 
appropriation  will  be  made  for  his  relief.'' 

So  it  will  apply  payment  to  the  debt  most  burdensome 
to  the  debtor,  especially  to  one  bearing  interest,  or  subject- 
ing him  to  a  penalty  or  criminal  charge,  rather  than  to 
those  which  are  less  burdensome.^"     So  to  a  debt  which  is 

^  Tooke  V.  Bonds,  29, Tex.,  419;  Hill  v.  Southerland,  i  Wash.  (Va.),  128; 
Mayor  of  Alexandria  v.  Patten,  4  Cranch,  317  ;  White  v.  Trumbull,. 3  Green  (N. 
T.),  314;  Bank  of  N.  A.  v.  Meredith,  2  Wash.  C.  C,  47  ;  Harding  v.  Wormley, 
8  Baxter,  578.  If  the  debtor  were  not  notified,  it  is  otherwise.  Hankey  v. 
Hunter,.  Peake  Ad.  Cas.,  107. 

«  Tayloe  v.  Sandiford,  7  Wheat.,  13. 

'  Reed  v,  Boardman,  20  Pick.,  441  ;  Wetherell  v.  Joy,  40  Me.,  325. 

^  See  Chitty  on  Bills  [^403,  404],  455,  456 ;  Lingle  v.  Cook,  32  Grat.,  272. 

"  Lash  V.  Edgerton,  13  Minn.,  210.  If  payment  is  made  before  maturity  of  a 
debt  drawing  interest,  it  will  be  appropriated  to  principal  instead  of  interest 
Starr  v.  Richmond,  30  111.,  276. 

^  Anketel  v.  Converse,  17  Ohio  St.,  11. 

'  Mills  V.  Fowlkes,  5  Bing.  N.  C,  461  ;  U.  S.  v.  Kirkpatrick,  9  Wheat.,  720  ; 
Bobe  V.  Stickney,  36  Ala.,  482  ;  Smith  v.  Loyd,  11  Leigh,  512  ;  Wendt  v.  Ross, 
33  Cal.,  650  ;  Home  v.  Planters'  Bank,  32  Ga.,  I. 

*  Lash  V.  Edgerton,  13  Minn.,  210  ;  Moss  v.  Adams,  4  Ired.  Eq.,  42  ;  Baine 
V.  Williams,  10  Sm.  &  M.,  113;  Burch  v.  Tebbutt,  2  Stark.,  74 ;  Cole  v.  Withers, 
33  Grat.,  204  ;  Trullinger  v.  Kofold,  7  Oregon,  228  ;  but  see  Gwinn  v,  Whitaker. 
1  H.  &  J.,  754- 

'  Marr\-atts  v.  White,  2  Stark.,  loi. 

10  Wright  V.  Laing,  3  B.  &  C,  165  ;  Meggot  v.  Mills,  I  Lord  Ra\TTi.,  286  ; 
Peters  v.Anderson,  5  Taunt.,  596  ;  Spiller  v.  Creditors,  16  La.  Ann.,  292  ;  con- 
tra. Mills  V.  Powlkes,  5  Bing.  N.  C,  455  ;  7  Scott,  444  ;  Stone  v.  Seymour,  15 
Wend.,  29. 


278  DISCHARGE    BY    PAYMENT.  §   1 253. 

Still  binding  in  law  rather  than  to  one  barred  by  the  statute 
of  limitations.^  It  has  been  thought,  however,  that  a  cred- 
itor may  apply  payment  to  a  debt  barred  by  limitation 
when  the  debtor  makes  no  election.^  But  this  is  doubtful 
at  least.  The  debtor  only  would  be  permitted  to  apply  it 
to  an  illegal  demand.^  If  one  of  two  demands  becomes 
barred  by  limitation  before  any  appropriation  of  payment 
is  made,  then  the  law  will  appropriate  payment  to  the 
barred  debt.* 

If  payment  is  made  to  a  party  who  holds  a  debt  due  to 
himself,  and  another  due  to  himself  and  the  plaintiff,  he  is 
bound  to  apply  the  payment  ratably  between  the  two 
debts.^ 

§  1253.  Payments  by  partners  and  joint  debtors, — If  a 
partner  owes  a  debtor,  of  whom  his  firm  is  debtor  also, 
and  pays  the  money  of  the  firm,  it  will  be  appropriated  by 
law  to  the  debt  of  the  firm  ;  ^  and  if  he  pays  such  debtor 
his  own  money,  it  will  be  appropriated  to  his  own  debt.' 
And  no  appropriation  will  be  allowed  which  has  the  effect 
of  paying  one  man's  debt  with  another  man's  money.^ 
When  a  person  owes  the  same  debtor  on  joint  and  on  in- 
dividual account,  and  simply  pays  an  amount,  without  ap- 
propriating it  specifically,  or  it  appearing  whether  it  came 
from  his  individual  or  his  joint  funds,  the  creditor  may 
apply  it  to  either  account.^  "  Where  one  of  several  part- 
ners dies,  and  the  partnership  is  in  debt,  and  the  surviving 
partners  continue  their  dealings  with,  a  particular  creditor, 

'  Nash  V.  Hodgson,  6  De  G.  M.  &  G.,  474. 

'  Armistead  v.  Brooke,  18  Ark.,  521  ;  Mills  v.  Fowlkes,  5  Bing.  N.  C,  455. 
'  Kidder  v.  Norris,  18  N.  H.,  532  ;  Rohan  v.  Hanson,  il  Cush.,  44;  Stone  v. 
Talbot,  4  Wis.,  442. 

*  Robinson's  Admrs.  v.  Allison,  36  Ala.,  525. 
'  Colby  V.  Copp,  35  N.  H.,  434. 

*  Thompson  v.  Brown,  Moody  &  M.,  40. 
'  Fairchild  v.  Holly,  10  Conn.,  175. 

*  Thompson  v.  Brown,  Moody  &  M.,  40. 

*  Van  Rensselaer's  Ex'rs  v.  Roberts,  5  Den.,   570 ;  Baker  v.  Stackpole,  ,9 
Cow.,  420. 


§   1254-        PAYMENT  SUPRA  PROTEST  OR  FOR  HONOR.  '.'79 

and  the  latter  joins  the  transactions  of  the  old  and  new 
firms  in  one  entire  account,  then  the  payments  made  from 
time  to  time  by  the  surviving  partners  must  be  applied  tc 
the  old  debt."  1 


SECTION  VIII. 

PAYMENT  SUPRA   PROTEST  OR   FOR   HONOR. 

§  1254.  There  is  a  peculiar  kind  of  payment  sometimes 
made  after  protest,  and  which  is  called  accordingly  pay 
mcnt  supra  protest.  It  is  a  general  principle  of  the  com- 
mon law,  that  a  stranger  can  not  voluntarily,  and  without 
the  request  of  another,  pay  his  debt  and  acquire  a  right  to 
reimbursement.^  But  an  exception  is  made  in  respect  to 
bills  of  exchange,  and  for  the  benefit  of  trade,  which  is  not 
extended  even  to  negotiable  notes.^  When  the  bill  has 
been  protested  for  non-payment,  and  not  before,'*  a  stranger 
may  pay  it  for  the  honor  of  the  drawer,  or  acceptor  (if  it 
has  been  accepted),  or  of  any  indorser,  or  he  may  pay  it  for 
the  honor  of  all  the  parties — for  honor  generally,  as  such  a 
payment  is  termed.  And  such  a  payment  does  not,  like  a 
simple  payment  by  the  original  drawee,  operate  as  a  satis- 
faction of  the  bill,  but  itself  transfers  the  holder's  rights  to 
the  party  paying,  unless  the  party  paying  limits  and  nar- 
rows them.^  If  the  payment  is  made  for  the  honor  of  a 
particular  indorser,  the  party  paying  may  sue  such  indorser, 
and  all  parties  prior  to  him  whom  he  could  have  re- 
sorted to,  but  not  subsequent  indorsers,  for  it  stands 
like  a  payment  made  at  the  request  of  the  indorser,  for 
whose    honor   it    is   made,    and    the    payor  stcpra  protest 

'  Simon  v.  Ingham,  2  B.  &  C,  72,  ^ayley,  J. ;  3  Dowl.  &  R.,  249  ;  Hooper  v. 
Keay,  2  O.  B.  Div.,  178. 

°  Story  on  Notes,  §  453.  '  Smith  v.  Sawyer,  55  Me.,  141, 

*  Vandevvall  v.  Tyrrell,  I  Mood.  &  M.,  87  ;  Bayley  (2  Am.  ed.),  328  ;  Chitty 
[*5o8,  509],  575  ;  Byles  [*262],  409. 

"  Chitty  on  Bills  (13  Am.  ed.),  [*509j,  576. 


28o  DISCHARGE    BY    PAYMENT.  §    1 255. 

narrows  and  limits  his  rights  to  recover  against  them 
only.^  But  if  he  pays  for  honor  of  the  bill  generally,  it  is 
the  same  as  payment  for  the  honor  of  the  last  indorsee,  and 
he  may  recover  against  all  parties  to  the  bill,^  declaring 
specially  upon  the  bill,  according  to  the  custom  of  mer- 
chants,^ or  generally  upon  a  count  for  money  paid  for  de- 
fendant's use.'*  But  Mr.  Chitty  says  "  it  is  considered  safer 
to  declare  specially."^ 

§  1255.  Payor  supra  protest  is  subrogated  to  rights  of 
party  for  whose  honor  he  pays. — As  the  party  paying  supra 
protest  becomes  substituted,  as  against  parties  anterior  to  the 
one  for  whose  honor  he  pays,  to  the  rights  and  remedies 
which  such  party  for  whose  honor  he  pays  would  have  had 
against  them,  had  he  himself  paid,  it  follows  that  the  right  of 
one  who  pays  for  the  honor  of  the  drawer  to  sue  the  acceptor 
depends  upon  whether  or  not  the  acceptance  was  for  value.^ 
In  England  it  was  at  first  held  that  he  could  sue  the  ac- 
ceptor, whether  he  had  effects  of  the  drawer  in  his  hands  oi 
not  ; '''  but  this  view  was  subsequently  overruled,  and  the 
doctrine  of  the  text  established.^ 

§  1256.  Whe?i  acceptor  may  pay  supra  protest. — The  ac- 
ceptor, if  he  have  previously  made  a  simple  acceptance,  can 
not  pay  for  honor  of  an  indorser,  because,  as  acceptor,  he 

'  Mertens  v.  Withing-ton,  i  Esp.,  112;  Chitty  PS09],  577. 

Tairley  v.  Roch,  Lutw.,  891  ;  Chitty  P509],  576,  577;  Byles  (Sharswood's 
ed.)  [*26i],  408  ;  Edwards,  441. 

^Cox  V.  Earle,  3  B.  &  Aid.,  430  ;  Fairley  v.  Roch,  Lutw.,  891. 

*  Vandewall  v.  Tyrrell,  Mood.  &  M.,  87 ;  Smith  v.  Nissen,  i  T.  R.,  269 
(semble). 

'Chitty  [*5io],  citing  Reid  v.  Smart. 

'Byles  (Sharswood's  ed.)  [*26o],  407,  408  ;  Chitty  [*5o8],  575. 

"^  Ex  parte  Wackerbath,  5  Ves.,  574  (1800),  the  Lord  Chancellor  saying  :  "  I 
have  talked  to  one  or  two  persons  in  trade  upon  this,  who  answered  that  the 
persons  accepting  for  the  honor  of  the  drawer  have  a  right  to  come  upon  the 
acceptor.  I  put  the  case,  that  the  drawer  had  no  effects  in  the  hands  of  the 
acceptor.  The  answer  is,  they  accept  for  the  honor  of  the  drawer,  but  they  ac- 
cept an  accepted  bill.  The  justice  of  the  case  is,  that  if  there  were  no  effects 
they  should  go  in  the  first  place  against  the  drawer,  but  they  should  not  be  al- 
together without  remedy." 

^  Ex  parte  Lambert,  13  Ves.,  Jr.,  179  (1806). 


^  1258.   PAYMENT  SUPRA  PROTEST  OR  FOR  HONOR.       28 1 

is  already  bound  in  that  character.^  But  if  he  has  accepted 
the  bill  for  the  drawer's  accommodation,  without  being  in 
possession  of  effects,  and  no  provision  is  made  by  the 
drawer  for  its  payment,  he  may  pay  it  stipra  protest,  and 
acquire  a  remedy  against  the  drawer  on  the  bill.^  But  this 
is  unnecessary,  except  as  a  precaution  in  regard  to  evidence, 
for  without  it  the  acceptor  might,  in  an  action  for  money 
paid,  recover  back  the  amount,  though  he  could  not  with- 
out such  ceremony  recover  on  the  bill. 

§  1257.  The  person  who  desires  to  pay  a  bill  for  the 
honor  of  another,  must  be  ready  and  offer  to  do  so  at  the 
time  and  place  of  payment,  otherwise  he  will  have  no  right 
to  insist  on  that  privilege.^ 

No  person  should  make  a  payment  supra  protest  without 
ascertaining  that  the  signatures  of  those  for  whose  honor  he 
pays  are  genuine  ;  for  should  it  turn  out  otherwise,  he 
would  have  no  remedy  against  them.  Nor  could  he  recover 
back  the  amount  from  the  party  to  whom  he  has  paid  it, 
unless  he  discovers  the  mistake,  and  gives  notice  to  him  in 
time  to  prevent  any  loss.^  And  it  has  been  held  that  the 
forgery  must  be  discovered,  and  the  notice  thereof  given,  on 
the  very  day  of  payment,  so  as  to  enable  the  party  who 
holds  the  bill  to  give  the  promptest  notice  of  dishonor,  and 
secure  the  liability  of  all  prior  parties.^ 

§  1258.  The  formal  mode  of  makmg  payment  sicpra  pro- 
test is  this :  The  party  proposing  to  make  such  payment 
goes  before  a  notary  public  after  the  bill  has  been  noted  for 
protest  ®  (though  it  is  not  necessary  that  the  protest  should 
have  been  formally  extended),'''  and  makes  a  declaration  for 

•  Chitty  on  Bills  (13  Am.  ed.)  [*5o8],  575.  "  Ibid. 

'  Denston  v.  Henderson,  13  Johns,  322  ;  Bayley  on  Bills  (2  Am.  ed.),  329. 

*  See  chapter  XLII,  on  Forgery,  section  iv. 

^  Wilkinson  v.  Johnson,  3  B.  &  C,  428  ;  5   Dow.  &  Ry.,  403.     See  chapter 
XVIII,  on  Acceptance,  §  528,  note,  vol.  i  ;  Chitty  on  Bills  [*509],  575. 

*Vande\vall  v.  Tyrrell,  i  Mood.  &  M.,  87.     See  chapter  XVlll,  sec.  vi,  §  52^ 

I'Ol.   I. 

"Geralopulo  v.  Wieler,  10  C.  B.,  690  (70  E.  C.  L.  R.) 


282  DISCHARGE    BY    PAYMENT.  <§   1 258 

whose  honor  he  makes  payment,  which  declaration  should 
be  recorded  by  the  notary,  either  in  the  protest  or  in  a 
separate  instrument.^  He  must  then,  in  a  reasonable  time, 
notify  the  party  for  whose  honor  he  pays,  otherwise  such 
party  will  not  be  bound  to  refund.^ 

It  is  observed  by  Byles,  that  "the  most  obvious  and  ad- 
vantageous course  to  be  pursued  by  a  man  desiring  to  pro- 
tect the  credit  of  any  party  to  a  dishonored  bill  is  simply 
to  pay  the  amount  to  the  holder,  and  take  the  bill  as  an  or- 
dinary transferee.  But  the  holder  may  possibly  object ;  for 
example,  the  bill  may  not  have  been  indorsed  in  blank,  and 
the  holder  may  refuse  to  indorse  even  sans  recours.  In 
such  an  event  a  payment  supra  protest  becomes  essential."^ 

The  privilege  of  payment  supra  protest  is  not  extended 
by  the  law  merchant  to  promissory  notes,  which  are  not  de- 
signed for  such  general  circulation  as  bills  of  exchange,  and 
the  party  making  such  payment  acts  at  his  peril.^ 

*  Byles  (Sharswood's  ed.)   [*26o],  407;  Chitty  [*509],  575,  576;  Edwards  on 
Bills,  441. 

"^  Wood  V.  Pugh,  7  Ham.,  164. 

*  Byles  (Sharswood's  ed.)  [*26i],  408. 

*  Byles  on  Bills  (Sharswood's  ed.),  [*262] ;  Story  on  Notes,  §  453. 


CHAPTER  XXXIX. 

CONDITIONAL    AND    ABSOLUTE    PAYMENT. TAKING     BILL    OB. 

NOTE    FOR    OR    ON    ACCOUNT    OF    A    DEBT. 


SECTION  I. 

WHEN    THE   PRESUMPTION   OF   PAYMENT    ARISES    FROM   TAKING 
A    BILL   OR    NOTE. 

§  1259.  When  a  bill  or  note  is  taken  for  or  on  account  of 
a  debt,  the  question  arises  whether  it  was  taken  in  absolute 
discharge  of  it,  and  operates  as  a  complete  merger,  or 
simply  as  a  collateral  security,  or  in  suspension  of  the  debt, 
during  its  currency.  The  intention  of  the  parties  is  the 
controlling  element.  And  if  there  be  any  distinct  agree- 
ment on  the  subject  all  controversy  is  silenced.  But  when 
no  particular  intention  is  manifested,  and  no  express  or  im- 
plied agreement  appears,  the  question  is  to  be  solved  by 
principles  of  law  which  make  presumptions  as  to  the  in- 
tention of  the  parties  according  to  the  circumstances  of 
each  particularcase.  Sometimes  the  debt  is  antecedent  to 
the  giving  of  the  bill  or  note  ;  sometimes  contemporaneous. 
And  the  debtor  may  give  (i)  his  own  bill  or  note  ;  or  (2) 
transfer  the  bill  or  note  of  another  w^ithout  indorsement ; 
or  (3)  transfer  it  with  indorsement. 

§  1 260.  Debtor  s  bill  or  note  for  precedent  debt. — Firstly, 
let  us  consider  the  case  when  the  debtor  gives  his  own  bill  or 
note  for  or  on  account  of  a  precedent  debt.  It  is  a  general 
principle  of  law  that  one  simple  executory  contract  does  not 
extinguish  another  for  wdiich  it  is  substituted,  and  negotiable 
securities  form  no  exception.     And  by  the  general  commer- 

"  (2S3) 


284  CONDITIONAL  AND  ABSOLUTE  PAYMENT.  §   I260. 

cial  law,  as  well  of  England  ^  as  of  the  United  States,^  a 
bill  of  exchange  drawn  or  promissory  note  made  by  the 
debtor  does  not  discharge  the  precedent  debt  for  which  it  is 
given,  unless  such  be  the  agreement  of  the  parties.  The 
creditor  may  return  the  bill  or  note  when  dishonored  by 
non-acceptance  or  non-payment,  and  proceed  upon  the 
orio-inal  debt.  The  acceptance  of  the  instrument  by  the 
creditor  is  considered  as  accompanied  by  the  condition  of 
its  payment.  Thus,  it  was  said  in  the  time  of  Lord  Holt : 
"  A  bill  shall  never  go  in  discharge  of  a  precedent  debt, 
except  it  be  a  part  of  the  contract  that  it  shall  be  so."  ^ 
Such  has  been  the  rule  in  England  ever  since  ;  and  it  pro- 
ceeds upon  the  obvious  ground  that  nothing  can  be  justly 
considered  as  payment  in  fact  but  that  which  is  in  truth 
such,  unless  something  else  is  agreed  to  be  received  in  its 
place  ;  and  that  a  mere  promise  to  pay  ought  not  to  be  re- 
garded as  an  effective  payment  is  manifest. 

It  is  to  be  regretted  that  any  exception  should  be  found 


1  Dowse  V.  Master,  Style,  263  ;  Smith  v.  Chester,  i  T.  R.,  655  ;  Richardson  v. 
Rickman,  5  T.  R.,  517  ;  Price  v.  Price,  16  M.  &  W.,  232. 

2  The  Kimball,  3  Wall,  45  ;  Bank  U.  S.  v.  Daniel,  12  Pet.,  32  ;  Peters  v.  Bev- 
erley, 10  Pet.,  532  ;  Downey  v.  Hicks,  14  How.,  240;  Clark  v.  Young,  i  Cranch, 
181  ;  Sheehy  v.  Mandeville,  6  Id.,  253  ;  Lewis  v.  Davison,  29  Grat.,  226 ;  McCluny 
V.  Jackson,  6  Grat.,  96  ;  McGuire  v.  Gadsby,  3  Call.,  324  ;  Armistead  v.  Ward,  2 
Pat.  &  H.,  515  ;  Middlesex  v.  Thomas,  5  C.  E.  Green,  39 ;  Glenn  v.  Smith,  2  Gill 
&  J.,  512  ;  Clopper  v.  Union  Bank,  7  Har.  &  J.,  120  ;  Walton  v.  Bemiss,  16  La., 
140 ;  McLaren  v.  Hall,  26  Iowa,  298 ;  Steamboat  Charlotte  v.  Hammond,  9  Mo., 
63 ;  Yarneil  v.  Anderson,  14  Id.,  619  ;  Doebling  v.  Loss,  40  Id.,  1 50 ;  Archibald  v. 
Argall,  53  111.,  307  ;  Miller  v.  Lumsden,  16  111.,  161  ;  Logan  v.  Attix,  7  Iowa,  ^y  ; 
Davis'  Estate,  5  Whart.,  537  ;  Jones  v.  Strawhan,  4  Watts  &  S.,  261  ;  Mclntyre 
v.  Kennedy,  29  Penn.  St.,  448  ;  Dougal  v.  Cowles,  5  Day,  511  ;  Merrick  v.  Boury, 
4  Ohio  St.,  60  ;  SutUff  V.  Atwood,  15  Ohio  St.,  186  ;  Burdick  v.  Green,  15  Johns, 
249;  Cole  V.  Sackett,  i  Hill,  516;  Winsted  Bank  v.  Webb,  39  N.  Y.,  325; 
Hawley  v.  Foote,  19  Wend.,  516;  Frisbie  v.  Lamed,  21  Wend.,  450;  Syracuse 
R.R.  Co.  V.  Collins,  3  Lans.,  29;  Smith  v.  Miller,  43  N.  Y.,  171  ;  Board  of  Edu- 
cation V,  Fonda,  T]  N.  Y.,  350;  Gordon  v.  Price,  10  Ired.,  385;  McNeil  v. 
McCamley,  6  Tex.,  163  ;  Union  Bank  v.  Smiser,  i  Sneed,  501  ;  Marshall  v.  Mar- 
shall, 42  Ala.,  149;  Mvatts  v.  Bell,  41  Ala.,  222  ;  Guionv.  Doherty,  43  Miss.,  538 
Stam  V.  Kerr,  31  Miss.,  199  ;  Welch  v.  AUington,  23  Cal.,  322 ;  Smith  v.  Owens, 
21  Call,  II  ;  Edwards  on  Bills,  203;  Breitung  v.  Lindauer,  37  Mich.,  217  ;  Poole 
V.  Rice,  9  W.  Va.,  73;  Feamster  v.  Withrow,  12  W.  Va.,  611 ;  In  re.  Hurst,  I 
Flippin  C.  C.  R.,462  ;  Walsh  v.  Lennon,  98  111.,  27  ;  Wilbur  v.  Jernegan,  11  R.  I.. 
113;  Nightingale  v.  Chafee,  11  R.  I.,  609;  Crawford  v.  Roberts,  50  Cal.,  236; 
Brown  v.  Olmsted,  50  N.  Y.   163;  Nightingale  v.  Chafee,  11  R.  I.,  619. 

°  vjlark  V.  Mundal,  i  Salk.,  124. 


^  I  26 1.       PRESUMPTION  FROM  TAKING  A  BILL  OR  NOTE.         285 

in  the  adjudicated  cases  to  the  adoption  of  a  principle  so 
generally  prevalent  and  so  well  founded  in  reason.  But 
the  courts  of  Massachusetts,  Maine,  Vermont,  Indiana,  and 
Louisiana  have  held  that  the  taking  of  a  bill  or  note  on 
account  of  a  precedent  debt  is  to  be  presumed  to  be  a 
satisfaction  of  it ;  but  they  admit  parol  evidence  to  rebut 
this  presumption,  by  proof  of  an  express  or  implied  con- 
tract that  the  debt  should  only  be  suspended,  not  dis- 
charged.^ And  when  the  old  note  is  secured  by  mortgage 
the  presumption  of  payment  does  not  arise  as  in  other 
cases. '^ 

§  1 261.  Secondly  :  Debtor  s  note  for  contemporaneous  debt. 
— When  a  person  contracts  a  debt  or  purchases  goods,  and 
contemporaneously  executes  his  own  note  for  the  amount. 
Story '^  considers  it /r/;;2«_/^z^zV  conditional  payment  only; 
while  Parsons  says  :*  "  It  seems  to  be  substantially  selling  a 
note  by  barter,  or  exchanging  it  for  goods."  **  And  we 
can  hardly  conceive,"  he  adds,  "of  a  bill  being  taken  at  the 
time  of  the  sale,  unless  it  be  the  understanding  of  the 
parties  to  regard  it  as  payment.  The  remedy  on  the  note 
or  bill,  which  is  more  convenient  to  the  creditor,  is  all  that 
should  be  allowed  him,  for  there  is  no  sufficient  reason  for 
allowing  resort  to  be  had  to  the  original." 

There  is  certainly  great  force  in  the  reasoning  of  Parsons. 

1  Ely  V.  James,  123  Mass.,  36,  and  held  presumably  the  same  in  Maine. 
Parkham  Sewing-Machine  Co.  v.  Brock,  113  Mass.,  19-I.;  Dodge  v.  Emerson, 
Mass.  S.  C,  Oct.,  1881  ;  Albany  L.  J.,  vol.  25,  No.  8  (Feb.  25,  1882),  p.  155. 
Appleton  V.  Parker,  15  Gray,  173;  Thatcher  v.  Dinsmore,  5  Mass.,  302;  Whit- 
conib  V.  Williams,  4  Pick.,  231  ;  Chapman  v.  Durant,  10  Mass.,  51  ;  Goodenow  v. 
Tyler,  7  Mass.,  38  ;  Wood  v.  Bodwell,  12  Mass.,  289  ;  Varner  v.  Nobleborough,  2 
Greenl.,  124  ;  Gooding  v.  Morgan,  37  Me.,  619  ;  Gilmore  v.  Bussey,  12  Me.,  418  ; 
Ward  V.  Bourne,  56  Me.,  161  ;  Hutchins  v.  Olcutt,  4  Vt.,  549 ;  Torrey  v.  Baxter, 
13  Vt.,  452  ;  Dickinson  v.  King,  28  Vt.,  378 ;  Farr  v,  Stevens,  26  Vt.,  299 ;  Gas- 
kins  V.  Wells,  15  Ind.,  253;  Smith  v.  Bettger,  68  Ind.,  254;  Hunt  v.  Boyd,  2  La., 
109 ;  Mehlberg  v.  Fisher,  24  Wise,  607.  The  learned  editors  of  American 
Leading  Cases  attribute  the  departure  of  these  cases  from  the  general  rule  to  a 
variation  in  the  course  of  business,  which  attaches  a  different  meaning  to  the 
same  acts  and  declarations.     2d  vol.,  250. 

"^  See  §  1266^,  and  Taft  v.  Boyd,  13  Allen,  84 ;  Parkham  Sewing-Machine  Co. 
V.  Brock,  113  Mass.,  194;  Dodge  v.  Emerson,  S.  C.  Mass.,  Oct.,  1881  ;  Albany 
L.  J.,  Feb.  25,  1882,  p.  155. 

'  Story  on  Notes,  §  104.  *  2  Parsons  N.  &  B.,  157. 


■286  CONDITIONAL  AND  ABSOLUTE  PAYMENT.  §1262 

But,  on  the  other  hand,  the  debtor  has  broken  his  contract 
to  pay  when  his  bill  or  note  is  dishonored  ;  and  if  the  cred- 
itor, who  has  parted  with  value,  sues  for  the  original  con- 
sideration, the  authorities  predominate  in  favor  of  allowing 
him  to  recover  ;  ^  though  the  views  of  Parsons  are  sustained 
by  some  of  the  adjudicated  cases.  And  were  the  question 
of  new  impression,  we  should  be  inclined  to  adopt  them. 

§  1262.  Thirdly  :  Strangers  bill  or  note  for  precedent 
debt  indorsed  or  unindorsed. — If  A.  be  indebted  to  B.  in  the 
sum  of  one  hundred  dollars,  and  when  applied  to  for  the 
money,  he  gives  him  the  draft  of  C.  on  D.,  payable  to  his 
(A.'s)  order,  and  himself  indorses  it,  he  would,  of  course,  be 
liable  as  indorser  in  the  event  of  its  dishonor,  and  of  due 
presentment  and  notice.  But  suppose  he  simply  passes  to 
B.,  by  delivery,  the  draft  of  C.  on  D.  payable  to  bearer,  and 
that,  when  due,  it  is  dishonored,  does  the  precedent  indebted- 
ness revive  ?  In  England,  where  goldsmiths'  and  bankers' 
notes  are  so  passed  by  delivery  for  precedent  debts,  it  is  con- 
sidered that,  if  not  paid  after  due  diligence  taken  in  present- 
ing them,  the  creditor  may  sue  on  the  original  consideration, 
provided  he  gives  timely  notice  of  their  dishonor;^  and  it 
has  been  considered  that  the  same  rule  governs  the  transfer 
by  delivery  of  ordinary  bills  and  promissory  notes  of  private 
persons.^    High  American  authorities  support  this  view,*  and 

'  In  2  American  Lead.  Cases,  263,  it  is  said  :  "  There  is  much  less  reason  for 
supposing  that  payment  for  a  contemporaneous  sale  on  the  bills  or  notes  of  an 
individual  is  absolute,  than  where  it  is  made  in  bank  notes  ;  and  it  would  seem 
that  this  effect  can  not  be  ascribed  to  it,  as  a  matter  of  law,  and  apart  from  the 
agreement  of  the  parties.  The  cases  fully  establish  that,  in  the  absence  of  such 
an  agreement,  the  vendor  may  sue  for  goods  sold  and  delivered,  when  the  in- 
strument is  drawn  and  indorsed  by  the  vendee,  and  is  dishonored  by  the  party 
primarily  liable  for  its  payment,  as  maker  or  acceptor."  See  Sheehy  v.  Mande- 
ville,  6  Cranch,  253. 

'^Ward  V.  Evans,  2  Ld.  Raym.,  928  ;  Moore  v.  Warren,  i  Stra.,  415. 

'  Camidge  v.  Allenby,  6  B.  &  C,  373  ;  Swinyard  v.  Boyes,  5  M.  &  S.,  62  ;  Van 
Wart  v.  Woolley,  3  B.  &  C,  439  ;  S.  C,  5  Dow.  &  R.,  374 ;  ex  parte  Black- 
bume,  10  Vesey,  204  ;    Story  on  Bills,  §  225. 

*M'Lughan  v.  Bovard,  4  Watts,  315,  Gibson,  C.  J. ;  Leaugue  v.  Wasing,  85 
Penn.  St.,  244  ;  Gordon  v.  Price,  10  Ired.  Law  R.,  388,  Ruffin,  C.  J. ;  Downey 
V.  Hicks,  14  How.,  249  (a  certificate  of  deposit),  Taney,  C.  J. ;  Gibson  v.  Tobey, 
53  Barb.,  195  ;  Crane  v.  McDonald,  45  Barb.,  355  ;  Noel  v.  Murray,  3  Kern, 
169 ;   I  Duer,  388  ;  Gallagher  v.  Roberts  2  Wash.  C.  C,  J  93. 


5>    1264.       PRESUMPTION  FROM  TAKING  A  BILL  OR  NOTE.         287 

it  is  earnestly  advocated  and  may  be  justly  regarded  as  the 
wisest  and  best  view,  and  more  consistent  with  the  general 
principles  which  are  accepted  as  applicable  to  conditional 
and  absolute  payments ;  but  it  must  be  contended  that 
there  is  great  force  in  the  reply  that,  as  such  instru- 
ments may  be  indorsed,  and  generally  are  indorsed, 
when  the  transferrer  assumes  any  liability  for  their  pay- 
ment, the  more  natural  presumption,  however  easily 
overthrown,  would  be  that  when  the  transferee  takes 
them  without  indorsement,  he  takes  the  risk  on  himself.^ 
If  the.  party  indorses  the  note,  it  will  operate  as  absolute 
payment,  unless  he  has  due  notice  of  dishonor.^  A  refusal 
of  the  debtor  to  indorse  the  note  would  be  evidence  that 
it  was  received  as  payment.^ 

§  1263.  In  an  English  case,  where  it  appeared  that  in  the 
morning  A.  sold  B.  a  quantity  of  corn,  and  at  three  o'clock 
in  the  afternoon  of  the  same  day,  B.  deli  veered  to  A.,  in  pay- 
ment, certain  promissory  notes  of  the  bank  of  C,  which 
had  then  stopped  payment,  but  which  circumstance  was  not 
at  the  time  known  to  either  party,  Bayley,  J.,  said  :  "  If  the 
notes  had  been  given  to  A.  at  the  time  when  the  corn  was 
sold,  he  could  have  had  no  remedy  upon  them  against  B. 
A.  might  have  insisted  on  payment  in  money,  but  if  he  con- 
sented to  receive  the  notes  as  money,  they  would  have  been 
taken  by  him  at  his  peril."  And  it  was  held  that  B.  was 
bound,  as  the  notes  were  given  after  the  debt  was  contracted."* 
But  this  distinction  has  been  much  criticised.^ 

§  1264.  FourtJily :  Stranger  s  note  for  contemporaneous 
debt  unindorsed. — When  the  debtor  transfers  the   bill    or 

'  Dennis  v.  Williams,  40  Ala.,  633.  Payee  surrendered  a  note,  and  took  note 
of  stranger  from  debtor,  without  indorsement.     Held,  absolute  payment. 

"•  Soffe  V.  Gallagher,  3E.  D.  Smith,  507  ;  Stam  v,  Kerr,  31  Miss.,  199 ;  cor.tra, 
Cook  V.  Beech,  10  Humph.,  413. 

^  Breed  v.  Cook,  15  Johns,  241. 

*  Camidge  v.  Allenby,  6  B.  &  C  ,  373.  See  chapter  XXII,  §  740,  vol.  I,  and 
also  chapter  on  Bank  Notes ;  2  Parsons  N.  &  B.,  1 56,  note  7n. 

'  Timmins  v.  Gibbins,  18  Q.  B.,  722  ;  14  E.  L,  &  Eq.,  64;  Corbet  v.  Bank  ot 
Smyrna,  2  Harring.  (Del.),  235. 


288  CONDITIONAL  AND  ABSOLUTE  PAYMENT.  §   1 265 

note  of  a  third  party  for  a  contemporaneous  debt,  without 
indorsing  it,  there  is  certainly  strong  reason  for  presuming 
the  transaction  to  be  an  exchange  of  the  bill  or  note  for  the 
consideration  moving  to  the  debtor.  The  debtor  parts  with 
his  property  in  the  instrument,  and  the  party  with  whom  he 
is  dealing  parts  with  his  goods,  undertakes  to  do  something, 
or  otherwise  gives  him  value.  The  instrument  transferred, 
in  the  absence  of  an  express  or  implied  agreement,  would 
seem  to  constitute  in  itself  the  consideration  moving  from 
the  vendee,  and  there  would  be  no  debt  merged  in  it,  or 
capable  of  revivor  by  its  dishonor.  This  view  is  well  sus- 
tained by  authority,^  but  not  without  dissent. 

§  1265.  Fifthly  :  Stranger''  s  note  for  contemporaneous  debt 
indorsed. — When  the  debtor  transfers  and  indorses  the  bill 
or  note  of  a  third  party  for  a  contemporaneous  debt,  the 
view  is  generally  adopted  that  there  is  a  presumption  of 
conditional  payment  only.  The  indorsement  is  like  the 
drawing  of  a  new  bill  by  the  debtor,  and,  as  his  contract  is 
broken  by  its  dishonor,  the  creditor  may  sue,  as  in  the  first 
case,  for  the  amount  of  the  consideration.  The  indorse- 
ment by  the  debtor,  by  which  he  incurs  personal  liability, 
rebuts  the  presumption  of  a  mere  exchange  of  the  paper 
for  the  goods  or  other  consideration,  which  arises  when 
there  is  mere  transfer  of  a  third  party's  bill  or  note  by  de- 
livery, or  indorsement  without  recourse.^ 

'  Bank  of  England  v.  Newman,  i  Ld.  Rayin.,  442  (1699)  ;  Chitty,  Jr.,  207, 
Holt,  C.  J.,  saying:  "If  a  man  give  such  a  bill  (a  bill  payable  to  himself  or 
bearer)  for  money  not  due  before  without  indorsement,  it  is  a  sale  of  the  bill." 
Ex  parte  Blackburne,  10  Ves.,  204 ;  Fydell  v.  Clark,  i  Esp.,  447.  A  banker 
discounting  a  bill  gave  his  customer  bills  and  notes  without  indorsing  them. 
Lord  Kenjron  said  (the  bills  turning  out  bad)  :  "  Having  taken  them  without  in- 
dorsing them,  he  hath  taken  the  risk  on  himself"  Whitbeck  v.  Vanness,  11 
Johns,  409  ;  Breed  v.  Cook,  15  Johns,  242  ;  Tobey  v.  Barber,  5  Johns,  68  ;  Noel 
v.  Murray,  i  Duer,  388,  Oakley,  C.  J.  ;  Camidge  v.  Allenby,  6  B.  &  C,  373  ;  2 
Parsons  N.  &  B.,  156,  183  ;  Byles  (Sharswood's  ed.)  [*I54,  372,  373],  275,  552  ; 
Edwards,  204;  Gibson  v.  Toby,  53  Barb.,  195  (1869).  But  presumption  may 
be  rebutted.  Porter  v.  Talcott,  i  Cow.,  381  ;  Rew  v.  Barber,  3  Cow.,  279; 
Torrey  v.  Hadley,  27  Barb.,  196  ;  Gordon  v.  Price,  10  Ired.  Law  R.,  388,  Ruffin, 

"Monroe  v.  Huff,  5  Den.,  369;  Boyd  v.  Hitchcock,  20  Johns,  76;  Soffe  v. 
Gallagher,  3  E.  D.  Smith,  507  ;  Shriner  v.  Keller,  25  Penn.  St.,  61  ;  2  Am.  Lead 
Gas.,  263  ;  2  Parsons  N.  &  B.,  159. 


^   1266.       PRESUMPTION  FROM  TAKING  A  BILL  OR  NOTE.         289 

§  1266.  Presumptions  as  to,  and  effect  of,  renewals. — 
Where  a  new  bill  or  note  is  given  in  renewal  of  another 
bill  or  note,  and  the  original  is  retained,  the  new  bill  or 
note  operates  only  as  a  suspension  of  the  debt  evidenced  by 
the  original,  and  is  not  a  satisfaction  of  it  until  paid.  Such 
at  least  is  the  weight  of  authority.^  And  in  England  it  has 
been  held  that  if  the  new  bill  or  note,  though  paid  at  ma- 
turity, be  not  large  enough  to  cover  the  principal  and  in- 
terest of  the  dishonored  bill,  the  latter  revives  and  may  be 
sued  on.^  But  there  are  cases  in  which  it  is  held  that  the 
old  note  is  merged  in  the  new  one.'^  Where  a  note  is  re- 
newed, it  is  said  by  eminent  authority  that,  according  to 
the  general  custom  and  understanding  of  the  mercantile 
world,  the  new  note  cancels  the  old  note  for  which  it  is 
given,  and  which  is  taken  up,  as  it  is  termed  ;  ^  but  no  prec- 

•  Kendrick  v.  Lomax,  2  C.  &  J.,  405  ;  Bishop  v.  Rowe,  3  M.  &  S.,  362 ;  Cumber 
V.  Wane,  i  Stra.,  426;  Woods  v.  Woods,  127  Mass.,  141.  In  McGuire  v. 
Gadsby,  3  Call.,  234,  eleven  small  notes  for  fifty  dollars  each  were  given  to  the 
plaintiff  McGuire  v.  Gadsby,  who  owed  him  five  hundred  and  fifty  dollars  on  his 
orig-inal  note  for  that  amount.  Three  of  the  small  notes  were  paid,  and  eight  re- 
maining unpaid,  McGuire  brought  suit  on  the  note  for  $550,  and  the  defendant 
pleaded  payment  and  gave  these  facts  in  evidence.  Roane,  J.  :  "  Do  the  smaller 
notes  extinguish  the  former  }  On  this  subject  we  take  the  law  to  be  settled,  that, 
in  order  to  make  one  instrument  an  extinguishment  of  another,  the  latter  must  be 
of  a  higher  dignity  than  the  former,  or  must  put  the  plaintiff  in  a  better  condi- 
tion, neither  of  which  is  the  case  of  these  notes,  all  precisely  of  the  same  tenor, 
and  not  sealed  ;  nor  do  the  latter  place  the  plaintiff  in  a  better  condition  than 
the  former.  They  benefit  the  defendant,  indeed,  by  giving  him  a  further  day  of 
payment,  which  he  did  not  avail  himself  of,  and  can  not  now  turn  that  favor  to 
the  prejudice  of  the  plaintiff,  who  did  not  sue  until  three  months  after  the  most 
remote  payment  was  to  have  been  made."  East  River  Bank  v.  Butterworth,  45 
Barb.,  476  ;  Gregory  v.  Thomas,  20  Wend.,  17  ;  Waydell  v.  Luer,  5  Hill,  448  ; 
Cole  V.  Sackett,  i  Hill,  516;  Moses  v.  Price,  21  Grat.,  556;  Hobson  v.  David- 
son, 8  Mart.  (La.),  431.  In  ex  parte  Barclay,  7  Ves.,  597,  the  new  bills  were  given 
"  in  lieu  "  of  the  originals,  but  the  latter  being  left  with  the  plaintiff,  it  was  held 
he  could  sue  upon  them.  Byles  (Sharswood's  ed)  [*229],  373  ;  Chitty  on  Bills 
(13  Am.  ed.)  [*i8i],  207  ;  Benjamin's  Chalmers'  Digest,  253,  254. 

'  Lumley  v.  Musgrave,  4  Bing.  N.  C,  9  ;  5  Scott,  230. 

*Nichol  V.  Bate,  10  Yerg.,  429;  Hill  v.  Bostick,  10  Humph.,  410;  Slaymaker 
V.  Gundacker,  10  S.  &  R.,  75, /^r  Tilgham,  C.  J.  In  Maine,  Massachusetts,  and 
Vermont,  where  a  note  is  presumed  to  be  payment,  the  new  note  is  of  course 
presumed  to  discharge  the  old.  Cornwall  v.  Gould,  4  Pick.,  444  ;  Huse  v.  Alex- 
ander, 2  Mete,  157.  But  otherwise  if  the  old  note  were  secured  by  mortgage. 
See  §§  1260,  i266(T. 

*2  Parsons  N.  &  B.,  203  ;  Bank  of  Commonwealth  v.  Letcher,  3  J.  J.  Marsh, 
195,  obiter. 

Vol.  II.— 19 


290  CONDITIONAL  AND  ABSOLUTE  PAYMENT.         §    12  66^. 

edent  clearly  in  point  is  cited,  and  the  distinction  is  not 
recognized  in  the  adjudicated  cases.^ 

In  a  number  of  cases  it  is  held  to  depend  upon  the  in- 
tention of  the  parties,*^  and,  of  course,  an  express  agreement 
would  control  the  effect  of  giving  the  new  note.  But  it 
should  be  shown  that  it  was  expressly  agreed  that  the  old 
one  should  be  extinguished,  in  order  to  have  the  effect  of 
extinguishment.^ 

§  1266(3;.  Surrender  of  old  security. — The  delivery  or 
surrender  to  the  maker  of  the  old  note  upon  its  being  re- 
newed, does  not  in  itself  raise  a  presumption  of  its  extin- 
guishment by  the  new,  it  being  considered  as  a  conditional 
surrender,  and  that  its  obligation  is  restored  and  revived 
if  the  new  note  be  not  duly  paid,*  and  the  same  rule  ap- 
plies when  the  new  note  has  been  carried  to  judgment,  but 
without  satisfaction.^ 

Professor  Parsons  says,  however,  as  we  have  already  seen 
in  the  preceding  section,  that  the  general  custom  and  un- 

'  Moses  V.  Trice,  21  Grat.,  556  ;  Olcott  v.  Rathbone,  5  Wend.,  490.  See  vol.  i, 
§205. 

''Weakly  v.  Bell,  9  Watts,  273  ;  Morriss  v.  Harvey,  S.  C.  of  Va.,  Sept.,  1881  ; 
Va.  Law  Journal,  January,  1882,  p.  21. 

=  Crockett  v.  Trotter,  i  Stew.  &  P.,  446. 

*  Olcott  V.  Rathbone,  5  Wend.,  490 ;  Jag-ger  Iron  Co.  v.  Walker,  76  N.  Y., 
522;  Parrott  v.  Colby,  71  N.  Y.,  597  (affirming  S.  C.  6  Hun,  55;  overruling 
Fisher  v.  Marvin,  47  Barb.,  1 59)  ;  Edwards  on  Bills,  200  ;  2  Parsons  N.  &  B., 
164;  5  Robinson's  Practice,  848;  Abbott's  Trial  Evidence,  447  ;  contra,  Mor- 
gan V.  Creditors,  i  La.,  527  ;  Smith  v.  Harper,  5  Calif.,  329 ;  Morriss  v.  Harvey, 
S.  C.  of  Va.,  Sept.  3,  1881  (semble)  ;  Va.  Law  Jour.,  Jan'y,  1S82,  p.  17  ;  2  Par- 
sons N.  &  B.,  203  ;  see  ante^  vol.  i,  §  205. 

^  In  First  Nat.  Bank  v.  Morgan,  13  N.  Y.  S.  C.  (6  Hun),  348,  suit  was  brought  on 
a  note  dated  September  8th,  1869.  On  November  8th,  1869,  a  renewal  note  was 
given  in  place  of  the  preceding,  which  had  been  delivered  up  ;  and  upon  the  re- 
newal note  judgment  was  obtained,  but  execution  thereon  was  returned  unsat- 
isfied. Bockes,  J.,  said :  "  Now  did  the  acceptance  of  this  note  of  November 
8th,  and  the  subsequent  proceedings  thereon  to  enforce  its  payment,  discharge 
the  debt  as  against  Morgan's  estate  }  The  giving  of  the  note  of  November  8th 
did  not  satisfy  or  discharge  the  debt  evidenced  by  the  note  of  September  8th. 
Cole  v.  Sackett,  i  Hill,  516  ;  Elwood  v.  Deidendorf,  5  Barb.,  398  ;  Winsted  Bank 
v.  Webb,  39  N.  Y.,  325  ;  Pratt  v.  Foote,  12  Barb.,  212,  213  ;  Farrington  v.  Frank- 
fort Bank,  24  Id.,  562  ;  Olcott  v.  Rathbone,  5  Wend.,  490 ;  Bates  v.  Rosekrans, 
37  N.  Y.,  409.  Nor  did  its  prosecution  to  judgment  without  satisfaction.  Davis 
V.  Anable,  2  Hill,  339  ;  Hawks  v.  Hinchleff,  17  Barb.,  492  ;  Corn  Exchange  Ins, 
Co.  v.  Babcock,  57  Id.,  231." 


^   1267.       PRESUMPTION  FROM  TAKING  A  BILL  OR  NOTE.         29  I 

derstanding  of  the  commercial  world  would  seem  to  de- 
mand  a  contrary  ruling  when  the  old  note  is  surrendered.^ 

§  1266/5.  When  debt  would  be  lost,  renewal  7iot  deemed 
payment. — Even  where  a  note  is  considered  as  paid  and 
discharged  by  one  given  for  it,  as  a  general  rule,  the  case  is 
excepted  where  the  debt  would  by  such  construction  be 
lost,  because  then  the  intention  to  receive  the  second  as  a 
discharge  would  be  prima  facie  rebutted.  This  view  would 
apply  where  the  first  note  is  secured  by  mortgage,^  and 
when  the  renewal  is  forged  or  altered.^ 

§  i266<;.  Renewals  of  notes  in  bank. — In  a  recent  New 
York  case,  Andrews,  J.,  said  :  "  It  may  well  be,  that  by 
common  understanding  and  usage,  when  a  note  is  dis- 
counted by  a  bank  to  take  up  a  prior  note  held  by  the 
bank  against  the  party  procuring  the  discount  and  the  avails 
are  credited  to  him,  the  transaction  is  to  be  regarded  as  an 
extinguishment  of  the  prior  note,  although  it  may  not  have 
been  actually  surrendered."*  The  constant  introduction 
of  such  refinements  shows  an  impatience  with  the  general 
principle  that  a  note  is  not  payment  unless  paid  ;  and  if 
that  general  principle  be  conceded,  as  it  must  be,  to  be  the 
rule  of  the  common  law  and  the  law  merchant,  consistency 
with  principle  would  not  admit  anything  to  be  payment 
except  money,  or  something  else  accepted  as  such.  As  said 
in  another  New  York  case  by  Folger,  J.  :  "  Until  the  prom- 
ise is  in  fact  redeemed  there  is  no  payment."^ 

§  1267.  Rebuttal  of  presumptions. — The  presumptions  of 
the  law  which  have  been  referred  to  are  universally  held  to 


'  2  Parsons  N.  &  B.,  203  ;  attte,  %  1266. 

2  Watkins  v.  Hill,  8  Pick.,  522  ;  see  Pomeroy  v.  Rice,  16  Pick.,  22  ;  2  Parsons 
N  &  B.,  205,  219  ;  see  vol.  i,  §  748  ;  Taft  v.  Bovd.  13  Allen,  84  ;  Dodge  v.  Emer- 
son, S.  C.  Mass.,  Oct.,  1881  ;  Albany  L.  J.  for  Feb.  25,  1882,  p.  155. 

'  Ante,  §  205  ;  Ritter  v.  Singmaster,  73  Penn.  St.,  400 ;  Sloman  v.  Cox,  i  C. 
M.  &  R.,  471  ;  Goodrich  v.  Tracey,  43  Vt.,  314;  Byles  on  Bills  (Sharswood's 
ed.)  [*23o],  373  ;  Edwards  on  Bills,  200. 

«  Phoenix  Ins.  Co.  v.  Church,  81  N.  Y.,  226  (1880). 

*  Jagger  Iron  Co.  v.  Walker,  76  N.  Y.,  526. 


292  CONDITIONAL  AND  ABSOLUTE  PAYMENT.  §   1 267 

be  open  to  rebuttal  ;  and  it  is  competent  for  the  parties  to 
show  that  the  bill  or  note  was  by  express  agreement  received 
in  absolute  payment  and  discharge  of  the  contemporaneous 
or  precedent  debt,  or  the  contrary,^  or  that  there  were  facts 
and  circumstances  attendant  upon  the  transaction  from 
which  an  understanding  and  agreement  might  be  inferred.' 
But  the  mere  fact  that  a  receipt  or  memorandum  passed 
between  the  parties  at  the  time  speaks  of  the  transaction  as 
"  in  payment,"  or  "  payment  in  full,"  or  "  in  satisfaction," 
it  has  been  considered  would  not  alone  warrant  the  infer- 
ence that  absolute  payment  was  intended,  but  would  be  in- 
terpreted as  meaning  conditional  payment,  to  be  in  full 
when  paid.^  But  a  different  view  has  been  taken  in  some 
cases.*  It  is  clear  that  when  the  receipt  is  "  in  full  when 
paid,"  it  contemplates  the  transaction  as  conditional  pay- 
ment only.^ 

And  the  presumption  of  payment  does  not  apply  where 
the  creditor  abandons  some  security  which  he  held  when  he 
takes  the  paper.^  The  transaction,  however,  is  always  to 
be  inspected  in  all  its  parts,  and  the  intent  of  the  parties, 
as  revealed  by  its  circumstances,  is  the  controlling  guide  to 


'  Boyd  V.  Hitchcock,  20  Johns,  76  ;  Booth  v.  Smith,  3  Wend,,  66  ;  Thompson 
V.Wilson,  27  Ind.,  370;  Appleton  v.  Parker,  15  Gray,  173;  Butts  v.  Dean,  2 
Met,  76  ;  Comstock  v.  Smith,  22  Me.,  262  ;  Follett  v.  Steele,  16  Vt.,  30  ;  Shum- 
way  V.  Reid,  34  Me.,  560 ;  Iowa  Co.  v.  Foster,  49  Iowa,  676. 

"  Harris  v.  Lindsay,  4  Wash.  C.  C,  98,  271  ;  White  v.  Howard,  i  Sandf.,  81. 

'  Tobey  v.  Barber,  5  Johns,  68  ;  Maillard  v.  Duke  of  Argj^Ie,  6  Man.  &  G.,  40  ; 
Berry  v.  Griffin,  10  Md.,  27  ;  Muldon  v.  Whitlock,  i  Cow.,  290  ;  Glenn  v.  Smith, 
2  Gill  &  J.,  494;  Putnam  v.  Lewis,  8  Johns,  389;  Steamboat  Charlotte  v.  Ham- 
mond, 9  Mo.,  58;  McLughan  v.  Bovard,  4  Watts,  308  ;  Gardner  v.  Gorham,  r 
Doug.  (Mich.),  507  ;  In  re.  Hurst,  i  Flippin  C.  C.  R.,  462 ;  Hotchin  v.  Secor,  8 
Mich.,  494;  Feamster  v.  Withrow.  12  W.  Va.,  651  ;  Dudgeon  v.  Haggart,  17 
Mich.,  273  ;  Burchard  v.  Frazer,  23  Mich.,  228  ;  Maze  v.  Miller,  i  Wash.  C.  C, 
328  ;  2  American  Leading  Cases,  246,  247.  In  i  Smith's  Lead.  Cas.  (7  Am. 
ed.),  613,  it  is  said  :  "  Merely  receipting  the  notes  as  cash,  or  giving  a  receipt  in 
full,  or  receipting  the  notes  as  being  payment  of  the  debt,  will  not  alone  be  suf- 
ficient to  prove  that  the  notes  were  taken,  not  as  conditional  payment,  but  as  an 
immediate  and  absolute  discharge." 

*  The  rule  in  Louisiana  is  different.     Barron  v.  How,  13  Mart.  (La.),  144. 

*  Dayton  v.  Trull,  23  Wend.,  345. 

*  Pomeroy  v.  Rice,  16  Pick.,  22 ;  Butts  v.  Dean,  2  Mete,  76 ;  Fowler  v.  Lud 
wig,  34  Me.,  455. 


^    1269.       PRESUMPTION  FROM  TAKING  A  BILL  OR  NOTE.         293 

Its  construction.  And  the  words  "  received  and  accepted 
in  satisfaction,"  employed  in  settlement  of  a  claim  which 
was  in  judgment  against  the  maker  of  the  note,  coupled  with 
the  fact  that  he  gave  an  indorser  on  the  note  so  given,  were 
recently  considered  in  Virginia  sufficient  to  show  an  abso- 
lute discharge  of  the  judgment  by  the  debtor's  note  in- 
dorsed.^ 

§  1268.  In  some  cases  it  has  been  held  that  an  agree- 
ment to  take  a  bill  or  note  in  absolute  payment  of  a  debt 
must  be  express  in  order  to  render  it  such  ;^  but  the  better 
opinion  is  that  such  agreement  may  be  implied,  as  well  as 
expressed,  and  that  all  the  circumstances  may  be  looked 
to,  to  ascertain  what  was  the  actual  agreement  of  the  par- 
ties.^ 

§  1269.  Frazidulent  representations  on  transfers  in  pay- 
ment render  the7n  void  as  such. — If  the  debtor,  at  the  time 
when  he  passes  the  bill  or  note  of  a  third  party  in  payment, 
represents  that  it  is  good,  or  that  the  parties  to  it  are  solv- 
ent, knowing  at  the  time  the  contrary,  it  is  a  fraud  upon 
the  creditor,  and.  immediately  on  discovering  it  he  may 
sue  the  debtor  for  the  original  debt.*  Or  if  such  bill  or 
note  were  given  for  goods  delivered  at  the  time,  the  vendor 
may  disaffirm  the  contract,  and  sue  in  trover  for  the  goods. 
In  New  York,  where  there  was  an  agreement  to  sell  a 

*  Morriss  V.  Harvey,  S.  C.  of  Va.,  September,  1881  ;  Va.  Law  Journal,  January, 
1882,  p.  21. 

'  Dougal  V.  Cowles,  5  Day,  511  ;  Muldon  v.  Whitlock,  i  Cow.,  290;  Hays  v. 
Stone,  7  Hill,  128  ;  Glenn  v.  Smith,  2  Gill  &  J.,  493  ;  Conkling  v.  King,  10  Barb., 
372. 

^  Merrick  v.  Boury,  4  Ohio  St.,  60;  Miller  v.  Lumsden,  16  III,  161  ;  Fulford 
V.Johnson,  15  Ala.,  384;  Gordon  v.  Price,  10  Ired.,  385;  Hart  v.  Boiler,  15 
Serg.  &  R.,  162  ;  Berry  v.  Griffin,  10  Md.,  27  ;  Johnson  v.  Cleaves,  15  N.  H., 
332  ;  Slocumb  v.  Holmes,  i  How.  (Miss.),  139. 

*  Bridge  v.  Batchelder,  9  Allen,  394  ;  Hawse  v.  Crowe,  i  R.  &  M.,  414  ;  Pierce 
V.  Drake,  15  Johns,  475  ;  Bayard  v.  Shunk,  i  Watts  &  S.,  94  ;  Martin  v.  Pennock, 
2  Barr.,  376;  Lowrey  v.  Murrell,  2  Port.,  280;  Brown  v.  Montgomery,  20  N.  Y., 
287  ;  Long  v.  Sprull,  7  Jones  (Law),  96  ;  Delaware  Bank  v.  Jarvis,  20  N.  Y.,  226  ; 
Gurney  v.  Womersley,  4  E.  &  B.,  133  (82  E,  C.  L.  R.)  ;  Fenn  v.  Harrison,  3  T. 
R-.  759;  Popley  V.  Ashlin,  6  Mod.,  147;  Holt,  121.  See  chapter  xxii,  §  736; 
vol.  I  ;  also  2  Pars.  N.  &  B.,  41,  266;  Byles  (Sharswood's  ed.)  [*I57,  15S],  278^ 
279,  note  ;  Story  on  Bills,  §  225. 


294  CONDITIONAL  AND  ABSOLUTE  PAYMENT.  §1270. 

quantity  of  flour  for  the  note  of  one  Lyon,  and  when  the 
flour  was  demanded  and  the  note  tendered,  Lyon  had  failed, 
it  was  held  that  the  contract,  though  valid,  was  executory ; 
and  that  the  consideration  for  the  flour  had  failed,  and  the 
vendor  was  not  bound  to  part  with  the  flour  for  the  note 
of  an  insolvent.^  The  court  assumed  the  law  to  be  that 
upon  an  agreement  to  accept  notes  in  payment,  if  the  notes 
turned  out  bad  before  the  article  was  delivered,  a  tender  of 
them  would  not  be  good  unless  the  vendor  had  contracted 
to  run  the  risk. 

§  1270.  In  defence  to  an  action  on  a  debt,  it  is  sufficient 
to  plead  that  a  bill  or  note  payable  to  order  or  bearer  was 
delivered  for  or  on  account  of  the  amount,  and  is  still  cur- 
rent, or  has  been  transferred  to  a  third  party.^  It  is  neces- 
sary to  state  in  the  plea  that  the  bill  or  note  was  payable  to 
order  or  bearer. 

If  a  debtor  give  a  bill  or  note  in  payment  to  an  agent 
whom  he  knows  has  no  authority  to  receive  anything 
but  cash,  he  is  not  discharged  from  the  demand  of  the 
principal.^ 

§  1 27 1.  If  the  debtor,  instead  of  paying  the  creditor, 
directs  him  to  take  a  bill  of  a  third  person,  and  he  does  so, 
and  the  bill  is  dishonored,  the  debtor's  liability  revives  ;  ■* 
and  it  is  not  necessary  that  the  creditor  should  notify  him 
of  the  dishonor.^  If  the  creditor,  not  having  the  option  of 
taking  cash,  takes  of  his  own  accord  a  bill  of  the  debtor's 
agent,  the  debtor  is  not  discharged.^  But  if  the  debtor  re- 
fers his  creditor  to   a  third  person  for  payment  generally, 

*  Rogett  V.  Merritt,  2  Cal.,  117. 

''Kearslake  v.   Morgan,   5  T.  R.,  513  ;  Griffiths  v.  Owens,  13  M.  &  W.,  58; 
Price  V.  Price,  16  M.  &  W.,  232  ;  Crisp  v.  Griffitlis,  2  C.  M.  &  R.,  159. 
'Sykes  v.  Giles,  5  M.  &  W.,  645. 

*  Marsh  v.  Pedder,  4  Camp.,  257  ;  Taylor  v.  Briggs,  M.  &  M.,  28  ;  Byles  on 
Bills  (Sharswood's  ed.),  [*37o],  550. 

^Swinyard  v.  Bowes,  5  M.  &  S.,  62. 

^Robinson  v.  Read,  9  B.  &  C,  444  (17  E.  C.  L.  R.)  ;  Marsh  v.  Pedder,  4 
Camp.,  257  ,  Byles  on  Bills  (Sharswood's  ed.),  [*37i].  55o. 


§   1272.  SUSPENSION  OF  RIGHT  OF  ACTION.  295 

and  the  creditor,  having  the  option  of  taking  cash,  elects  to 
take  a  bill,  which  is  afterward  dishonored,  the  origina 
debtor  is  discharged.^ 


SECTION   II. 

SUSPENSION    OF    RIGHT    OF    ACTION    BY    TAKING   BILL   OR    NOTE 
FOR   OR   ON   ACCOUNT   OF   A   DEBT. 

§  1272.  There  is  no  doubt  that  a  negotiable  bill  or  note 
given  for  or  on  account  of  a  contemporaneous  or  pre-existing 
debt,  and  whether  or  not  it  be  in  renewal  of  a  previous  bill 
or  note,  suspends  all  right  of  action  on  such  debt  during  its 
currency — that  is,  until  it  is  dishonored  by  non-acceptance 
or  non-payment  If  this  were  not  so,  the  creditor  who 
took  the  additional  security,  in  the  form  of  a  bill  or  note, 
might,  in  consequence  of  its  negotiable  character,  transfer 
it  to  a  bona  fide  holder,  and  subject  the  debtor  to  payment 
of  both  the  original  and  the  new  debt.^ 

But  as  soon  as  the  bill  or  note  is  dishonored,  the  original 
debt  revives,  and  the  creditor  may  pursue  his  remedy  for  it, 
or  sue  upon  the  bill  or  note.^  The  bill  or  note  taken  in 
conditional  payment  becomes,  by  its  dishonor,  a  collateral 
security,  which  the  creditor  may  retain  and  endeavor  to  col- 
lect, without  forfeiting  the  right  to  proceed  in  the  principal 
cause  of  action,  subject  to  the  obligation  of  surrendering 
up  the  bill  or  note  at  the  trial. ^ 

*  Strong  V.  Hart,  6  B.  &  C,  160  (13  E.  C.  L.  R.) 

*  Armistead  v.  Ward,  2  Pat.  &  H.,  504  ;  Black  v.  Zacharie,  3  How.,  483  ;  Van 
Epps  V.  Dillaye,  5  Barb.,  244  ;  Putnam  v.  Lewis,  8  Johns,  389  ;  Phoenix  Ins.  Co. 
V.  Allen,  II  Mich.,  501  ;  Stedman  v.  Gooch,  i  Esp.,  3;  Kearslake  v.  Morgan,  5 
T.  R.,  513  ;  Griffith  v.  Owen,  13  M.  &  W.,  58  ;  Price  v.  Price,  16  Id.,  231  ;  Maier 
V.  Canovan,  57  How.  (N.  Y.),  Pr.,  504;  Edwards,  197  ;  Byles  (Sharswood's  ed.) 
[*229l,  379. 

'Stedman  v.  Gooch,  i  Esp.,  4  ;  Owenson  v.  Morse,  7  T.  R.,  50;  Tobey  v. 
Barber,  5  Johns,  68;  Bank  of  Ohio  Valley  v.  Lockwood,  13  W.  Va.,  426. 

*  Price  V.  Price,  16  M.  &  W.,  231. 


296  CONDITIONAL  AND  ABSOLUTE  PAYMENT.  '^1273. 

8  1273.  When  bill  or  note  does  not  operate  as  suspension. 
— A  bill  or  note  given  for  or  on  account  of  a  debt  will  not 
operate  a  suspension  if  the  debtor  fails  to  perform  the  en- 
tire agreement  under  which  it  was  given.  Thus,  where 
suit  has  been  commenced  on  a  book  account,  and  the  de- 
fendant entered  into  an  agreement  to  give  his  note  for  the 
amount  and  pay  the  costs  of  suit,  but  only  gave  his  note, 
without  paying  such  costs,  it  was  held  that  the  plaintiff 
might  proceed  in  his  action  on  the  account.^  And  the  like 
decision  has  been  rendered  even  where  the  second  bill  had 
been  negotiated.^  But  this  has  been  justly  said  to  be 
clearly  wrong.^  And  clearly  if  the  bill  or  note  given  for 
the  antecedent  debt  were  paid,  the  plaintiff  could  not  then 
proceed  upon  it,  although  the  costs  were  not  paid  as 
agreed.* 

It  is  better  in  all  cases  where  a  bill  or  note  is  given  or 
transferred  for  a  contemporaneous  or  precedent  debt,  that 
the  parties  should  reduce  their  agreement  respecting  the 
transaction  to  writing,  and  state  either  that  the  instrument 
is  taken  in  absolute  payment,  and  at  the  creditor's  risk,  or 
else  only  in  conditional  payment  to  be  in  full  when  paid, 
which  will  at  once  settle  controversy  on  the  subject.^ 
When  this  is  not  done,  the  question  must  necessarily  be  re- 
solved by  the  jury,  upon  the  statements  of  the  parties  and 
all  the  circumstances  of  the  case,^  except  where  there  is  no 
evidence  whatever,  in  which  event  the  presumptions  which 
have  been  referred  to  would  be  followed. 

§  1 274.  The  taking  of  a  bill  or  note  from  a  party  bou7id 
by  contract  tmder  seal,  does  not  extinguish  or  suspend  the 
remedy  on  the  sealed  instrument,  until  such  bill  or  note  is 
actually  paid.     Obtaining  a  judgment  upon   it   does  not 

*  Putnam  v.  Lewis,  8  Johns,  389.  *  Norris  v.  AyleUe,  2  Camp.,  329. 
^Edwards  on  Bills,  299.  *  Dillon  v.  Rimmer,  I  Bing.,  100. 
^Herring  v.  Sanger,  3  Johns'  Cas.,  71 ;  Harris  v.  Lindsay,  4  Wash.  C.  C.  R., 

98,  271  ;  2  Am.  Lead.  Cas.,  246. 

*  Hart  V.  Boiler,  5  Serg.  &  R.,  162 ;  Johnson  v.  Weed,  9  Johns,  307 ;  Lyman 
V,  Bank  U.  S.,  12  How.,  244;  Gardner  v.  Gorham,  i  Doug.  (Mich.),  207. 


§1275-         HOLDER  OF  BILL  CONDITIONALLY  TAKEN.  297 

alter  the  case.*  Nor  will  the  taking  of  a  bill  or  note  for 
arrears  of  rent  prevent  the  landlord  from  pursuing  his 
remedy  of  distress.^  Taking  a  forged  note  does  not  dis- 
charge the  original,  although  the  original  be  surrendered  i** 
nor  is  an  indorser  of  the  original  discharged  if  he  was  fixed 
by  due  notice.^  And  taking  a  usurious  security  would 
stand  upon  the  same  footing  as  a  forged  one,  the  avoidance 
of  the  security  because  of  the  usury  reviving  the  debt.^ 


SECTION   III. 

RIGHTS  AND   DUTIES   OF   HOLDER   OF    BILL  OR  NOTE   TAKEN   IN 
CONDITIONAL  PAYMENT. 

§  1275.  When  suit  is  brought  against  a  defendant  upon 
a  debt,  whether  evidenced  by  a  note  or  otherwise,  and  it 
appears  that  he  has  given  a  bill  or  note  for  the  same  debt, 
which  has  become  mature  and  is  unpaid,  while  it  does  not 
operate  as  a  bar  to  the  suit,  it  is  essential  to  the  plaintiff's 
recovery  that  it  be  produced  and  surrendered  up  or  otherwise 
satisfactorily  accounted  for  at  the  trial.  This  is  necessary  as 
a  safeguard  to  the  defendant,  for  if  the  plaintiff  should  have 
passed  it  off  before  maturity  to  a  third  party,  the  defendant 
might  be  compelled  to  pay  the  debt  a  second  time.^    If  the 

'Drake  v.  Mitchell,  3  East.,  251  ;  Curtis  v.  Rush,  2  Ves.  &  B.,  416  ;  Byles 
(Sharswood's  ed.)  [*37o|,  549. 

2  Brown  v.  Gilman,  4  Wheat.,  256  ;  Chipman  v.  Martin,  13  Johns,  241  ;  Harris 
V.  Shipway,  Buller  N.  P.,  182;  Byles  [^^=370],  549;  2  Parsons  N.  &  B.,  164; 
Palfrey  v.  Baker,  3  Price,  572;  Davis  v.  Gyde,  2  A.  &  E.,  623  ;  4  N.  &  M.,  462. 

'  Goodrich  v.  Tracy,  43  Vt.,  319  ;  §  1266;^. 

*  Ritter  v.  Singmaster,  73  Penn.  St.,  400. 

^Gerwig  v.  Sitterly,  56  N.  Y.,  214;  Cook  v.  Barnes,  36  Id.,  520;  Hughes  v. 
Wheeler,  8  Cow.,  77  ;  Goodrich  v.  Tracy,  43  Vt.,  319. 

^  Matthews  v.  Dare,  20  Md.,  248  ;  Cole  v.  Sacket,  i  Hill,  516  ;  Lobey  v.  Barber, 
5  Johns,  66  ;  Dayton  v.  Trull,  23  Wend.,  345  ;  Alcock  v.  Hopkins,  6  Cush..484; 
Hays  V.  McClurg,  4  Watts,  452 ;  Milles  v.  Luinsden,  16  111.,  161  ;  Harris  v.  John- 
ston, 3  Cranch,  311  ;  Jones  v.  Savage,  6  Wend.,  658;  Raymond  v.  Merchant.  3 
Cow.,  150;  Smith  v.  Lockwood,  10  Johns,  367;  Bank  of  Ohio  Valley  v.  Lock- 
wood,  13  W.  Va.,  427  ;  Lazier  v.  Nevin,  3  tlagans  (W.  Va.j,  622 ;  Edwards  oa 
Bills,  204. 


298  CONDITIONAL  AND  ABSOLUTE  PAYMENT.  §   1 2  76, 

note  were  lost,  and  were  negotiable,  the  better  opinion  is 
that  the  debtor  should  sue  in  equity  where  indemnity  could 
be  required,  against  its  appearance  in  the  hands  of  a  bona 
fide  holder.^ 

§  1276.  Debt  discharged  by  laches  in  respect  to  demand 
or  notice. — When  a  party  contracts  a  debt,  and  contempora- 
neously gives  in  conditional  payment  his  draft  upon  a  third 
party,  it  is  the  duty  of  the  creditor  to  present  it  in  a  reason- 
able time  for  acceptance  or  payment,  and  to  give  notice  in 
the  event  of  its  dishonor  to  the  drawer.  If  he  fail  to  make 
such  presentment,  or  to  give  due  notice,  the  drawer  is  not 
only  discharged  from  liabiUty  on  the  bill,  but  also  from  the 
debt  or  consideration  for  or  on  account  of  which  it  was 
given.^  And  where  a  bill  or  note  is  indorsed  by  the  cred- 
itor in  conditional  payment  of  a  debt,  the  same  rule  would 
apply,  the  indorser  standing  in  the  relation  of  a  new  drawer  ; 
and  if  there  were  any  laches  respecting  presentment  or 
notice,  he  would  be  no  longer  liable  on  the  note,  or  for  the 
consideration.^     The  same  rule  applies  where  the  debt  was 

*  In  Dangerfield  v.  Wilby,  4  Esp.,  159,  where  the  plahitiff  sued  to  recover 
money  lent,  and  it  appeared  that  the  debtor  had  given  a  note  for  the  amount, 
which  was  not  produced  or  accounted  for,  Lord  Ellenborough  nonsuited  him, 
saying  :  "  It  was  incumbent  on  him  to  show  it  to  be  lost,  so  that  the  defendant 
should  not  be  again  subjected  to  payment  of  it." 

^  Mauney  v.  Coit,  80  N.  C,  300,  Smith,  C.  J.,  approving  the  text  ;  Berry  v. 
Bridges,  3  Taunt.,  130  (1810).  The  defendant  being  unable  to  pay  a  bill  when 
it  fell  due,  which  he  had  accepted,  indorsed  to  the  plaintiff  a  bill  drawn  by  the 
debtor  himself  and  payable  to  his  own  order.  It  was  dishonored  by  the  drawee, 
who  accepted,  but  did  not  pay  it,  and  no  notice  was  given  the  defendant.  Held 
that  defendant  was  discharged  both  from  the  bill  and  the  antecedent  debt,  for 
the  reason  that  the  plaintiff,  by  not  giving  him  due  notice,  had  put  it  out  of  his 
power  to  recover  what  was  due  thereon.  See  also  Blanchard  v.  Tittavawassee 
Boom  Co.,  40  Mich.,  566.  In  Dayton  v.  Trull,  23  Wend.,  345,  the  defendant 
gave  his  draft  payable  one  year  from  date,  and  the  plaintiff  suing  for  the  prece- 
dent debt,  it  was  held  that  he  must  show  that  the  draft  had  not  been  paid,  and 
that  due  diligence  had  been  exercised  to  present  it,  and  give  notice.  Bronson, 
J.  Smith  V.  Miller,  43  N.  Y.,  171,  where  it  is  said  :  "  Laches,  which  would  dis- 
charge the  drawer  or  indorser  of  a  bill  of  exchange,  will  as  effectually  extinguish 
the  debt  for  payment  of  which  a  bill  or  other  negotiable  instrument  is  trans- 
ferred. S.  C,  52  N.  Y.,  546  ";  Mehlberg  v.  Fisher,  24  Wise,  607  ;  Allan  v.  Eldred, 
50  Wise,  136;  Betterton  v.  Roope,  3  Lea  (Tenn.),  220;  Middlesex  v.  Thomas, 
5  C.  E.  Green,  39;  Phoenix  Ins.  Co.  v.  Allen,  11  Mich.,  501  ;  Story  on  Bills, 
§  109  ;  Edwards  on  Bills,  445.     See  §§  452,  971. 

^  Jennison  v.  Parker,  7  Mich.,  355  ;  Phoenix  Ins.  Co.  v.  Allen,  11  Mich.,  50I  ; 
Booth  V.  Smith,  3  Wend.,  66  ;  Byles  on  Bills  (Sharswood's  ed.),  [*372],  SS^  !  a 


5>   12  77-  HOLDER  OF  BILL  CONDITIONALLY  TAKEN.  299 

precedent.*  And  in  like  manner  if  the  creditor  takes  a  bill 
drawn  and  accepted,  or  indorsed  by  third  parties,  or  a  note 
indorsed  by  third  parties  as  conditional  payment  or  collat- 
eral security  for  a  debt,  and  omits  to  present  it  at  maturity, 
or  give  notice  of  its  dishonor  to  those  entitled  thereto,  it 
becomes  money  in  his  hands  as  between  him  and  his  debtor, 
and  constitutes  absolute  payment.^ 

Where,  however,  a  debtor  gives  his  own  note  indorsed 
by  other  parties,  or  the  bill  or  note  of  another  party  in- 
dorsed by  himself,  as  collateral  security  merely  for  a  debt 
already  secured  by  his  own  note  or  otherwise,  the  creditor 
may  pursue  his  remedy  upon  the  principal  and  upon  the 
collateral  securities  at  the  same  time ;  and  nothing  but  sat- 
isfaction of  the  one  will  bar  his  right  of  recovery  on  the 
other.^ 

§  1277.  Confiicting  authorities. — But  the  authorities  are 
somewhat  confused  and  unsettled,  it  being  contended  in 
some  cases  that  the  rule  which  makes  demand  and  notice 
essential  to  a  recovery  against  a  drawer  or  indorser  does 
not  apply  in  actions  brought  to  recover  a  debt  for  which  a 
bill  or  note  has  been  taken  in  payment ;  and  that  want  of 
demand  and  notice  will  not  be  a  defence  unless  payment 
has  actually  been  lost  through  the  laches  of  the  creditor.'* 
But  the  holder  of  a  bill  or  note  taken  for  or  on  account  of 

Parsons  N.  &  B.,  181,  154;  Edwards  on  Bills,  198,  201,  445  ;  Redfield  &  Bige- 
low's  Lead.  Cas.,  637,  642  ;  Huston  v.  Weber,  3  T.  &  C.  (N.  Y.J,  147  ;  i  Hun, 
120. 

'  Ibid. ;  Story  on  Bills,  §  109  ;  Stoiy  on  Notes,  §  117  ;  Edwards  on  Bills,  445  ; 
Tobey  v.  Barber,  5  Johns,  68. 

-  Peacock  v.  Purcell,  14  C.  B.  N.  S.,  728  ;  Edwards  on  Bills,  445. 

'  Lazier  v.  Nevin,  3  Hagans  (W.  Va.),  622. 

*  Gallagher's  Ex'rs  v.  Roberts,  2  Wash.  C.  C,  191  ;  Kephart  v.  Butcher,  17 
Iowa,  240 ;  see  also  Brooks  v.  Elgin,  6  Gill,  254  ;  Cook  v.  Buck,  10  Humph., 
412  ;  Hamilton  v.  Cunningham,  2  Brock.,  350.  In  2  Am.  Lead.  Cas.,  259,  260, 
the  learned  editors,  after  commenting  on  the  cases,  say  :  "  The  true  view  would 
seem  to  be  that  the  failure  of  the  creditor  to  pursue  the  usual  course  of  business 
with  reference  to  commercial  instruments  taken  for  a  debt  is  2.  prima  facie  bar 
to  a  suit  for  the  debt  itself,  which  may,  notwithstanding,  be  removed  by  proving 
that  the  instrument  was  unavailable  as  a  means  of  payment,  and  that  the  debtor 
has  not  been  injured  by  the  omission  to  present  it  at  maturity  and  to  give  notice 
of  its  non-payment." 


300  CONDITIONAL  AND  ABSOLUTE  PAYMENT.        §   12^ "J a, 

a  precedent  or  contemporaneous  debt  is  a  holder  for  value. 
If  he  passes  it  to  a  third  party,  the  parties  are  excluded 
from  equitable  defences,  and  subjected  to  all  the  liabilities 
of  parties  to  negotiable  instruments ;  and  thus  exposed  to 
the  burdens,  it  seems  but  right  that  they  should  be  entitled 
to  exact  all  the  privileges  which  attach  ordinarily  to  their 
positions. 

§  i2j']a.  Whether  debt  is  discharged  by  failure  to  prC' 
serve  liability  of  drawer  or  indorser  of  collateral  bill  or 
note. — When  the  transferrer  indorses  the  bill  or  note 
merely  as  collateral  security  for  or  on  account  of  a  precedent 
debt,  without  any  new  consideration  therefor,  it  has  been 
considered  that  he  is  not  entitled  to  require  strict  present- 
ment and  notice  as  an  indorser  ;  and  that  the  responsibility 
of  the  creditor  is  limited  to  the  loss  occasioned  by  his 
negligence  in  respect  to  presentment  and  notice.^ 

But  we  do  not  see  that  this  distinction  rests  on  solid 
foundations.  The  indorsee  of  a  collateral  bill  or  note  ac- 
quires the  rights  of  a  holder,  and  should  correspondingly 
discharge  a  holder's  duties.^  And  the  principle  has  been 
well  stated  in  an  English  case,  by  Erie,  C.  J.,  that  "The 
legal  effect  of  taking  a  bill  as  a  collateral  security  is,  that  if, 
when  the  bill  arrives  at  maturity,  the  holder  is  guilty  of 
laches,  and  omits  duly  to  present  it,  and  to  give  notice  of 
its  dishonor,  the  bill  becomes  money  in  his  hands,  as  between 
him  and  the  person  from  whom  he  received  it."^ 

§  1278.  Due  diligence  required  of  transferee  by  delivery. 
— When  the  debtor  transfers  by  delivery  merely  the  bill  or 
note  of  another  for  an  antecedent  debt,  he  is  undoubtedly 
not  entitled  to  require  strict  presentment  and  notice,  as  he 

'  Westphal  v.  Ludlow,  6  Fed.  R.,  348  ;  2  Am.  Lead.  Cas.,  260  ;  See  §§  452, 
828,  971. 

^  See  ante,  §  828. 

'Peacock  v.  Purcell,  14  C.  B.  N.  S.,  728 ;  see  in  accord  Betterton  v,  Roope,  3 
Lea  (Tenn.),  220;  Lee  v.  Baldwin,  10  Ga.,  208;  Haines  v.  Pearce,  41  Md.,  221  ; 
Roberts  v.  Thompson,   14  Ohio,  I  ;    Lawrence  v.  McCalmont,  2  How.,   426 
Hamilton  v.  Cunningham,  2  Brock,  350. 


^   1279.  EFFECT    UPON    A    LIEN.  3OI 

is  not  a  party  to  the  instrument.^  Still,  by  accepting  the 
instrument  in  conditional  payment,  the  creditor  comes 
under  an  obligation  to  use  due  diligence  in  making  it  sub- 
serve the  purpose  for  which  it  was  given  ;  and  if  by  his 
delay  and  laches  he  loses  the  opportunity  to  collect  and 
apply  the  proceeds,  he  can  not  then  enforce  the  original 
right  of  action  against  the  transferrer.^  But  the  burden  of 
proof  is  on  the  defendant  in  an  action  on  the  original  con- 
sideration to  show  that  there  had  been  laches  on  the  cred- 
itor's part ;  for  if  the  bill  or  note  remains  in  his  hands,  it  is 
presumptive  evidence  that  it  has  been  dishonored  by  non- 
payment.' 


SECTION    IV. 

THE   EFFECT   OF   TAKING  A   BILL   OR    NOTE   UPON   A   LIEN. 

§  1279.  By  the  common  law  a  party  selling  personal 
property  has  a  right  of  lien  for  the  purchase  money  as  long 
as  he  retains  possession  of  the  property.  A  lien  is  simply  a 
right  to  hold,  and  without  possession  there  can  be  no  lien.* 
The  vendor's  lien  may  be  waived  expressly.  "  It  may  also 
be  waived  by  implication  at  the  time  of  the  formation  of 
the  contract,  when  the  terms  show  that  it  was  not  contem- 
plated that  the  vendor  should  retain  possession  until  pay- 
ment ;  and  it  may  be  abandoned  during  the  performance  of 
the  contract,  by  the  vendor's  actually  parting  with  the  goods 
before  payment."^ 

§  1 2  79^.  When  lien  is  regarded  as  waived. — The  circum- 
stances under  which  the  lien  will  be  regarded  as  waived  are 

'  Story  on  Bills,  §  109;  Story  on  Notes,  §  117. 

*  Tobey  V,  Barber,  5  Johns,  68;  Dayton  v.  Trull,  23  Wend.,  345;  2  Am. 
Lead.  Cas.,  256. 

^Goodwin  v.  Coates,  i  Moody  &  R.,  221  ;  Bishop  v.  Rovve,  3  M.  &  Sel.,  362 ; 
2  Parsons  N.  &  B.,  183 ;  Byles  (Sharsvvood's  ed.)  [*372j,  551.  But  see  Dayton 
V,  Trull,  23  Wend.,  345. 

*Heywood  v.  Waring,  4  Camp.,  291.  'Benjamin  on  Sales,  598. 


302  CONDITIONAL  AND  ABSOLUTE  PAYMENT.  §I28o. 

as  follows:  (i)  In  \ht  first  place,  it  will  be  regarded  as 
waived  by  implication  when  the  goods  are  sold  on  credit,^ 
unless  there  be  an  express  agreement  to  the  contrary,  or  an 
established  usage  to  the  same  effect  in  the  particular  trade  of 
the  parties  be  shown.^  (2)  In  the  seco7td  place,  the  vendor's 
lien  will  also  be  waived  by  taking  a  bill,  note,  or  other 
security  payable  in  future,  for  the  goods  bought.^  A 
promissory  note  payable  on  demand,  however,  would  not 
defeat  the  vendor's  lien.* 

§  1280.  When  lien  revives. — But  if  the  goods  are  per- 
mitted to  remain  in  the  vendor's  hands  until  the  bill  or  note 
given  for  them  by  the  buyer  falls  due,  and  it  is  then  dis- 
honored, the  vendor's  lien  will  be  revived.^  In  such  a 
case  Lord  Tenterden  said  :  "  We  are  all  of  the  opinion  that, 
on  non-payment  of  the  bill,  the  defendant  ought  to  retain 
the  goods."  ^  Unless,  indeed,  the  bill  or  note  had  been  nego- 
tiated and  were  outstanding  in  the  hands  of  a  transferee, 
in  which  case  the  lien  would  not  be  revived  by  its  dis- 
honor.'^ 

§  1 28 1.  Vendors  lien  on  realty. — When  real  property 
is  sold,  the  principle  relative  to  personal  property  does  not 
apply,  and  the  acceptance  of  a  bill  or  note,  upon  which  no 


'  Spartali  v.  Benecke,  lo  C.  B.,  212;    19  L.  J.  C.  P.,  293. 

2  Field  V.  Lelean,  6  H.  &  N.,  617  ;  30  L.J.  Ex.,  168  ;  overruling  on  this  point 
Spartali  v.  Benecke,  supra.  * 

=  Chambers  v.  Davidson,  L.  R.,  i  P.  C.  App.,  296 ;  4  Moore  P.  C.  C.  N.  S.,  1 58, 
Lord  Westbury  saying  :  "  Lien  is  not  the  result  of  an  express  contract ;  it  is  given 
by  implication  of  law.  If,  therefore,  a  mercantile  transaction  which  might  in- 
volve a  lien  is  created  by  a  written  contract,  and  security  given  for  the  result  of 
the  dealings  in  that  relation,  the  express  stipulation  and  agreement  of  the  par- 
ties for  security  exclude  lien,  and  limit  their  rights  to  the  extent  of  the  express 
contract  that  they  have  made.  Expressum  facit  cessare  taciturn!'  Bunney  v. 
Poyntz,  4  B.  &  Ad..  568  (24  E.  C.  L.  R.)  ;  Barrett  v.  Goddard,  3  Mason,  107  ; 
Byles  on  Bills  (Sharswood's  ed.)  [*385],  566. 

*  Clark  V.  Draper,  19  N.  H.,  419;  contra,  Hutchins  v.  Olcott,  4  Vt.,  549. 

^•New  V.  Swain,  i  Dans.  &  L.,  193  ;  Valpy  v.  Oakeley,  16  Q.  B.,  641  ;  Dixon 
V.  Yates,  5  B.  &  Ad.,  341  ;  Benjamin  on  Sales,  623. 
°  New  V.  Swain,  i  Dans.  &  L.,  193. 

'  Bunney  v.  Poyntz,  4  B.  &  Ad.,  568  (24  E.  C.  L.  R.)  ;  Byles  on  Bills  [*373]. 
553  ;  2  Parsons  N.  &  B.,  166. 


§   1 28 1.  EFFECT    UPON    A    LIEN.  303 

third  person  is  security,  even  when  it  is  negotiated  to  a 
third  party  by  discount  or  otherwise,  does  not  amount  to  a 
relinquishment  of  the  vendor's  hen  on  the  land  for  the  un- 
paid purchase  money.^  The  master  of  the  Rolls  said  in  an 
English  case  :  "  The  effect  of  a  security  of  a  third  person 
has  never  been  decided  ;  but  I  concur  with  Lord  Redesdalc 
that  bills  of  exchange  are  not  security,  but  a  mode  of  pay- 
ment."^ Nor  will  a  check  drawn  on  a  bank  by  the  vendee, 
which  is  not  presented  or  paid,  operate  a  relinquishment  of 
the  vendor's  lien,  nor  any  instrument  whatever  inv^olving 
merely  the  vendee's  responsibility,^  even  if  another  person 
be  substituted  for  the  original  payee.*  In  Kansas,  where  a 
note  was  given  and  indorsed,  it  was  said  by  Brewer,  J.  : 
"  The  lien  which  the  vendor  has  is  something  more  than  a 
bare  right,  a  personal  privilege.  It  is  an  interest  created 
by  the  contract  of  the  parties,  and  is  as  fixed,  complete,  and 
absolute  as  the  interest  of  a  mortgage.  It  is  more,  for  the 
mortgagee  has  no  estate  in  the  land  under  the  decisions  of 
this  court,  while  the  vendor,  in  a  bond  to  convey,  holds  the 
legal  title.  It  is  a  general  rule  that  the  incident  follows  the 
principal  ;  the  transfer  of  a  debt  carries  with  it  the  security. 
The  vendor  holds  the  legal  title  as  security.  He  transfers 
the  debt  which  is  secured.  Why  may  not  the  indorsee,  the 
holder  of  the  debt,  avail  himself  of  the  security  ?  In  the 
case  of  a  mortgage  the  rule  is  well  settled.  What  is  this 
but  an  equitable  mortgage  ?"°  And  the  ruling  accorded 
with  these  views.  If  a  negotiable  note  is  drawn  by  the 
vendee,  and  indorsed  by  a  third  person,  or  drawn  by  a  third 
person,  and  indorsed  by  the  vendee,  it  is  considered  by 
high  authorities  that  it  will  repel  the  lien  presumptively.® 

'  Mag-ruder  v.  Peter,  11  Gill  &  J.,  217;  Tompkins  v.  Mitchell,  2  Rand.,  428; 
Bayley  v.  Greenleaf,  7  Wheat.,  46  ;  ex  parte  Loring,  2  Rose,  79 ;  Hughes  v. 
Kearney,  i  Sho.  &  L.,  135  ;  Hall  v.  Mobile  &:  M.  R.R.,  58  Ala.,  10  ;  i  Lomax 
Digest  [218],  268  ;  Byles  on  Bills  [*374],  554. 

^  Grant  v.  Mills,  2  Ves.  &  B.,  306  ;  Story  Eq.  Juris.,  §  1226. 

^  Honore  V,  Blakewell,  B.  Mon.,  67  ;  Mims  v.  Macon,  etc.,  R.R.  Co.,  Kelly,  333. 

*  Irvin  V.  Gamer,  50  Tex.,  48.  ^  Stevens  v.  Chadwick,  10  Kansas,  406. 

'  Brown  v.  Gilman,  4  Wheat.,  526  ;  i  Mason,  192 ;  Foster  v.  Trustees,  3  Ala., 
302  ;  Burk  v.  Gray,  6  How.  (Miss.),  527 ;  Woods  v.  Bailey,  3  Fla.,  41  ;  Boon  v. 


304  CONDITIONAL  AND  ABSOLUTE  PAYMENT.         §I28l^. 

§  1281^.  Whether  bond  for  purchase  money  waives 
vendors  lien. — It  has  been  held  that  taking  a  bond  for  the 
purchase  money  of  land  waives  the  vendor's  lien  ;  ^  but  the 
better  opinion  is  to  the  contrary,  and  that  the  bond  is 
mere  evidence  of  the  debt.^  And  when  such  securities  are 
taken  as  to  raise  the  presumption  of  a  waiver  of  the  lien, 
that  presumption  may  be  repelled  by  proof.^ 

§  1 28 1  (5.  Transfer  of  note  for  purchase  money. — When 
a  note  is  given  for  purchase  money  of  land,  and  is  trans- 
ferred by  the  vendor,  the  lien  passes  also  to  the  transferee,* 


Murphy,  6  Blackf.,  1272;  Campbell  v.  Baldwin,  2  Humph.,  248;  White  v. 
Dougherty,  Mart.  &  Y.,  309;  i  Lomax  Digest  [218],  269;  cotitra,  Magruder  v. 
Peter,  11  Gill  &  J.,  217.  In  Brown  v.  Oilman,  4  Wheat.,  255,  Marshall,  C.  J., 
said  :' "  The  notes  for  which  the  vendors  stipulated  are  to  be  indorsed  by  per- 
sons approved  by  themselves.  This  is  a  collateral  security  on  which  they  relied, 
and  which  discharges  any  implied  lien  on  the  land  itself  for  the  purchase 
money."  And  in  the  same  case,  when  before  the  lower  court  (i  Mason,  191), 
Story,  J.,  said :  "  On  a  careful  examination  of  all  the  authorities,  I  do  not  find  a 
single  case  in  which  it  has  been  held,  if  the  vendor  takes  a  personal  collateral 
security,  binding  others  as  well  as  the  vendee — as,  for  instance,  a  bond,  or  note 
with  a  security  or  indorser,  or  a  collateral  security  by  way  of  pledge  or  mort- 
gage— that  under  such  circumstances  a  lien  exists  upon  the  land  itself." 

'  Fawell  v.  Heelis,  2  Amb.,  724 ;  Winter  v.  Anson,  1  Sim.  &  S.,  434- 

2  White  v.  Casanove,  i  Har.  &  J.,  106  ;  Cox  v.  Fenvvick,  3  Bibb,  183  ;  Young 
V.  Wood,  II  B.  Mon.,  23  ;  Lagow  v.  Badollet,  i  Blackf.,  416  ;  Cole  v.  Withers, 
33  Grat.',  193;  Yaney  v.  Mauck,  15  Grat.,  300;  Knisely  v.  Williams,  3  Grat., 
233;  Story's  Eq.  Juris.,  §  1226.  Chancellor  Kent  has  said  on  this  subject  m 
his  Commentaries,  vol.  4,  section  58  [*I53],  "  In  several  cases  it  is  held  that 
taking  a  bond  from  the  vendee  for  the  purchase  money,  or  the  unpaid  part  of  it, 
affected  the  vendor's  equity,  as  being  evidence  that  it  was  waived,  but  the 
weight  of  authority  and  better  opinion  is,  that  taking  a  note,  bond,  or  covenants 
from  the  vendee  for  the  payment  of  the  money,  is  not  of  itself  an  act  of  waiver  of 
the  lien,  for  such  instruments  are  the  only  ordinary  evidence  of  the  debt.  Tak- 
ing a  note,  bill,  or  bond,  with  distinct  security,  or  taking  distinct  security  exclu- 
sively by  itself,  either  in  the  shape  of  real  or  personal  property  from  the  ven- 
dee, or  taking  the  responsibility  of  a  third  person,  is  evidence  that  the  seller  did 
not  repose  upon  the  lien,  but  upon  independent  security,  and  it  discharges  the 
lien." 

^  Story's  Eq.  Juris.,  §  1226. 

^  Sloan  V.  Campbell,  71  Mo.,  387  ;  Hall  v.  Mobile  &  M.  R.R.,  58  Ala.,  10; 
Edwards  v.  Bohannon,  2  Dana,  98  ;  Woods  v.  Bailey,  3  Fla.,  41  ;  Stevens  v. 
Chadwick,  10  Kansas,  406  ;  15  American  Rep.,  352,  353;  Buchanan  v.  Kimes, 
58  Tenn.,  275  ;  36  Am.  Rep.,  493  ;  see  a7ite,  §§  748,  834.  In  some  cases  it  has 
been  held  that  if  the  vendor's  lien  be  not  reserved,  but  is  merely  equitable  in  its 
character,  the  transfer  of  the  vendee's  note  by  the  vendor  does  not  carry  with  it 
the  lien.  Pillow  v.  Helm,  7  Baxter,  545  ;  Green  v.  De  Moss,  10  Humph.,  374. 
But  the  assignment  of  the  lien  is  in  any  event  merely  equitable,  and  the  distinc- 
tion as  to  the  assignment  of  express  and  implied  liens  does  not  seem  tenable. 
See  2  Parsons  N.  &  B.,  167-169,  and  notes. 


§   1282.  EFFECT    UPON    A    LIEN.  305 

unless  the  indorsement  were  without  recourse  or  the  vendoi 
who  transfers  guarantees  the  payment,  in  either  of  which 
cases  the  lien  is  defeated.^ 

§  1282.  Mechanics  liens. — In  many  of  the  States  of  the 
United  States  statutes  have  been  enacted  giving  mechanics' 
liens  on  the  buildings  or  works  constructed,  for  the  amount 
of  materials  furnished  and  labor  done  upon  them.  And,  as 
a  general  rule,  it  may  be  stated  that  such  liens  are  not 
waived  by  the  receipt,  on  the  part  of  the  mechanic,  of  a  bill 
of  exchange  or  negotiable  promissory  note  for  the  amount 
of  the  debt  which  such  lien  secures,'^  but  pass  as  an  incident 
of  the  debt  by  the  transfer  of  the  security  for  its  payment.^ 
Taking  a  bond  even  for  such  a  debt  would  not  be  re- 
garded as  waiving  such  a  lien.  Additional  securities  are  in 
their  nature  cumulative,  and  where  parties  have  not  ex- 
pressly or  impliedly  so  stipulated,  there  is  no  reason  why 
the  one  should  be  regarded  as  a  relinquishment  of  the 
other.^ 

*  Woods  V.  Bailey,  3  Fla.,  41  ;  Schnebly  v.  Ragan,  7  Gill  &  J.,  120. 
'Sweet  V.  James,  2  R.  I.,  270;   Gable  v.  Gale,  7  Blackf.,  218;  Steamboat 

Charlotte  v.  Hammond,  9  Mo.,  58  ;  Mix  v.  Ely,  2  Greene  (Iowa),  508,  513. 

*  Jones  V.  Hurst,  67  Mo,,  568. 

*  Kinsley  v.  Buchanan,  5  Watts,  118;   Henchman  v.  Lybrand,  14  Serg.  & 
R.,  32. 

Vol.  II. — 20 


CHAPTER  XL. 

DISCHARGES     OF     BILLS     AND     NOTES     OTHERWISE     THAN    BV 

PAYMENT. 


SECTION  I. 

DISCHARGES   BY   OPERATION   OF   LAW. 

§  1283.  Besides  the  discharge  of  all  liability  by  payment, 
there  may  be  other  discharges  by  operation  of  law  and  by 
agreement  between^  the  parties.  By  operation  of  law  the 
obligation  of  any  party  to  the  bill  or  note  may  be  dis- 
charged :  (i)  By  a  general  bankrupt  or  insolvent  act  of  the 
State  or  country  where  the  contract  is  made  or  is  payable.^ 
(2)  By  merger  of  the  bill  or  note  in  a  judgment  thereon 
against  the  party  or  parties  liable  thereon.  (3)  By  appoint- 
ment of  the  maker  or  acceptor  to  be  the  executor  of  the 
holder.^  (4)  By  gift  or  bequest  of  the  bill  or  note  to  the 
maker  or  acceptor  by  last  will.  (5)  By  any  matter  which 
constitutes  such  discharge  by  the  local  law. 

§  1284.  Judgment  merges  debt. — As  between  the  parties 
thereto,  a  judgment  on  a  bill  or  note  operates  as  a  merger 
of  the  indebtedness,  and  while  other  parties  to  the  instru- 
ment may  be  sued  upon  it,  the  one  against  whom  the  judg- 

*  But  the  insolvent  laws  of  a  State  have  no  extra  territorial  force  or  effect. 
They  are  inoperative  as  to  citizens  of  another  State  or  Territory,  although  the 
contract  is  to  be  performed  within  the  State  granting  the  discharge.  Baldwin 
V.  Hale,  I  Wall.,  223  ;  Soule  v.  Chase,  39  N.  Y.,  342  ;  Pratt  v.  Chase,  44  N.  Y., 
597- 

"^  This  is  the  common  law  rule.  But  in  equity  the  executor  is  accountable 
for  the  amount  of  his  debt  as  assets  if  necessary  for  payment  of  debts  of  the  tes- 
tator ;  otherwise  he  is  discharged.  Story  on  Notes,  §  444 ;  Marvin  v.  Stone,  2 
Cowen,  781.  And  the  common  law  rule  is  generally  abolished  by  statutes  in 
the  United  States. 

(306) 


§    1286.  DISCHARGES    BY    OPERATION    OF    LAW.  307 

mcnt  has  been  obtained  is  liable  only  under  such  judgment. 
The  judgment  extinguishes  the  bill  or  note  as  to  the  judg- 
ment debtor,  but  is  no  satisfaction  so  as  to  discharge  other 
parties  until  paid.^  If  the  judgment  be  rendered  by  a  court 
without  jurisdiction  it  is  void  and  without  effect.^ 

§  1285.  There  are  some  other  cases  in  which  the  debt 
may  be  extinguished  by  merger.  Thus,  at  common  law,  if 
the  creditor  appoint  his  debtor  executor,  by  the  English 
law  it  operates  at  law  as  a  release  or  extinguishment  of  the 
debt,  provided  there  are  other  assets  to  pay  the  creditor's 
debt.^  But  this  principle  does  not  obtain  in  the  United 
States.  Where  one  of  three  acceptors  is  the  holder  of  the 
bill  at  maturity,  the  liability  to  pay,  and  right  to  receive  the 
money,  concur  in  one  person,  and  operates  as  performance 
and  extincruishment  of  the  contract.^  So  where  an  estate 
descends  to  the  debtor  as  heir.^  So  a  gift  of  the  bill  or 
note  to  maker  or  acceptor  cancels  it.^ 

§  1286.  A  bill  is  not  satisfied  by  bequest  of  a  legacy  by 
the  drawer  to  the  payee  who  is  its  holder.^  But  an  entry 
by  the  testator  who  is  holder  of  the  bill,  in  his  book,  that 
the  maker  of  a  note  should  pay  no  interest,  and  should  not 
be  called  on  for  the  principal,  discharges  it.^ 


■  Russell  &  Erwin  Man.  Co.  v.  Carpenter,  13  N.  Y.  S.  C.  (5  Hun),  164  ;  Clax- 
ton  V.  Swift,  2  Show.,  441  ;  Tarleton  v.  Allhusen,  2  Ad.  &  El,  32  ;  Story  on 
Notes,  §  409 ;  2  Parsons  N.  &  B.,  232  ;  Byles  pn  Bills  (Sharswood's  ed.),  [*228], 
372. 

^  Linn  v.  Carson,  32  Grat.,  171. 

'Williams  on  Executors,  937;  Freakley  v.  Fox,  9  Bam.  &  Cres.,  130;  Story 
on  Bills,  §  442 ;  Story  on  Notes,  §  407  ;  Byles  on  Bills  (Sharswood's  ed.)  [*54, 
233].  140,  376. 

*  Harmer  v.  Steele,  4  Welsby  H.  &  G.,  i.  '  Story  on  Bills,  §  445. 

'Stewart  v.  Hidden,  13  Minn.,  43.  '  Carr  v.  Eastabroke,  3  Ves.,  561. 

*Edon  V.  Smyth,  5  Ves.,  341,  350,  note,  citing  Ashton  v,  Pye. 


3o8  DISCHARGES  OTHERWISE  THAN  BY  PAYMENT.       ^   1 287. 

SECTION  II. 

DISCHARGES   BY   AGREEMENT   OF  THE   PARTIES. 

§  1287.  By  agreement  between  the  parties  a  discharge 
may  be  effected  :  (i)  By  accord  and  satisfaction  by  re« 
ceipt  of  some  collateral  thing  from  the  maker  or  acceptor. 

(2)  By  a  release  from  the  holder  to  the  maker  or  acceptor. 

(3)  By  a  covenant  never  to  sue  the  maker  or  acceptor  on 
the  instrument.  (4)  By  agreement  that  another  shall  be 
substituted  as  the  debtor.  (5)  By  agreement  that  another 
security  shall  be  taken  in  lieu  of  the  bill  or  note.  (6)  By 
taking  a  higher  security. 

§  1288.  First:  An  accord  and  satisfaction,  as  between 
the  maker  or  acceptor  and  the  holder,  by  the  giving  and  ac- 
ceptance of  some  collateral  thing  in  discharge  of  the  bill  or 
note,  utterly  extinguishes  it.  For  whatever  amounts  to  sat- 
isfaction of  a  bill  or  note  by  the  acceptor  or  maker  is  satis- 
faction as  to  all  parties  who  are  collaterally  liable.  Satisfac- 
tion made  by  one  partner  of  a  firm,  which  are  either  makers 
or  indorsers,  discharges  all  the  partners  ;  and  so  where  a 
person  is  partner  in  two  firms,  one  of  which  are  the  rnakers, 
and  the  other  indorsers  of  the  note,  satisfaction  by  him  dis- 
charges both  firms.^  If  an  executory  contract  is  the  con- 
sideration of  another  executory  contract,  both  may  be  mut- 
ually rescinded,  the  giving  up  one  being  the  consideration 
for  giving  up  the  other.^ 

But  a  contract  upon  an  executed  consideration  can  not  be 
discharged  either  before^  or  after  the  breach,^  save  by  a  re- 
lease, or  by  satisfaction  for  a  valuable  consideration.  If 
the  holder  of  a  bill  or  note  renounces  his  claim  and  gives 
up  the  instrument,  the   drawer  and  indorsers  are  as  much 

'  Atkins  V.  Owens,  4  Nev.  &  Man.,  123.  '  King  v.  Gillet,  7  M.  &  W.,  55, 

*  Byles  on  Bills  (Sharswood's  ed.),  [*224],  367,  note. 

*Byles  (Sharswood's  ed.),  P225],  368;  2  Parsons  N.  &  B.,  235. 


5    1289.       DISCHARGES  BY  AGREEMENT  OF  THE  PARTIES.        3O9 

discharged  as  by  payment,  and  he  can  not  sue  the  maker  or 
acceptor  upon  it.  And  having  voluntarily  relinquished  the 
evidence  of  the  debt,  it  may  be  doubted  if  he  could  sue  the 
maker  or  acceptor  at  all. 

§  1289.  Pari  payment  is  ordinarily  only  payment  pro 
ta7ito. — A  part  payment  of  a  bill  or  note  which  has  fallen 
due  only  extinguishes  \X.  pro  tanto,  and  an  agreement  that  it 
shall  be  in  full  discharge  of  the  debt  does  not  make  such 
part  payment  any  more  effectual  as  to  the  residue,  there 
being  no  sufficient  consideration  for  the  discharge  of  the 
whole.^  But  any  agreement  by  way  of  compromise,*  or 
composition,^  into  which  any  new  element  entered,  would 
be  sustained,  and  if  the  claim  were  disputed,  agreement  to 
receive  part  payment  in  full  would  discharge  it. 

§  1289^.  Wheii  part  payment  will  support  agreement  to 
accept  it  in  satisfactio7i. — If  the  part  payment  were  before 
maturity,'*  or  were  made  by  a  stranger,^  or  was  made  by  a 
bill  or  note  with  a  surety,^  or  collateral  security,'  or  were 
in  any  way  more  advantageous  to  the  creditor,^  it  would 
suffice  to  support  any  agreement  based  upon  it.  As  said, 
in  Massachusetts,  by  Dewey,  J.  :  "  The  same  ancient 
authority  which  declares  that  the  payment  and  acceptance 
of  a  less  sum  on  the  day  the  debt  becomes  due,  in  satisfac- 


'  Fitch  V.  Sutton,  5  East.,  230  ;  Pinnel's  Case,  5  Co.,  1 17  ;  Price  v.  Cannon,  3 
Mo.,  453  ;  Meyers  v.  Byin^on,  34  Iowa,  205  ;  Missouri  Loan  Bank  v.  Garner,  r 
Mo.  App.,  200  ;  Rea  v.  Owens,  37  Iowa  ;  Carroway  v.  Odcneal,  56  Miss.,  223  ; 
Cavaness  v.  Ross,  33  Ark.,  572. 

"Jenks  V.  Barr,  56  III.,  450;  2  Parsons  N.  &  B.,  218;  Sibree  v.  Tripp,  15  M. 
&  W.,  23;  Cumber  v.  Wane,  i  Str.,  425. 

'  Murray  v.  Snow,  37  Iowa,  410. 

\  Bowker  v.  Childs,  3  Allen,  434  ;  Brooks  v.  White,  2  Mete,  283  ;  Whittle  v. 
Skinner,  23  Vt.,  231  ;  Lee  v.  Oppenheimer,  32  Me.,  253. 

*  Welby  V.  Drake,  i  Car.  &  P.,  557  ;  Thompson  v.  Percival,  5  B.  &  Ad.,  925. 

'Hardman  v.  Bellhouse,  9  M.  &  W.,  596 ;  Mason  v.  Campbell,  27  Minn.,  54. 

^  Lewis  V.  Jones,  4  Bam.  «&  C,  506. 

*See  Goddard  v.  O'Brien,  English  High  Court,  Q.  B.  Div.,  March  27,  18S2, 
and  Mechanics'  Bank  v.  Huston,  S.  C.  of  Penn.,  February  13,  1882,  both  of  which 
cases  are  referred  to  in  Central  L.  J.,  March  26,  1882,  p.  401  (Vol.  14,  No.  21), 
and  in  both  of  which  it  is  held  that  the  giving  up  of  a  negotiable  instrument  for 
a  less  sum  than  a  debt,  in  full  payment,  introduces  an  element  of  advantage 
which  discharges  the  debt. 


3 TO         DISCHARGES  OTHERWISE  THAN  BY  PAYMENT.        gISQO. 

tion  of  a  greater,  is  no  defence  beyond  the  amount  paid, 
also  declares  that  the  payment  and  acceptance  of  a  less 
sum  before  the  day  of  payment  has  arrived,  in  satisfaction 
of  the  whole,  would  be  a  good  accord  and  satisfaction , 
for  it  is  said,  peradventure,  parcel  of  the  sum  before  the 
day  it  fell  due  would  be  more  beneficial  to  him  than  the 
whole  at  the  day,  and  the  value  of  the  satisfaction  is  not 
material."^  The  same  rule  would  apply  if  a  number  of 
notes,  some  of  which  were  due  and  some  of  which  were 
not  due,  were  delivered  up  for  less  than  face  value  ;  ^  and 
also  if  the  old  note  were  by  agreement  surrendered  up  for 
a  new  one,  the  contract  then  being  executed.^  Where  suit 
had  been  brought  on  a  note,  and  a  compromise  was  effect- 
ed, the  holder  agreeing  to  indorse  on  the  note  a  credit  of 
$50,  if  defendant  would  pay  balance  on  a  certain  day ;  and 
under  this  agreement  suit  was  dismissed,  it  was  held,  that 
on  failure  of  defendant  to  pay  the  balance  the  payee  might 
erase  the  credit  given.* 

§  1290.  Secondly :  A  release  is  technically  an  instru- 
ment under  seal,  the  seal  importing  a  consideration.  But 
the  release  of  a  party  to  a  bill  or  note  by  any  agreement, 
upon  a  valuable  consideration,  is  as  effectual  as  if  made 
under  seal.^  And  it  discharges  a  joint  party,  and  all  par- 
ties who  are  subsequent  to  the  one  released,  and  might 
have  looked  to  him  on  making  payment  for  reimburse- 
ment. It  is  not  necessary  that  the  releasor  should  be  the 
holder  of  the  instrument  at  the  time  of  making  the  re- 
lease.® But  a  release  of  a  drawee  before  he  accepts  is  no 
bar  to  a  suit  on  his  acceptance,  for  it  can  only  operate  on 
existing  rights.''' 

'  Brooks  V.  White,  2  Mete,  283.  =  Bowker  v.  Childs,  3  Allen,  436. 

=  Draper  v.  Hill,  43  Vt.,  439  ;  Ellsworth  v.  Fogg-,  35  Vt.,  255. 

*  Chamberlin  v.  White,  79  111.,  549. 

'  Benjamin  v.  McConnell,  4  Gilm.,  536 ;  Milliken  v.  Brown,  I  Rawle,  391  ; 
Nicholson  v.  Revill,  4  Ad.  &  E.,  675  ;  6  Nev.  &  M.,  192. 

°  Scott  V.  Lefford,  i  Camp.,  246. 

'  Hartley  v.  Manton,  5  O.  B.,  247 ;  Ashton  v.  Freestun,  2  Man.  &  G.,  I ;  2 
Scott  N.  R.,  273 ;  Brage  v.l^etter,  i  Ld.  Raym.,  65. 


§1293-        DISCHARGES  BY  AGREEMENT  OF  THE  PARTIES.        3II 

If  there  is  not  a  technical  release  under  seal,  which,  as 
has  been  said,  imports  a  consideration,  no  agreement  can 
operate  as  a  release,  unless  it  is  upon  a  sufficient  considera- 
tion.^ A  verbal  agreement  of  the  payee  of  a  note  with 
the  maker  to  release  him,  and  accept  a  third  party  in  his 
stead,  who  signs  in  pursuance  of  such  agreement,  is  upon 
sufficient  consideration,  and  is  valid. ^ 

§  1 29 1.  Thirdly :  A  general  covenant  7iot  to  sue  the 
maker  or  acceptor  will  operate  as  an  extinguishment  of  the 
debt  as  to  him,''  and  will,  of  course,  operate  as  a  discharge 
of  the  drawer  and  indorsers.'*  But  such  a  covenant  does 
not  discharge  another  who  is  jointly  liable  with  the  cove- 
nantee ;  ^  nor  will  such  a  covenant  not  to  sue,  given  by  one 
of  two  creditors,  operate  as  a  release.^  And  a  covenant 
not  to  sue  for  a  limited  time  will  not  affect  a  release  as  be- 
tween the  parties  (though  it  will  discharge  the  sureties), 
unless  it  be  stipulated  that  it  may  be  pleaded  in  bar.^  Nor 
will  an  agreement  not  to  sue  for  a  limited  time  discharge 
the  party  with  whom  it  is  made.® 

§1292.  Four  tJily  and  fifthly :  The  substitution  of  another 
debtor,  or  of  another  security  for  the  bill  or  note,  do  not 
here  require  extended  notice.  They  depend  upon  the 
agreements  between  the  parties,  and  are  governed  by  the 
general  law  of  contracts. 

§  1293.  Sixthly:  Bo7id  or  covenant  for  debt. — A  bill  or 
note,  or  other  simple  contract  debt,  is  merged  in  a  bond  or 
covenant  taken  for  or  to  secure  the  claim,  as  against  the 

'  Keeler  v.  Bartine,  12  Wend.,  no  ;  Carter  v.  Zenblin,  68  Ind.,  405. 

*  Carpenter  v.  Murphee,  49  Ala.,  84.  '  Story  on  Notes,  §  409. 

*  Byles  (Sharswood's  ed.),  384. 

*■  Dean  v.  Newhall,  8  Term  R.,  168  ;  Hutton  v.  Eyre,  6  Taunt..  289 ;   Lacy  v. 

Kinnaston,  Holt,  178  ;  I  Ld.  Raym.,  688;  Twopenny  v.  Young,  3  Barn.  &  C, 

208 ;  2  Parsons  N.  &  B.,  238  ;  Story  on  Notes,  §  409  ;  Story  on  Bills,  §  43I• 
'Walmsleyv.  Cooper,  II  Ad.  &  E.,  216;  3  Per.  &  D.,  149. 
■'  Drage  v.  Netter,  i  Ld.  Raym.,  65  ;  Hartley  v.  Manton,  5  Q.  B.,  247  ;  Ashton 

V.  Freestun,  2   Man.  &  G.,    i  ;  Thimbleby  v.  Barron,  3  M.  &  W.,  210;  Byles 

(Sharswood's  ed.)  [*24o],  385. 

*  Ford  V.  Beech,  11   Q.  B.,  842   (63  E.  C.  L.  R.) ;  Byles  (Sharswood's  ed.) 
[*23o],  374. 


312         DISCHARGES  OTHERWISE  THAN  BY  PAYMENT.         §1294. 

party  executing  such  bond  or  covenant,  because  in  legal 
contemplation  the  specialty  is  an  instrument  of  a  higher 
nature,  and  affords  a  higher  security  and  a  better  remedy 
than  the  original  demand  presented.^  But  this  does  not 
hold  even  in  favor  of  a  surety  by  simple  contract,  if  it  ap- 
pear on  the  face  of  the  subsequent  deed  that  it  was  intended 
only  as  an  additional  or  collateral  security,  and  there  is 
nothing  in  the  deed  itself  expressly  inconsistent  with  such 
intention.^  Nor  would  the  principle  stated  apply  where 
bonds  are  given  for  interest  on  coupons  secured  by  mort- 
gage, for  so  long  as  the  debt  remains  the  courts  will  never 
presume  the  principal  security  to  have  been  surrendered 
without  satisfaction.^ 

SECTION   III. 

DISCHARGE   OF  A  JOINT   PARTY. 

§  1294.  A  note  may  be  the  joint  note  of  two  or  more 
parties,  or  it  may  be  the  joint  and  several  note  of  two  or 
more  parties.  A  note  simply  joint  is  the  single  note  of  all 
the  joint  parties  taken  collectively.  But  the  joint  and  sev- 
eral note  of  the  same  parties  is  one  more  than  as  many 
notes  as  the  number  of  the  signers,  being  the  several  note 
of  each  one  of  them  and  the  joint  note  of  all.'* 

Now,  when  the  maker  of  a  joint  note,  or  a  joint  ac- 
ceptor, or  joint  indorser,  is  discharged  by  a  release  or  other- 
wise, all  others  jointly  bound  with  him  are  discharged  ;  for 
no  separate  suit  against  each,  or  joint  suit  against  all,  can 
be  maintained  in  such  a  case.  And  besides,  the  discharge 
of  one  by  the  holder  deprives  the  others  of  the  right  of  pro- 
portional relief  by  contribution,  which  they  would  other- 
wise become  entitled  to  on  making  payment.^ 

'  Story  on  Notes,  §  409.  '  Bowles  v.  Elmore,  7  Grat.,  390. 

»  Gibcrt  V.  W.  C.  V.  M.,  etc.,  R.R.,  33  Grat.,  597  ;  Cole  v.  Withers,  33  Grat., 
186. 

*  King  V.  Hoare,  13  M.  &  W.,  505. 

"  Nicholson  V.  Revill,  6  Nev.  &  M.,  192  ;  4  Ad.  &  El,  675  ;  Brooks  v.  Stuart, 
10  Ad.  &  EL,  854  ;  King  v.  Morrison,  2  Dev.,  341  ;  Harrison  v.  Close,  2  Johns. 


§   1296.  DISCHARGE    OF    A    JOINT    PARTY.  3I3 

§  1295.  An  agreement  with  one  partner  to  look  to  him 
only  for  the  whole  debt,  if  not  for  a  valuable  consideration, 
will  not  discharge  him.^  But  if  the  holder  accept  from  him 
a  separate  security  in  discharge  of  the  social  debt,  that  will 
be  sufficient.^  A  release  of  one  of  two  joint  debtors  will 
not  discharge  the  others  if  the  holder's  rights  against  them 
be  expressly  reserved  ;  ^  nor  will  a  copartner  be  discharged 
by  time  given  another  if  there  be  such  a  reservation.'* 
Where  one  of  three  partners,  after  a  dissolution  of  partner- 
ship, undertook  to  pay  a  particular  partnership  debt  on  two 
bills  of  exchange,  and  that  was  communicated  to  the  holder, 
who  consented  to  take  the  separate  notes  of  the  one  part- 
ner for  the  amount,  strictly  reserving  his  right  against  all 
three,  and  retained  possession  of  the  original  bills,  it  was 
held  that  the  separate  notes,  having  proved  unproductive, 
he  might  still  resort  to  his  remedy  against  the  other  part- 
ners ;  and  that  the  taking  under  these  circumstances  the 
separate  notes,  and  even  afterward  renewing  them  several 
times  successively,  did  not  amount  to  satisfaction  of  the 
joint  debt.^ 

§  1296.  Judgment  against  joint  promisor  and  covenant 
not  to  sue. — A  judgment  against  one  of  two  joint  promisors 
is  a  bar  to  an  action  against  both  jointly,^  and  is  also  a  bar 

448;  Tuckerman  v.  Newhall,  17  Mass.,  581  ;  Boardman  v.  Paige,  ii  N.  H., 
431  ;  Robertson  v.  Smith,  18  Johns,  459;  Crawford  v.  Roberts,  8  Oregon,  324; 
Byles  (Sharswood's  ed.)  [*232],  375  ;  Thomson  on  Bills,  387  ;  Story,  §  431  ; 
Story  on  Notes,  §§  425,  435  ;  i  Parsons  N.  &  B.,  247,  250  •  Edwards  on  Bills, 
573.  574  ;  Chitty  (13  Am,  ed.)  [*4i6],  470,  472. 

'  Lodge  V.  Dicas,  3  Barn.  &  Aid.,  611. 

"  Bedford  v.  Deakin,  2  Bam.  &  Aid.,  210  ;  Evans  v.  Drummond,  4  Esp.,  89  ; 
Nicholson  v.  Revill,  4  Ad.  &  El.,  675  ;  Stephen  v.  Thompson,  2  Wms.,  ^^  \ 
Story  on  Bills,  §  431  ;  Byles  (Sharswood's  ed.)  [*48],  132. 

'  Kearsley  v.  Cole,  16  M.  &  W.,  128  ;  Price  v.  Barker,  4  El.  &  Bl.,760  ;  Thom- 
son on  Bills,  387  ;  i  Parsons  N.  &  B.,  249. 

*  Lodge  V.  Dicas,  3  Barn.  &  Aid.,  611  ;  Crawford  v.  Millspaugh,  13  Johns,  87. 

'  Bedford  v.  Deakin,  2  B.  &  Aid.,  210 ;  2  Stark.,  173. 

»  Mason  v.  Eldred,  6  Wall.,  238  ;  Willings  v.  Consequa,  i  Peters,  C.  C,  305  ; 
Gibbs  V.  Bryant,  i  Pick.,  121  ;  Smith  v.  Black,  9  S.  &  R.,  145  ;  Lechmere  v. 
Fletcher,  i  Cr.  &  M.,  635  ;  Odell  v.  Carpenter,  71  Ind.,  467  ;  Robertson  v.  Smith, 
18  Johns,  459  ;  Ward  v.  Johnson,  13  Mass.,  14S  ;  King  v.  Hoare,  13  M.  «&  W., 
494;  5  Robinson's  Practice,  822;  i  Parsons  N.  &  B.,  249;  but  see  Sheehy 
V.  Mandeville,  6  Cranch,  253  ;  Higgins'  Case,  6  Co.  R.,  45  ;  2  Parsons  N.  & 
B.,  252. 


314         DISCHARGES  OTHERWISE  THAN  BY  PAYMENT.         §  I  297. 

to  an  action  against  the  other  one.*  The  joint  parties  can 
not  be  sued  separately,  for  they  have  incurred  no  separate 
obhgation  ;  and  they  can  not  be  sued  jointly,  because  judg- 
ment has  already  been  recovered  against  one  who  would  be 
subjected  to  two  suits  for  the  same  cause.^  But  where  the 
liability  is  joint  and  several,  a  judgment  against  one  does 
not  preclude  procedure  against  the  other  or  others,  though 
after  judgment  against  one,  all  can  not  be  sued  jointly.^ 

A  covenant  not  to  sue  one  of  two  or  more  joint  makers 
does  not  discharge  or  release  the  others,  being  regarded  as  a 
mere  personal  covenant,  for  breach  of  which  an  action  will 
not  lie.^  Nor  does  part  payment  by  one  joint  debtor  dis- 
charge another,^  nor  the  mere  taking  of  security  from 
one/ 

§  1297.  Giving  time  to  joint  party. — Upon  the  same 
principle  that  a  covenant  not  to  sue  a  joint  party  will  not 
operate  as  a  discharge  of  other  joint  parties,  the  giving  of 
time  to,  and  taking  the  note  of  one;'  or  proceeding  in  a 
suit  against  one  even  to  judgment,^  but  without  satisfaction, 
it  has  been  thought,  will  be  no  discharge  of  the  other  joint 
parties  ;  but  the  better  opinion  is  that  judgment  against  one 
joint  party  bars  proceedings  against  all  other  parties  who 
are  joint,  and  not  also  several.* 

§1298.  Death  of  joint 'party. — At  common  law  it  is 
the  settled  doctrine  that  in  case  of  a  joint  obligation,  if  one 


*  Ibid. ;  Byles  on  Bills  (Sharswood's  ed.)  [*228],  272 ;  Story  on  Notes,  §  409 ; 
King  V.  Hoare,  1 3  M.  &  W.,  494  ;  Holman  v.  Langtree,  40  Ind.,  349. 

""  Mason  v.  Eldred,  6  Wall.,  238. 

'  Story  on  Bills,  §  428  ;  see  U.  S.  v.  Cushman,  2  Sumner,  310,  426;  Byles 
(Sharswood's  ed.)  [*228],  372 ;  5  Robinson's  Practice,  823. 

"  Twopenny  v.  Young,  3  Barn.  &  C,  208 ;  Mallet  v.  Thompson,  5  Esp.,  178  ; 
Story  on  Notes,  §§  409,  421,  425. 

^  Ruggles  V.  Patten,  8  Mass.,  480. 

«  Bedford  v.  Deakin,  2  B.  &  Aid.,  210  ;    Thomson  on  Bills  (Wilson's  ed.),  393. 

'  Draper  V.  Wild,  13  Gray,  580;  Parker  v.  Cousin,  2  Grat.,  372;  Story  on 
Notes,  §§  409,  421  ;  Story  on  Bills,  §  428. 

*  See  Sheehy  v.  Mandeville,  6  Cranch,  253;    and  Story  on  Notes,  §  409,  note  7 

*  Ante,  §  1296 ;  Story  on  Notes,  §  409. 


§   1299-  DISCHARGE    OF    PARTNERSHIP    DEBT.  315 

of  the  obligors  die,  his  representative  is  at  law  discharged, 
and  the  survivor  alone  can  be  sued.^  And  it  seems  to  be 
equally  well  settled,  that  if  the  joint  obligor  so  dying  be  a 
surety  not  liable  for  the  debt  irrespective  of  the  joint  obli- 
gation, his  estate  is  absolutely  discharged  both  at  law  and 
in  equity,  the  survivor  only  being  liable,^  and  this  is  the 
case  even  though  in  the  surety's  lifetime  there  was  a  joint 
judgment  against  him  and  his  coprincipal.^  In  many  of 
the  States  statutes  have  changed  this  principle,  but  in  others 
it  is  still  preserved.  In  such  cases  where  the  surety  owes 
no  debt  outside  and  irrespective  of  the  joint  obligation,  the 
contract  is  the  measure  and  limit  of  his  liability.  He  signs 
a  joint  contract,  and  incurs  a  joint  liability,  and  no  other  ; 
and  dying  prior  to  his  comaker,  the  liability  attaches  to  the 
survivor  alone. 


SECTION   IV. 

DISCHARGE     OF     PARTNERSHIP     DEBT     BY     BILL     OR     NOTE     OF 

ONE    PARTNER. 

§  1299.  The  doctrine  is  now  regarded  as  sound  and  well 
settled  as  a  general  rule  (though  there  has  been  vacillation 
and  difference  of  opinion  on  the  question),  that  the  giving 
of  the  separate  bill  or  note  of  one  of  several  partners  for  a 
copartnership  debt,  is  good  consideration  for  the  discharge 
of  the  other  partners.  For  it  may  be  advantageous  to  the 
creditor  in  various  ways  ;  it  avoids  difficulties  which  might 
arise  from  suing  the  debtor  with  other  defendants  ;  in  the 
event  of  his  bankruptcy  it  would  have  priority  over  joint 
debts  in   England  ;  and  it   may   be   more  convenient  and 

'  Getty  V.  Binsse,  49  N.  Y,,  388  ;  Towers  v.  Moore,  2  Vem.,  98 ;  Simpson  v. 
Vaughan,  2  Atk.,  31  ;  Harrison  v.  Field,  2  Wash.  (Va.),  136  ;  Other  v.  Iveson 
3  Drew.  Ch.  R.,  177. 

"  Getty  V.  Binsse,  49  N.  Y.,  388  ;  Simpson  v.  Field,  2  Cases  in  Ch.,  22. 
'  Risley  v.  Brown,  67  N.  Y.,  160. 


3l6  DISCHARGES  OTHERWISE  THAN  BY  PAYMENT.       §  I3OO. 

satisfactory  to  the  creditor  in  the  pursuit  of  his  remedy, 
whether  in  equity  or  at  law.^ 

§  1300.  Effect  of  separate  note  of  one  partner  for  partner- 
ship debt. — The  bill  or  note  of  one  partner  may  be  undoubt- 
edly taken  as  collateral  security  merely  for  the  firm's  debt, 
in  which  case  the  latter  is  not  affected  thereby.^  It  may 
also  be  taken  with  an  express  reservation  to  the  creditor  of 
all  remedies  against  the  firm,  in  which  case  also  the 
original  liability  of  the  firm  is  undoubtedly  preserved.' 
But  the  question  remains,  what  is  the  presumption 
when  the  separate  bill  or  note  of  one  partner  is  taken, 
payable  at  a  future  day,  for  the  debt  of  the  firm,  and 
what  is  its  effect  ?  Partners  are  joint  parties,  not  joint 
and  several.  And  the  prevailing  doctrine  is  that  the  sepa- 
rate note  of  a  partner  for  a  partnership  debt  is  not  presum- 
ably an  extinguishment  or  satisfaction  thereof,  and  that 
the  burden  of  proof  is  upon  the  party  alleging  it  to  show 
that  such  effect  was  intended.*  In  Massachusetts  a  differ- 
ent view  prevails,  but  in  that  State,  however,  an  individual 
note  is  presumptively  payment.^ 

The  view  upon  which  this  doctrine  must  rest  is,  that 
the  one  partner  simply  adds  his  separate  security  for  a  joint 
debt,  and  that,  while  it  would  be  a  breach  of  contract  to 
sue  him  on  the  joint  debt,  while  the  separate  security  is 


1  Thompson  v.  Percival,  5  B.  &  Ad.,  925 ;  Reed  v.  White,  5  Esp.,  122  ;  Evans 
V.  Drummond,4Esp.,  89  ;  Powell  v.  Charless,  34  Miss.,  485  ;  Nicholas  v.  Cheairs, 
4Sneed,  231;  Arnold  v.  Camp,  12  Johns,  410;  Van  Epps  v.  Dillaye,  6  Barb., 
244 ;  Waydell  v.  Luer,  3  Denio,  510  (overruling  same  case,  5  Hill,  448,  and  Cole 
V.  Sackett,  i  Hill,  516) ;  see  Sheehy  v.  Mandeville,  6  Cranch,  264;  Edwards  on 
Bills,  194,  195  ;  2  American  Lead.  Cas.,  248  ;  Byles  (Sharswood's  ed.)  [*37i], 
550  ;   2  Parsons  N.  &  B.,  199. 

"  2  Parsons  N.  &  B.,  201. 

»See;5ci-/,  §  1322 ;  Bedford  v.  Deakin,  2  B.  &  Aid.,  210,  Holroyd,  J. ;  Story 
on  Notes,  §  425. 

"Ante,  §§  1295,  1297;  Parker  V.  Cousins,  2  Grat.,  372;  estate  of  Davis  and 
Desauque,  5  Whart.,  530 ;  Thompson  v.  Briggs,  8  Foster,  40 ;  Gardner  v.  Conn, 
34  Ohio  St.,  187  ;  Muldon  v.  Whitlock,  i  Cow.,  290;  Montross  v.  Byrd,  6  La. 
An.,  519  ;  Leabo  v.  Goode,  67  Mo.,  126;  Powell  v.  Charless,  34  Mo.,  485  ;  Ed- 
wards on  Bills,  193,  194;  Lindley  on  Part.  (Ewell's  ed.),  *440,  and  note. 

*  French  v.  Price,  24  Pick.,  13.     See  ante,  %  1266. 


^   1300^.  DISCHARGE    OF    PARTNERSHIP    DEBT.  317 

current,  his  remedy  lies  by  action  for  such  breach  (as,  in 
like  manner,  it  lies  for  breach  of  covenant  not  to  sue  ^)  ; 
and  the  creditor  may  at  any  time  sue  upon  the  original 
joint  contract  without. regard  to  the  separate  security.  If, 
when  the  separate  security  is  taken,  the  note  or  other 
security  of  the  firm  is  surrendered  up,  it  would  seem  prima 
facie,  though  not  conclusively,  demonstrative  of  an  inten- 
tion to  exchange  the  new  security  for  the  old,  and  to  re- 
gard the  latter  as  discharged.*^  And  the  question  as  to  the 
intent  of  the  parties  is  generally  one  of  fact  to  be  deter- 
mined by  a  jury.  The  surrender  of  the  partnership  secu- 
rity and  the  acceptance  of  the  separate  note  of  one  member, 
enables  the  latter  to  represent  to  his  associates,  with  appar- 
ently satisfactory  vouchers,  that  the  partnership  obligation 
is  at  an  end,  and  to  settle  with  them  accordingly  ;  and  the 
case  differs  from  those  in  which  it  is  considered  that  no 
presumption  of  satisfaction  arises  from  the  renewal  by  an 
individual  of  his  own  paper,  and  the  surrender  to  him  of 
the  instrument  renewed.^ 

§  1300^.  Renewals  in  firms  7tame  after  dissolution. — If 
after  dissolution  of  a  firm  a  creditor,  who  is  not  affected 
with  notice  of  dissolution,  take  from  one  of  the  former 
partners  a  bill  or  note  in  the  firm  name,  it  is  as  binding  on 
the  firm  as  if  no  dissolution  had  occurred,  upon  principles 
stated  in  another  portion  of  this  work.'*  But  if  the  creditor 
have  notice  of  dissolution,  it  has  been  held,  that  a  note 
given  in  the  firm's  name  by  one  of  the  former  partners  could 
not  bind  any  other  ex-partners  as  a  party  to  it,  because  un- 
authorized by  them  ;  and  further,  that  it  discharged  the 
non-consenting   ex-partners,    who    stood    in    relation    of 

'  Story  on  Notes,  §  421, 

"5  Robinson's  Practice,  863';  2  American  Lead.  Cas.,  271  ;  Morriss  v.  Harvey, 
S.  C.  of  Va.,  Sept.  T.,  1881,  reported  in  Va.  Law  Journal  for  January,  1^82,  p. 
21  ;  estate  of  Davis,  5  Whart.,  538  ;  INLason  v.  Wickersliam,  4  Watts  &  S.,  100. 
Compare  Wiseman  v.  Lyman,  7  Mass.,  286 ;  Sneed  v.  Wiester,  2  A.  K.  ^Llrsh, 
277  ;  Sheehy  v.  Mandeville,  6  Cranch,  253  ;  contra,  Powell  v.  Charless,  34  Mo., 
485  ;  Leabo  v.  Goode,  67  Mo.,  130. 

»See  ante,  §  1266a.  ^  Ante,  vol.  i,  §§  369a,  369<5,  370a,  yjob. 


3l8        DISCHARGES  OTHERWISE  THAN  BY  PAYMENT.       §1300^ 

sureties  to  the  settling  partner,  he  having  taken  the  assets 
and  assumed  the  debts.^  Upon  the  peculiar  circumstances 
presented  the  case  was,  as  it  seems  to  us,  rightly  decided ; 
but  what  is  the  ordinary  presumption  and  effect  of  the 
transaction  when  one  ex-partner  of  a  dissolved  firm  gives 
a  partnership  bill  or  note  for  the  firm  debt  ?  If  unauthor- 
ized by  the  other  ex-partners,  and  taken  by  one  affected 
with  notice  of  the  dissolution,  it  can  not  bind  them.  Does 
it  discharge  them  ?  We  think  not.  It  can  not  be  pre- 
sumed to  have  been  intended  to  discharge  them,  for  it  pre- 
tends to  bind  them.  And  if  they  are  discharged  it  must  be 
upon  the  ground  that,  as  between  themselves,  partners  are 
sureties,  and  that  suspension  of  remedy  against  one  dis- 
charges the  others.  But  we  have  already  seen  that  taking 
the  bill  or  note  of  one  joint  contractor  does  not  discharge 
the  others ;  and  as  the  unauthorized  firm  note  can  only 
bind  the  parties  making  or  consenting  to  it,  we  can  perceive 
no  legal  principle  upon  which  the  discharge  of  non-con- 
senting members  of  the  firm  can  be  grounded.^ 

The  very  numerous  cases  on  this  and  similar  questions 
present  quite  a  diversity  and  confusion  of  views.  It  is 
difficult  to  discern  in  many  of  them  the  principles  rehed 
upon  ;  and  impossible  to  reconcile  them.  We  have  stated 
the  conclusions  which  seem  to  us  the  most  consistent  with 
general  principles ;  and  are  without  space  to  enter  into  all 
the  refinements  and  vacillations  of  the  adjudicated  cases.^ 

*  Smith  V.  Sheldon,  35  Mich.,  42.  Where  a  retiring- partner  surrenders  assets  to 
continuing  partner  under  an  agreement  that  he  shall  pay  the  debts  of  the  firm, 
and  notifies  the  creditor  of  dissolution  and  of  the  agreement,  the  acceptance  of 
the  individual  note  of  the  continuing  partner  by  the  creditor  would  discharge 
the  retiring  partner,  he,  under  these  circumstances,  being  regarded  as  surety. 
Maier  v,  Canavan,  8  Daly,  272  ;  see  Lindley  on  Partnership,  *44o,  and  Evvell's 
note. 

^  Parker  v.  Cousins,  2  Grat.,  372.  ' 

^In  Byles  on  Bills  (Sharsvvood's  ed.)  [="48],  132,  it  is  said:  "The  taking 
security  from  one  of  several  partners,  joint  makers  of  a  note,  or  acceptors  of  a 
bill,  will  in  general  discharge  the  other  copartners."  Story  says  the  same  thing 
with  even  more  emphasis.  Story  on  Bills,  §  431.  More  guardedly  Parsons  says 
"  In  general,  or,  at  least,  frequently,  a  holder  who  takes  security  from  one  or 
more  partners  liable  on  negotiable  paper  discharges  the  rest."  i  Parsons  N.  & 
B.,  135.     The  doctrine  is  too  strongly  stated  by  Byles  and  Story — for  it  is  sim- 


§   I30I.  DISCHARGE  OF  PARTNERSHIP  DEBT.  319 

§  1 30 1.  Where  no  new  security  is  taken,  a  mere  promise 
to  look  to  one  partner  only,  or  that  one  only  should  assume 
the  debts,  is  not  binding,  because  without  consideration.* 
But  if  third  parties  were  induced  to  enter  into  an  arrange- 
ment on  the  faith  of  such  a  promise,  it  would  be  otherwise. 
And  it  has  been  urged  that  when  the  partner  seeking  to  be 
discharged  is  shown  to  have  altered  or  varied  his  situation 
on  the  faith  of  such  agreement,  the  rule  would  be  different 
also.^  When  two  or  more  persons,  not  partners,  are  jointly 
indebted,  the  individual  note  of  one  will  operate  as  a  dis- 
charge of  both,  if  so  agreed  between  the  parties  ;^  but  such 
agreement  will  not  be  presumed,  and  must  be  distinctly 
proved.^ 

ply  a  question  of  intent,  the  presumption  being :  where  the  partnership  security 
is  retained  that  it  is  preserved  alive,  and  the  contrary  when  it  is  surrendered  ; 
such  presumption  being  controllable  by  other  circumstances  appearing.  In 
Thompson  v.  Percival,  3  Nev.  &  M.,  167  ;  5  B.  &  Ad.,  925,  there  was  evidence 
tending  to  show  agreement  to  look  only  to  the  separate  security,  an  accepted 
bill  of  the  continuing  partner,  and  the  question  whether  it  was  an  accord  and 
satisfaction  was  left  to  the  jury. 

'  Lodge  V.  Drias,  3  B.  &  Aid.,  611.  '2  Am.  Lead.  Cas.,  249. 

'  IVIyatts  V.  Bell,  41  Ala.,  222. 

*  Bowers  v.  Still,  49  Penn.  St.,  475  ;  Schollenberger  v.  Seldenridge,  lb.,  83.  See 
ante,  §  1297. 


CHAPTER  XLI. 

WHAT  DISCHARGES  A  SURETY. THE  LAW  OF    PRINCIPAL  AND 

SURETY  IN  ITS  APPLICATION  TO  BILLS  AND  NOTES, 

§  1302.  In  the  chapter  on  "Payment  and  other  Dis- 
charo-es "  have  been  considered  the  matters  which  operate 
as  a  discharge  of  liability  of  the  maker  and  acceptor  of  a 
negotiable  instrument,  with  incidental  reference  to  the 
effect  of  such  matters  on  the  Hability  of  the  drawer  and  in- 
dorsers.  But  there  are  other  matters  which  discharge  the 
drawer  and  indorsers  that  deserve  especial  attention,  as 
theii-  relations  to  the  holder  of  the  instrument  are  very  dif- 
ferent from  those  of  the  maker  or  acceptor.  These  mat- 
ters maybe  conveniently  discussed  under  the  head  of  "The 
Law  of  Principal  and  Surety  in  its  Application  to  Bills  and 
Notes."  And  under  that  heading  will  also  be  appropriately 
embraced  those  cases  in  which  the  party  signs  a  negotiable 
instrument  describing  himself  as  surety ;  or  is  known  to  be 
such,  although  signing  as  a  joint  or  several  promisor. 


SECTION   I. 

WHO    ARE    PRINCIPALS     AND    WHO     SURETIES — AND     GENERAL 
PRINCIPLES   OF   SURETIES'   LIABILITIES. 

§  1303.  In  the /r^/  place,  as  to  who  are  to  be  regarded 
as  principals,  and  who  as  sureties.  The  acceptor  of  a  bill 
and  the  maker  of  a  note,  when  the  acceptance  is  made  or 
note  executed  upon  a  valuable  consideration,  are  undoubt- 
edly principals  as  to  all  the  parties  thereto.  And  the  drawer 
(320) 


^   1304.        WHO  ARE  PRINCIPALS  AND  WHO  SURETIES.  32 1 

of  such  a  bill,  and  the  indorsers  of  such  a  bill  or  note,  are 
sureties  of  the  acceptor  or  maker  to  the  holder.^  But  though 
all  the  parties  to  such  a  bill  are  sureties  of  the  acceptor, 
they  are  not  as  between  themselves  cosureties,  liable  for 
contribution  to  each  other  in  the  event  that  any  one  should 
pay  the  amount  for  the  acceptor  ;  but  each  prior  party  is 
a  principal  as  between  himself  and  each  subsequent  party. 
Thus,  if  the  bill  were  payable  to  the  drawer's  order,  and 
accepted,  and  then  indorsed  by  the  drawer  and  two  subse- 
quent indorsers  successively,  to  the  holder,  the  drawer  and 
indorsers  would  be  sureties  of  the  acceptor  to  the  holder. 
But  as  between  the  holder  and  the  drawer,  the  drawer  is 
■principal  debtor,  and  the  indorsers  sureties.  As  between 
the  holder  and  second  indorser,  the  second  indorser  is  prin- 
cipal, and  the  third  indorser  is  surety.^ 

If  the  drawer  and  indorser  of  a  bill  for  the  acceptor's 
accommodation  agree  that  each  shall  pay  one-half  the  bill, 
if  the  acceptor  fail  to  pay,  they  are  joint  sureties  ;  and  if 
either  one  pay  the  whole  amount,  he  may  recover  half 
from  the  other.^ 

§  1304.  In  New  York  it  has  been  held,  that  while  an  in- 
dorser is  in  the  nature  of  a  surety,  he  is  answerable  upon 
an  independent  contract,  and  it  is  his  duty  to  take  up  the 
bill  when  dishonored  ;  and  that  the  rule,  adopted  in  that 
State,  that  a  surety  may  call  upon  the  creditor  to  prosecute 
the  principal,  did  not  extend  in  its  privilege  to  an  indorser, 
though  he  could  show  any  act  impairing  his  right  to  resort 
against  the  principal  in  exoneration  of  himself  from  his 
engagement  to  the  creditor.* 

'  Clark  V.  Devlin,  3  Bos.  &  P.,  363  ;  Wallace  v.  M'Connell,  13  Pet..  136 ;  Blair 
V.  Bank  of  Tennessee,  11  Humph.,  84;  Chitty  (13  Am.  ed.)  [*4ii],  463. 

^  Newcomb  v.  Rapior,  21  Wend.,  108  ;  Byles  on  Bills  (Sharswood's  ed.)  [*236], 
379  ;  Edwards,  565. 

'  Edelen  v.  White,  6  Bush  (Ky.),  408. 

*  Trimble  v.  Thorn,  16  Johns,  152  (1819) ;  Beardsley  v.  Warner,  6  Wend.,  613 
(1831).  In  the  case  of  a  non-negotiable  note,  the  assignee  must  sue  the  maker 
before  he  can  resort  to  the  assignor.  Lee  v.  Love,  i  Call,  497 ;  Bronaugh  v 
Scott,  5  Call,  78 ;  Perrin  v.  Broadwell,  3  Dana,  596 ;  Huntington  v.  Harvey,  4 

Vol.  II.— 21 


322  WHAT    DISCHARGES    A    SURETY.  $   I305. 

§  1305.  Fixedindorsei's  are  sureties. — The  fact  that  the 
liability  of  the  drawer  or  indorser  is  fixed  by  due  demand 
and  notice,  does  not  alter  their  relation  as  sureties  of  the 
debt ;  it  simply  fixes  their  liability  as  sureties  for  its  pay- 
ment, provided  nothing  is  done  by  the  creditor  to  exoner- 
ate them.  This  view  is  established  by  great  weight  of  au- 
thority, and  may  be  regarded  as  settled.^  Professor  Par- 
sons regards  some  New  York  cases  as  maintaining  a  dif- 
ferent doctrine — that  after  demand  and  notice  the  drawer 
and  indorser  become  definitely  liable  as  principals.^  This 
view  is  a  just  deduction  from  these  cases,  but  they  did  not 
so  expressly  decide,  but  only  that  the  indorser  is  not  a 
surety  entitled  to  require  the  holder  to  sue  as  sureties  might 
do  under  the  New  York  law.^ 

When,  however,  a  final  judgment  has  been  entered 
against  the  drawer  or  indorser,  the  relation  of  suretyship 
ceases,  and  his  liability  is  merged  in  that  of  a  principal 
judgment  debtor.^ 

§  1306.  Whatever  discharges  acceptor  or  maker  dis- 
charges drawer  and  indorsers. — As  a  general  rule,  what- 
ever discharges  the  acceptor  of  a  bill  or  maker  of  a  note 
discharges  the  drawer  and  indorsers  who  are  sureties,  for 

Conn.,  125  ;  Bishop  v.  Yeazle,  6  Blackf.,  127  ;  Ricketson  v.  Wood,  10  Mo..  547. 
These  and  other  cases  are  quoted  by  Professor  Parsons  (2  Parsons  N.  &  B.,  244) 
for  the  doctrine  that  the  indorsee  of  a  negotiable  note  loses  his  recourse  against 
the  maker  by  neglect  to  sue.  But  they  do  not  so  hold,  their  application  being 
limited  to  the  resort  of  an  assignee  of  a  non-negotiable  note  against  his  as- 
signor. There  are,  however,  statutory  provisions  in  some  of  the  States  which 
require  prompt  recourse  against  the  principal  before  pursuing  the  indorser. 

1  Clark  V.  Devlin,  3  Bos.  &  Pul.,  365  ;  English  v.  Darley,  2  Id.,  61 ;  Gould  v. 
Robson,  8  East.,  576;  Veazie  v.  Carr,  3  Allen,  14 ;  Bank  U.  S.  v.  Hatch,  6  Pet., 
250;  Burrill  v.  Smith,  7  Pick.,  291  ;  Lobdell  v.  Niphler,  4  La.  O.  S.,  295  ;  Hef- 
ford  V.  Morton,  11  Id.,  117;  Millaudon  v.  Arnons,  15  Mart.,  596;  Wood  v. 
Jefferson  Co.  Bank,  9  Cow.,  194;  Hubbly  v.  Brown,  16  Johns,  70;  Priest  v. 
Watson,  7  Mo.  Ap.,  578  ;  Story  on  Notes,  §  413 ;  Story  on  Bills,  §  425  ;  2  Par- 
sons N.  &  B.,  243,  244 ;  Edwards,  569. 

"^  2  Parsons  N.  &  B.,  243. 

*  Trimble  v.  Thorn,  16  Johns,  152  ;  Beardsley  v.  Warner,  6  Wend.,  613  ;  War- 
ner v.  Beardsley,  8  Wend.,  202,  Seward,  Senator,  gucere. 

'Bray  v.  Manson,  8  Mees.  &  W.,  668,  Parke,  B. ;  Baker  v.  Flower,  5  Jur.,  655. 
It  is  otherwise  in  Texas  by  statute.  Pasch.  Dig.,  art.  4789  ;  Parker  v.  Nations, 
33  Tex ,  210. 


5   1306^.       WHO  ARE  PRINCIPALS  AND  WHO  SURETIES.  323 

the  contract  which  they  undertook  to  assure  thus  passes 
out  of  existence  by  the  act  of  the  beneficiary.  He  can 
not  discharge  the  party  primarily  bound  for  the  perform- 
ance of  an  engagement,  and  then  insist  that  another 
shall  stand  responsible  for  its  performance.  Besides,  the 
drawer  or  indorscr,  on  making  payment  for  the  maker 
or  acceptor,  would  be  entitled  to  the  holder's  remedies 
against  him  ;  and  if  the  holder  has  discharged  him  from  his 
oblicration,  the  drawer  or  indorser  would  be  remediless  and 
have  no  resort  for  reimbursement.^ 

Upon  this  principle,  where  the  holder  of  a  note  sued  the 
maker  and  recovered  judgment,  and  afterward  sued  the  in- 
dorser for  a  balance  of  interest,  it  was  held  that  the  latter 
suit  could  not  be  maintained  ;  for  the  maker  was  discharged 
by  the  first  suit  from  all  further  liability,  on  the  principle 
nemo  debet  bis  vexari  eadem  causa,  and  therefore  there  could 
be  no  remedy  against  the  indorser.^  A  mere  surety  may 
plead  in  bar  to  an  action  on  a  note  the  discharge  of  the 
principal  on  account  of  its  illegality.^ 

§  1306^.  Cases  in  which  surety  is  bound  although  prin- 
cipal is  not. — There  are  some  cases,  however,  in  which  the 
principal  may  be  discharged  and  the  surety  be  still  bound. 
Thus,  if  a  party  became  surety  for  a  married  woman  whose 
note  is  void  because  she  could  not  make  such  a  contract,  the 
surety  will  nevertheless  be  bound,  there  being  no  fraud, 
duress,  or  deceit  in  the  procuration  of  the  note;*  but  it 
would  be  otherwise  if  either  of  these  elements  entered  into 
the  transaction. '^  How  far  an  indorser  is  bound,  though 
the  maker  may  not  be,  has  been  elsewhere  considered.^ 


'  Sargent  v.  Appleton,  6  Mass.,  85  ;  Couch  v.  W^aring,  9  Conn.,  261 ;  Byles  on 
Bills  (Sharswood's  ed.),  378,  386;  Broadway  S.  B.  v.  Schmucker.  7  Mo. 
Ap.,  171. 

=  Couch  V.  Waring,  9  Conn.,  261.  '  Gill  v.  Morris,  1 1  Heiskell,  614 

*  Davis  V.  Staaps,  43  Ind.,  103;  Hicks  v.  Randolph,  3  Baxter,  352;  Jones  v. 
Crosthwaite,  17  Iowa,  393  ;  Allen  v.  Berryhill,  27  Iowa,  531.     See  §  1 314. 

"Osborn  v.  Robbins,  36  N.  Y.,  365. 

*  See  vol.  I,  §§  669-679,  especially  §  675. 


324  WHAT    DISCHARGES    A    SURETY.  $   ^SO/- 

§  1307.  Discharge  of  prior  indorser  discharges  subse- 
quent indorsers. — We  have  already  seen  that  whatever  dis- 
charges a  prior  indorser  discharges  all  subsequent  indorsers, 
for  the  reason  that  he  stood  between  them  and  the  holder, 
and  on  making  payment  each  one  could  have  had  recourse 
against  him,  but  from  which  his  discharge  precludes  them.^ 
It  follows  from  the  same  reasoning  that  discharge  of  a  sub- 
sequent indorser  can  discharge  no  prior  party  ;  for  such 
subsequent  indorser  could,  under  no  circumstances,  be  liable 
to  such  prior  party.^  The  contracts  of  the  several  indorsers 
are  like  so  many  links  of  a  pendant  chain  :  if  the  holder 
dissolves  the  first,  every  link  falls  with  it.  If  he  dissolves 
an  intermediate  link,  all  after  it  are  likewise  dissolved. 
But  the  lasf  link  supports  nothing,  and  its  dissolution  in- 
jures no  one.^ 


SECTION    11. 

WHAT    ACTS    OF    CREDITOR    DISCHARGE    A     SURETY     FOR    THE 

DEBT. 

§  1308.  We  may  enumerate  as  matters  which  will  dis- 
charge a  surety  :  (i)  Misrepresentation  or  concealment  to 
induce  his  becoming  surety.  (2.)  Diversion  of  the  instru- 
ment from  the  agreed  purpose.  (3)  Alteration  of  the  in- 
strument. (4)  Payment.  (5)  Release.  (6)  Satisfaction. 
(7)  Covenant  not  to  sue  a  prior  party.  (8)  Parting  with 
security  for  the  debt.  (9)  Agreement  to  indulge  prior 
party  by  extension  of  time  or  forbearance  of  suit. 


'  Newcomb  v.  Raynor,  21  Wend.,  108.  But  it  is  not  necessary  to  notify  a  prior 
indorser  in  order  to  hold  a  subsequent  one. 

^  Claridge  v.  Dalton,  4  M.  &  S.,  232 ;  English  v.  Darley,  2  Bos.  &  P.,  61  ; 
Smith  V.  Knox,  3  Esp.,  46;  Bank  U.  S.  v.  Hatch,  6  Pet.,  250  ,  White  v.  Hopkins, 
3  Watts  &  S.,  99  ;  Lynch  v.  Reynolds,  16  Johns,  41  ;  Thomson  on  Bills,  393  ; 
Story  on  Notes,  §§  420,  423,  434 ;  Story  on  Bills,  §  429. 

*  See  Edwards  on  Bills,  570. 


§  1309. 

§  1309-  (I-  ^^'  *^^^^  in.)  ^s  to  misrepresentation,  con- 
cealment, duress,  diversion,  and  alteration. — The  contract 
of  suretyship  is  a  contract  tiberrvtioe  fidei.  Therefore 
where  one  is  induced  to  become  surety  for  another,  as 
drawer  of  a  bill,  or  indorser  of  a  note  for  accommodation, 
or  otherwise,  and  there  is  any  misrepresentation  or  fraud- 
ulent concealment  of  a  material  fact,  which,  if  known, 
would  have  induced  the  drawer  or  indorser  or  other  surety 
not  to  enter  into  the  contract,  his  contract  is  void  from  the 
beginning  as  between  the  surety  and  all  parties  privy  to 
such  misrepresentation  or  concealment*  Any  essential 
vice  in  the  obligation  of  the  principal  which  may  suffice  to 
annul  it  is  as  available  to  the  surety  as  to  him,  unless  the 
surety  be  also  the  assignor,  in  which  case  he  is  estopped 
from  setting  up  the  antecedent  defect.^  If  the  principal 
signed  under  duress,  the  holder  guilty  of  the  duress  could 
not  enforce  the  obligation  against  a  surety.^  If  the  payee 
is  neither  cognizant  of,  nor  participates  in  the  fraud,  he  is 
not  affected  by  it.^  Any  fraud  which  deceives  the  surety 
after  he  has  become  a  party  releases  him.^  And  where  a 
bill  is  drawn  or  accepted,  or  a  note  made  or  indorsed  for 
accommodation,  with  an  agreement  that  it  shall  be  used  for 
a  particular  purpose,  any  div^ersion  in  its  use  operates  a  dis- 
charge of  the  accommodation  party  as  to  all  other  parties 
who  have  knowledge  of  such  diversion.^  But  this  subject 
is  elsewhere  more  fully  considered.'''  So  alteration  is  else- 
where treated.® 


*  Hamilton  v.  Watson,  12  C.  &  F.,  109;  North  British  Ins.  Co.  v.  Lloyd,  10 
Exch.,  523;  Solser  v.  Brock,  3  Ohio  St.,  302;  Evans  v.  Keelancl,  9  Ala.,  42; 
Byles  (Sharswood'sed.j,  377  ;  Melick  v.  First  N.  B.,  52  Iowa,  94.  where  payee  as- 
sured surety  that  payor  was  not  indebted  to  him  in  any  farther  amount. 

""  Putnam  v.  Schuyler,  11  N.  Y.  S.  C.  (4  Hun),  168. 
'Griffith  V. Sitgreaves,  90  Penn.  St.,  161. 

*  Anderson  v.  Warne,  71  111.,  20.  '  Harris  v.  Brooks,  21  Pick.,  122. 

"  Dewey  v.  Cochran,  4  Jones,  184  ;  Southerland  v.  Whitaker,  5  Jones,  5  ;  I 
Parsons  N.  &  B.,  236. 

'  See  chapter  xxiv,  §§  790,  796,  vol.  i. 

*  See  chapter  XLUI,  on  Alteration,  vol.  2. 


J 


26  WHAT    DISCHARGES    A    SURETY.  §   I31O. 


If  the  holder  inform  an  indorser  that  the  bill  has  been 
paid  by  the  acceptor,  which  statement  is  untrue,  he  can  not 
afterward  sustain  an  action  against  the  indorser,  though  his 
liability  was  duly  fixed,  if  in  the  meantime  any  party  against 
whom  the  indorser  could  have  had  recourse  for  payment 
has  become  insolvent.^ 

§  1 3 10.  (IV)  Payment  by  the  maker  or  acceptor  of 
course  discharges  the  drawer  and  indorsers.^  (V)  So  also 
does  a  release  of  the  acceptor  or  maker  discharge  drawer 
and  indorsers,^  even  though  they  consent  to  the  release,  for 
that  only  confirms  it.^  But  if  there  were  in  the  release  an 
express  reservation  of  the  holder's  rights  against  the  drawer 
and  indorsers,  they  would  not  be  discharged,  their  rights 
and  remedies  against  the  maker  or  acceptor  being  thus 
reserved  by  implication.^  (VI)  Whatever  amounts  to 
satisfaction  of  the  bill  or  note  by  the  maker  or  acceptor, 
operates  as  an  absolute  discharge  of  all  parties  collaterally 
liable. 

There  is  a  distinction  between  extinguishment  and  satis- 
faction. The  holder's  claim  may  be  extinguished  as  to  an 
indorser  or  drawer,  and  the  debt  yet  unsatisfied.  But  if 
there  is  satisfaction  by  one,  it  operates  as  to  all*  (VII) 
A  covenant  not  to  sue  a  prior  party  discharges  the  surety, 
because  it  disables  him  from  suing  should  he  pay  the  debt. 

§  1311.  (VIII)  As  to  the  creditor  s  parting  with  security 
for  the  debt. — Upon  making  payment  of  the  debt,  the 
surety  is  undoubtedly  entitled  to  all  the  rights,  remedies, 
and  securities   which    the  creditor  could    have   enforced.''^ 

^  Petrie  V.  Feeder,  21  Wend.,  171. 

*  See  chapter  xxxviii,  on  Payment,  ante,  p.  250. 

=  Byles  on  Bills  [*24o],  384. 

''  Broadway  S.  B.  v.  Schmucker,  7  Mo.  Ap.,  171  ;  Eggemann  v.  Henschen, 
56  Mo.,  123. 

°  Gloucester  Bank  v.  Worcester,  10  Pick.,  528  ;  Stewart  v.  Eden,  2  Cai.,  121  ; 
Tombeckbe  Bank  v.  Stratton,  7  Wend.,  429 ;  Story  on  Bills,  §  429. 

°  Story  on  Notes,  §  403  ;  2  Parsons  N.  &  B.,  252. 

^  Williams  v.  Price,  i  Sim.  &  St.,  581  ;  ex  parte  Mure,  i  Coxe,  93  ;  King  v 
Baldwin,  2  Johns  Ch.,  317  ;    Humphrey  v.  Hitt,  6  Grat.,  509  ;  Hayes  v.  Ward,  4 


§   131  I.    WHAT  ACTS  OF  CREDITOR  DISCHARGE  A  SURETY.     327 

And  while  the  creditor  may  not  only  cibstain  from  active 
measures,  but  may  even  reHnquish  steps  already  com- 
menced,^ he  must  do  nothing  which  can  impair  the  rights 
and  remedies  of  the  surety.  Therefore,  if  any  collateral 
security  which  the  creditor  held  be  released,  or  a  judgment 
lien  given  up,  or  a  levy  withdrawn,  the  surety  is  discharged.^ 
But  the  withdrawal  of  an  execution  from  the  hands  of  the 
sheriff  before  a  levy  will  not  discharge  the  surety.'^  Nor 
will  an  omission  to  revive  a  judgment,  by  means  of  which 
the  lien  and  the  land  are  lost  ;  ^  nor  discontinuance  of  steps 
to  foreclose  a  mortgage.^  But  neglect  to  record  a  mortgage, 
whereby  its  value  is  lost,  would  discharge  the  surety,*  and 
this  even  though  the  original  mortgage  would  have  been 
worthless,  if  recorded,  by  reason  of  prior  liens. "^ 

But  the  surety  will  not  be  discharged  in  any  case  where 
it  can  be  clearly  proved  that  the  act  of  the  creditor  has 
worked  no  real  injury.     And  he  is  discharged  only  to  the 


Johns  Ch.,  123  ;  Sullivan  v.  Morrow,  4  Ind.,  425  ;  Smith  v.  Jay,  23  Vt.,  656  ; 
Kirkpatrick  v.  Hawk,  80  111.,  122;  Kurd  v.  Spencer,  40  Vt.,  581;  Dillon  v. 
Russell,  5  Neb.,  484  ;  Treanor  v.  Yingling-,  37  Md.,  491  ;  Muirhead  v.  Kirk- 
patrick, 9  Harris,  237  ;  Byles  (Sharswood's  ed.)  [*246-7],  392  ;  2  Am.  Lead, 
Cas.,  348. 

'Bellows  V.  Lovell,  5  Pick.,  307;  Lawson  v.  Sayder  i  Md.,  171;  Com- 
missioners V.  Ross,  3  Bin.,  250;  Montpelier  Bank  v.  Dixon,  4  Vt.,  399. 

»  Commonwealth  V.  Haas,  16  S.  &  R.,  252  ;  Farmers' Bank  v.  Reynolds,  13 
Ohio,  84  ;  Mayhew  v.  Boyd,  5  Md.,  102  ;  Ferguson  v.  Turner,  7  Mo.,  497  ; 
Sneed  v.  White,  3  J.  J.  Marsh,  525;  Mayhew  v.  Crickett,  2  Swans.,  193; 
Winston  v.  Yeargin,  50  Ala.,  340  ;  Woodward  v.  Walton,  7  Heisk.,  50;  Clopton 
V.  Spratt,  52  Miss.,  251  ;  Case  v.  Hawkins,  53  Miss.,  702  (an  acco-imodation 
indorser)  ;  5  Rob.  Prac.  (new  ed.),  766  ;  i  Parsons  N,  &  B.,  242  ;  see  cases 
cited  above  in  note  i  ;  Byles  on  Bills  [*24i],  386. 

'  Humphrey  v.  Hitt,  6  Grat.,  509  ;  Lenox  v.  Prout,  3  Wheat..  520  ;  Alcock  v. 
Hill,  4  Leigh,  622  ;  M'Kenny  v.  Waller,  i  Leigh,  434  ;  Sawyer  v.  Bradford,  6 
Ala.,  572  ;   Morrison  v.  Hartmann,  2  Harris,  416. 

♦  U.  S.  V.  Simpson,   3  Penn.,  437  ;    Farmers'  Bank  v.  Reynolds.    13  Ohio,  84. 

"  Butler  V.  Gambs,  i  Mo.  App.,  466. 

"  Barr  v.  Boyer,  2  Neb.,  265. 

'  Atlanta  Nat'l  Bank  v.  Douglas,  51  Ga.,  205  (1874),  McCay,  J. :  "  The 
failure  of  the  principal  to  record  the  loss  of  the  lien,  in  this  case,  the  destruction 
of  the  mortgage,  is  a  change  in  the  terms  of  the  security's  undertaking.  He 
only  guarantee's  the  notes  as  security  by  the  mortgage,  and  when  the  mortgage 
was  destroyed,  his  contract  was  no  longer  existent ;  its  terms  were  broken," 
distinguishing  and  explaining  Toomer  v.  Deckerson,  37  Ga..  428.  In  Union 
Nat'l  Bank  v.  Cooley,  27  La.  Ann.,  202,  it  wus  held,  that  surrender  of  a  void 
and  valueless  collateral  did  not  release  surety. 


328  WHAT    DISCHARGES    A    SURETY.  §   13 1 2. 

extent  that  he  would  be  injured  if  held  bound/  Thus 
withdrawal  of  a  levy  on  property  only  entitles  the  surety 
to  a  credit  for  the  value  of  the  property  levied  on.^ 

Where  the  payee,  receiving  from  maker  before  maturity 
an  order  on  the  indorser,  gave  up  the  note,  but  on  dis- 
honor of  the  order  demanded  it  back,  it  was  held  the 
indorser  could  not  be  injured,  and  therefore  was  not 
discharged.^ 

§  1 3 1 2.  (IX)  Extension  of  time,  or  forbearance  of  suit. — 
The  principle  that  whatever  discharges  the  principal  dis- 
charges the  surety  is  of  extended  application,  and  it  is 
operative  whenever  anything  is  done  which  relaxes  the 
terms  of  the  exact  legal  contract  by  which  the  principal  is 
bound,  or  in  anywise  lessens,  impairs,  or  delays  the  remedies 
which  the  creditor  may  resort  to  for  its  assurance  or  en- 
forcement. For,  whenever  the  creditor  relaxes  his  hold 
upon  the  principal  debtor,  he  impairs  the  hold  upon  him 
which  the  surety  would  acquire  by  substitution  in  his  place 
on  making  payment ;  and  good  faith  and  fair  dealing 
require  that  the  surety  should  not  be  exposed  to  the  inju- 
ries which  might  thus  be  inflicted  upon  him/  In  the 
immense  majority  of  cases  the  act  done  does  not  actually 
damage  the  surety  a  shilling,  yet  the  doctrine  is  so  firmly 
established  that  only  legislative  enactment  can  change  it.^ 

Extension  of  time  for  payment  is  the  most  frequent  form 
in  which  the  creditor  so  deals  with  the  principal  as  to  dis- 
charge the  surety  ;  and  whenever  such  indulgence  is  granted 
in  pursuance  of  a  binding  legal  contract,  the  surety  is  at 
once  released  from  his  obligations.^  And  the  same  effect 
follows  (the  discharge  of  the  surety)  if  time  is  given  to  one 
of  the  joint  makers  of  a  note  of  which  the  surety  is  in- 

'  Payne  v.  Commercial  Bank,  6  Smedes  &  M.,  24 ;  Loomis  v.  Fay,  24  Vt.,  240  : 
Neff's  Appeal,  9  Watts  &  S.,  36. 

'  Ward  V.  Vass,  7  Leigh,  135.  '  Smith  v.  Harper,  5  Cal.,  330. 

*  Thomson  on  Bills,  390.  ^  Swire  v.  Redman,  i  Q.  B.  Div.,  536  (1876). 

•  See  §§  131 5  to  1 319  inclusive  ;  also,  §  1329  and  §  1259,  et  seq. 


§    1314-    WHAT  ACTS  OF  CREDITOR  DISCHARGE  A   SURETY.     329 

dorscr.^  If  the  debtor  takes  a  time  draft,  or  a  renewal  note 
from  the  principal,  the  presumption  is  that  right  of  action 
is  suspended,  and  time  of  payment  extended  to  its  maturity, 
and  an  indorser  of  the  original  bill  or  note  is  thereby  pre- 
sumptively discharged.^ 

§  1 3 13.  The  reason  why  extension  of  time  of  payment 
discharges  the  surety  is  that  he  would  be  entitled  to  the 
creditor's  place  by  substitution  ;  and  if  the  creditor,  by 
agreement  with  the  principal  debtor,  without  the  surety's 
assent,  disables  himself  from  suing  when  he  would  be  other- 
wise entitled  to  do  so,  and  thus  deprive  the  surety,  on  pay- 
ing the  debt,  from  immediate  recourse  on  his  princijKil,  the 
contract  is  varied  to  his  prejudice — hence  he  is  discharged.^ 
But  this  principle  on  which  sureties  are  released  "  is  not  a 
mere  shadow  without  substance.  It  is  founded  upon  a  re- 
striction of  the  rights  of  the  sureties  by  which  they  are 
supposed  to  be  injured."*  Therefore,  when  there  is  a  legal 
impossibility  of  injury,  the  principle  does  not  apply.  This 
was  decided  to  be  the  case  where  the  maker  of  a  note  was 
a  discharged  bankrupt ;  and  an  agreement  between  him 
and  the  holder  for  two  months'  delay,  although  on  a  valid 
consideration,  it  was  held  did  not  discharge  the  indorser, 
because  the  latter  could  not,  by  making  payment,  have 
recourse  against  him.^ 

§  1 3 1 4.  Defences  available  to  principal,  but  not  to  surety. 
' — While,  as  a  general  rule,  whatever  discharges  the  princi- 
pal discharges  the  surety,  the  principal  may  sometimes  have 
a  defence  which  is  not  available  to  the  surety.  Where 
one  signs  a  joint  and  several  note  with  a  married  woman  as 
surety,  her  plea  of  coverture  will  be  no  defence  to  him.^ 

'  Story  on  Notes,  §  414. 

"  Pomeroy  v.  Tanner,  70  N.  Y.,  547  ;  Buck  v.  Smiley,  64  Ind.,  431.     S&a  post, 
§  1329,  and  cases  cited. 
'  King  V.  Baldwin,  2  Johns'  Ch.,  559.  *  6  How,,  283. 

'  Tiernan's  Exr's  v.  Woodruff,  5  McLean,  350. 
•  Smyley  v.  Head,  2  Rich.,  590,     See  ante,  §  1306a. 


330  WHAT    DISCHARGES    A    SURETY.  §   ^3^5- 

So  if  a  corporation  made  a  note  which  was  in  excess  of  its 
leo-al  power,  a  surety  therein  would  nevertheless  be  bound.^ 
And  the  indorser  of  a  note  on  which  the  maker's  name  is 
forged,  or  of  which  the  maker  is  an  infant  or  married 
woman,  is  liable  thereon,  because  he  guarantees  the  instru- 
ment zn  toto^  And  one  who  signs  a  note  as  principal,  but 
is  in  reality  a  surety,  and  so  known  to  the  holder — signing 
after  others  whose  names  are  forged  upon  the  note,  and 
while  it  is  in  the  hands  of  the  beneficiary — affirms  the 
genuineness  of  the  forged  signatures,  and  can  not  deny 
them  unless  the  holder  was  privy  to  the  fraud.^ 

§  13 1 5.  Elements  in  indulgence  necessary  to  discharge 
surety. — The  following  elements  or  circumstances  must 
unite  in  order  to  constitute  an  indulgence  which  will  dis- 
charge the  surety.  First,  a  consideration,  for  without 
it  the  promise  would  not  be  binding.  Second,  a  promise 
or  agreement  to  indulge,  for  without  it  the  hands  of  the 
creditor  are  not  tied,  although  he  may  have  received  collat- 
eral security  for  the  debt.  Third,  the  promise  must  not 
be  altogether  indefinite,  for  an  indefinite  promise  of  for- 
bearance is  void  and  nugatory,  since  it  might  be  for  an 
hour,  which  would  be  of  no  advantage  to  the  debtor. 
Fourth,  the  indulgence  must  be  without  the  surety's  assent, 
for  if  he  assents  he  is  a  party  to  it.  Fifth,  the  indulgence 
must  be  without  reservation  of  remedy  against  the  surety, 
for  that  would  reserve  the  surety's  recourse  on  his  princi- 
pal. Sixth,  the  agreement  must  be  with  the  principal,  and 
not  with  a  stranger. 

§  1316.  First,  as  to  the  consideration. — There  must  un- 
doubtedly be  a  consideration  for  the  promise  to  indulge, 
and  if  the  agreement  be  merely  voluntary,  the  surety  is  not 
discharged.  Mere  indulgence  at  the  will  of  the  creditor, 
extended  to  the  debtor,  in  nowise  impairs  the  obligation  of 

-  Conn  V.  Cobum,  7  N.  H.,  368.  "  See  ante,  %  675,  vol.  i. 

*  Selser  v.  Brock,  3  Ohio  St.,  302.     See  atite,  §  672,  vol.  I. 


5    1317-    WHAT  ACTS  OF  CREDITOR  DISCHARGE  A  SURETY.     ;^^! 

the  surety ;  if  it  did,  it  would  be  a  most  inconvenient  and 
oppressive  rule,  as  then  suits  must  immediately  follow  the 
maturity  of  the  paper.  It  is  well  settled  that  there  must 
be  a  valid  common  law  agreement,  in  binding  legal  form, 
to  give  time  to  the  maker  or  acceptor  in  order  to  effect  the 
discharge  of  the  drawer  or  indorser.^  Therefore  where  the 
executrix  of  an  estate  verbally  promised  to  pay  the  holder 
out  of  her  own  estate,  if  he  would  forbear  to  sue,  the 
drawer  was  held  to  be  still  bound,  because  the  contract  was 
not  binding  under  the  statute  of  frauds.^  Mere  gratuitous 
forbearance  of  whatever  duration  inside  of  the  limitation 
bar,  will  not  discharge,  for  it  is  not  the  forbearance,  but  the 
contract  that  operates  the  discharge;^  and  even  where  the 
holder  insists  on  interest,  that  will  not  suffice  to  discharge 
the  surety.^ 

§  131 7.  Usuriotis  pi^emium  for  extension  of  time. — 
But  an  agreement  to  forbear  suit,  made  in  consideration  of 
a  usurious  premium,  which  has  been  executed  by  payment 
of  the  premium  and  by  forbearance  accordingly,  would  dis- 
charge the  drawer  or  indorser  ;^  and  such,  it  has  been  held, 
would  also  be  its  effect  if  the  usurious  contract  were  exec- 
utory, on  the  ground  that  in  such  a  case  the  creditor  places 
himself  under  a  moral  obligation,  based  upon  a  considera- 

*  McLemore  v.  Powell,  12  Wheat.,  554  ;  Bank  of  Utica  v.  Ives,  17  Wend.,  501  ; 
Crawford  v.  Millspaugh,  13  Johns,  87;  Davis  v.  Graham,  29  Iowa,  514;  Gal- 
braith  v.  Fullerton,  53  111.,  126;  Buckalew  v.  Smith,  44  Ala.,  638  ;  Payne  v. 
Commercial  Bank,  6  Smed.  &  M.,  24;  Aud  v.  Magruder,  10  Cal.,  282  ;  Hazard 
V.  White,  26  Ark.,  155  ;  Byles  (Sharswood's  ed.),  385  ;  Story  on  Notes,  §  419; 
Stor)'  on  Bills,  §  426 ;  Parkhurst  v.  Vail,  73  111.,  343 ;  ex  parte  Balch,  2  Low, 
440;  S&&  post,  §  1326. 

^  Philpot  V.  Briant,  4  Bing.,  717  ;  Berry  v.  Pullen,  69  Me.,  10 1. 
3  Page  V.  Webster,  15  Me.,  249 ;  Berry  v.  Pullen,  69  Me.,  loi  ;  Veazic  v.  Carr, 
3  Allen,  14. 

*  Philpot  V.  Briant,  4  Bing.,  717.  See  Story  on  Bills,  §  425.  But  see  Rose  v. 
Williams,  5  Kansas,  483. 

^  Armistead  v.  Ward,  2  Pat.  &  H.,  504;  Whittemore  v.  Ellison,  72  111.,  301  ; 
Hamilton  v.  Prouty,  50  Wise,  592  ;  Scott  v.  Harris,  76  N.  C,  205  ;  36  Am. 
Rep.,  871,  note  ;  Austin  v.  Dorwin,  21  Vt.,  38  ;  People's  Bank  v.  Pearson,  30  Vt., 
711  ;  Billington  v.  Wagoner,  33  N.  Y.,  31  ;  Kenningham  v.  Bedford,  i  B.  Mon., 
325;  Kyle  v.  Bostwick,  10  Ala.,  589;  Vilas  v.  Jones,  10  Paige,  76;  Miller  v. 
McCan,  7  Paige,  451  ;  Harbert  v.  Dumont,  3  Ind..  346  ;  Redman  v.  Deputy,  26 
Id.,  338  ;  Cross  v.  Wood,  30  Id.,  378  ;  Abel  v.  Alexander,  45  Ind.,  523. 


c;c'2  WHAT    DISCHARGES    A    SURETY.  §   1317^ 


00 


tion  which  is  beneficial  to  him,  and  which  he  recognizes  as 
bindino- ;  and  to  permit  him  to  take  advantage  of  his  own 
wrong,  would  enable  him  to  profit  doubly  by  his  illegal 
action.^  But  the  weight  of  authority  is  against  this  view.' 
It  has  been  held  that  where,  by  statute,  a  bonus  paid  for 
forbearance  to  sue  is  necessarily  applied  as  part  payment,  or 
by  agreement  it  is  so  applied,  an  indorser  will  not  be  dis- 
charged, because  no  legal  obligation  not  to  sue  is  created ;  ^ 
and  that  a  promise  by  the  maker  to  pay  a  greater  rate  of 
interest  on  the  note,  being  without  consideration,  does  not 
discharge  an  indorser.*  In  the  absence  of  such  a  statute  an 
agreement  to  pay  a  greater  rate  of  interest  w^ould  discharge 
the  indorser.^  The  payment  of  legal  interest  in  advance 
will  uphold  an  agreement  for  forbearance,  and  discharge 
the  surety,^  and  a  note  for  the  interest  will  be  equal  to  its 
payment  in  advance.'' 

§  1317^.  Whether  an  agreefnent  to  pay  the  same  rate 
of  interest  will  support  the  stipulation  to  forbear,  is  a  ques- 
tion on  which  authorities  differ.  Some  consider  that  it 
will ;  ^  others  that  it  will  not,^  which  latter  is,  as  we  think, 


*  Armistead  v.  Ward,  2  Pat.  &  H.,  504  ;  Corielle  v.  Allen,  13  Iowa,  289;  Wheat 
V.  Kendall,  6  N.  H.,  504;  Smith  v.  Pearson,  52  Cal.,  611.  See  on  this  subject, 
Gates  V.  National  Bank,  100  U.  S.  (10  Otto),  248. 

'Vilas  V.  Jones,  I  Comst.,  274  ;  McComb  v.  Kittridg-e,  14  Ohio,  348  ;  Abel  v. 
Alexander,  45  Ind.,  523 ;  Braman  v.  Hawk,  i  Blackf.,  392  ;  Naylor  v.  Moody,  3 
Blackf.,  92;  Coman  v.  The  State,  4  Blackf.,  241  ;  Meiswinkler  v.  Jung-,  30  Wis., 
361  (1872) ;  St.  Maries  v.  Polleys,  47  Wise,  78  ;  Church  v.  Maloy,  70  N.  Y.,  63  ; 
Tudor  V.  Goodloe,  i  B.  Mon.,  324;  Scott  v.  Hall,  6  B.  Mon.,  127  ;  Patton  v. 
Shanklin,  14  B.  Mon.,  17;  Halstead  v.  Brown,  17  Ind.,  202;  Smith  v.  Hyde,  36 
Vt.,  306;  Burg-ess  v.  Dewey,  36  Vt.,  618  ;  Irvine  v.  Adams,  48  Wise,  .-1.68.  See 
also  Berry  v.  PuUen,  69  Me.,  10 1. 

*  Nightingale  v.  Meginnis,  34  N.  J.  (5  Vroom),  461.  See  Fernan  v.  Double- 
day,  3  Lans.,  216. 

*  Schlussel  V.  Warren,  2  Oregon,  18.  '  Kittle  v.  Wilson,  7  Neb.,  84. 

*  2  Hare  &  Wallace  Lead.  Cas.,  469.  But  it  is  held  such  agreement  is  not 
presumed.  First  Nat.  Bank  v  Leavitt,  65  Mo.,  563  ;  St.  Joseph  F.  &  M.  Ins. 
Co.  V.  Hauck,  71  Mo.,  466  ;  contra,  Crosby  v.  Wyatt,  10  N.  H.,  322. 

^  Gahn  v.  Niemcewicz,  11  Wend.,  312. 

«  Pierce  v.  Goldberry,  31  Ind.,  52  (overruled  in  Abel  v.  Alexander,  45  Ind., 
523)  ;  Chute  v.  Pattee,  37  Me.,  102  ;  McComb  v.  Kittridge,  14  Ohio,  348  (over- 
ruled in  Jones  v.  Brown,  il  Ohio  St.,  601)  ;  Fawcett  v.  Freshwater,  31  Ohio  St., 
637  ;  Blazer  v.  Bundy.  15  Ohio  St.,  57  ;  Wood  v.  Newkirk,  15  Ohio  St.,  295. 

»  Harter  v.  Moore,  5  Blackf.,  367  ;  Stuber  v.  Schack,  83  111.,  192,  Schoefield, 
J. :  "  The  promise  to  pay  interest  being  merely  a  promise  to  do  that  for  which 


§  I3I9- 


OOs 


the  better  opinion,  for  it  is  merely  a  promise  to  do  what 
the  party  is  already  bound  to  do. 

§  131 7<5.  Part  payment  is  not  a  sufficient  consideration 
tor  an  agreement  to  extend  time,  and,  therefore,  if  there  be 
no  other  consideration  for  an  extension,  it  would  not  dis- 
charge a  surety.^  But  if  a  note  were  given  for  the  balance 
it  would  itself  be  a  consideration  for  extension,  and  a  surety 
would  be  thereby  discharged.^ 

§  1 3 18.  Second:  The  promise  must  be  absolute. — There 
must  be  an  absolute  agreement  for  indulgence  by  extension 
of  time  or  forbearance  to  sue  ;  for  an  agreement  based  upon 
a  condition  which  is  uncomplied  with  is  not  binding,  and 
therefore  does  not  discharge  those  who  occupy  the  relation 
of  sureties,  but  leaves  all  parties  unaffected.^  So  an  unac- 
cepted offer  is  inchoate  and  ineffectual.* 

§  1 3 1 9.  Third :  The  i?tdulgence  must  not  be  indefinite. — 
The  promise  or  agreement  to  indulge  the  principal  must 
specify  some  definite  time,  or,  at  least,  be  not  indefinite  ; 
for  otherwise  the  time  might  be  so  short  (as  an  hour,  for 
instance)  as  to  be  of  no  advantage  to  the  debtor.^  If  the 
time  be  definite  and  unconditional  a  day  will  suffice.** 
Agreement  to  extend  time  "  20  or  30  days"  is  definite  as 
to  20  days,  and  therefore  discharges  surety.''     "  Until  after 


the  party  was  already  liable,"  is  not  a  sufficient  consideration  ;  Wilson  v.  Pow- 
ers, 130  Mass.,  127. 

*  Andrews  v.  Hagadon,  54  Texas,  571  ;  Herbert  v.  Servin,  41  N.  J.  L.  R.  (13 
Vroom).  225  ;  Carraway  v.  Odenhall,  56  Miss.,  223  ;  Prather  v.  Gammon.  25 
Kan.,  379  ;  Jenness  v.  Cutler,  12  Kan.,  500  ;  Halderman  v.  Woodward,  22  Kan., 
734  ;  Royal  v.  Lindsay,  15  Kan.,  291  ;  see  §  1327. 

=  See  Jaffray  v.  Crane,  50  Wise,  349,  where  note  for  part  of  debt  taken  in 
satisfaction  was  held  to  discharge  a  surety. 

'  Hansberger  v.  Geiger,  3  Grat.,  144 ;  Norris  v.  Cumming,  2  Rand.,  323. 

«  Hewet  V.  Goodrick,  2  Car.  &  P.,  468  ;  Badnall  v.  Samuel,  3  Price,  521  ; 
Thomson  on  Bills,  395. 

»  Alcock  V.  Hill,  4  Leigh,  622  ;  Gardner  v.  Watson,  13  111.,  347  ;  Miller  v. 
Stem,  2  Penn.  St.,  286  ;  Blackstone  Bank  v.  Hill,  10  Pick.,  133  ;  Parnell  v.  Price, 
3  Rich.,  121  ;  Menifee  v.  Clark,  35  Ind.,  304  ;  Abel  v.  Alexander,  45  Ind.,  523. 

•  Smith  V.  Sheldon,  35  Mich.,  42  ;  Fellows  v.  Prentiss,  3  Denio,  512. 
'  Scott  V.  Harris,  76  N.  C,  205. 


334 


WHAT    DISCHARGES    A    SURETY.  §   I32O 


harvest  time"  has  been  held  too  indefinite  an  agreement  of 
extension  to  discharge  a  surety,^  but  the  opposite  view  ob- 
tained as  to  an  agreement  to  extend  the  time  "  until  after 
threshing."^  The  indulgence  must  be  for  a  period  longer 
than  that  which  would  be  required  by  law  for  judgment  to 
be  obtained  ;  otherwise,  though  upon  a  valid  consideration, 
the  surety  will  not  be  discharged.^  Thus,  where  it  was 
ao-reed  that  the  risfht  of  action  should  be  suspended,  but 
also  that  in  case  of  any  default  the  holder  should  have 
judgment  at  as  early  a  period  as  he  could  have  obtained  it 
had  he  pursued  his  legal  remedy,  the  surety  was  held  not 
to  be  discharged.^ 

So,  taking  a  cognovit  from  the  acceptor,  payable  as  early 
as  a  judgment  could  otherwise  be  obtained,  does  not  exon- 
erate the  drawer  or  indorsers.^  It  would  be  otherwise  if 
the  postponement  were  beyond  the  period  when  judgment 
could  be  regularly  obtained.^  And  the  general  rule  above 
stated  applies  only  to  cases  where  time  has  been  given  after 
suit  brought,  and  does  not  apply  where  time  is  given  by 
contract  before  any  action  has  been  commenced.'^ 

§  1320.  An  agreement  for  continuance  of  a  case  to  an- 
other term  of  court,  based  on  a  valuable  consideration, 
would  discharge  the  drawer  or  indorser  of  the  bill  or  note 
in  suit,  because  it  would  operate  as  a  suspension  of  any 
remedy  for  the  debt  for  the  stipulated  period.^  But  if 
merely  by  consent  and  without  consideration,  it  would  not 
have  this  effect.^ 


'  Findley  v.  Hill,  8  Oregon.  248.  '  Moulton  v.  Posten,  52  Wise,  169. 

3  Sizer  v.  Heacock,  23  Wend.,  81  ;  Hallett  v.  Holmes,  18  Johns,  28  ;  Isaac  v. 
Daniel,  8  Ad.  &  El.  N.  S.,  500  ;  Price  v.  Edmunds,  10  Barn.  &  C.  578  ;  Lee  v. 
Levi,  4  Barn.  &  C,  390  ;  I  Carr.  &  P.,  553  ;  Byles  on  Bills  (Sharswood's  ed.) 
[*242],  387  ;  2  Parsons  N.  &  B.,  242  ;  Story  on  Bills,  §  427  ;  Chitty  on  Bills  (13 
Am.  ed.),  468  ;  Story  on  Notes,  §  415. 

'  Kennard  v.  Knott,  2  Man.  &  G.,  474-        '  Fentum  v.  Pocock,  5  Taunt.,  192. 

'  Story  on  Notes,  §  415  ;  Edwards  on  Bills,  570. 

'  Raught  V.  Black,  2  Disney  (Ohio),  477. 

*  Bank  U.  S.  v.  Hatch,  6  Pet.,  250.  "  Hays  v.  Myrick,  47  Ala.,  335. 


§  1322.    WHAT  ACTS  OF  CREDITOR  DISCHARGE  A  SURETY.      335 

§  132 1.  Fourth:  The  surety  s  assent  prevents  his  dis- 
charge.—  Volenti  noii  fit  injuria  is  a  maxim  of  law,  and  it 
applies  where  the  sureties  consent  to  the  indulgence.  Then 
they  are  parties  to  it,  and  are  not  discharged.^  Where  the 
drawer  replied  to  the  holder,  who  stated  the  offer  of  the 
principal,  "  You  may  do  as  you  like,"  it  was  held  an  assent 
to  the  indulgence  proposed.^  And  in  Thomson  on  Bills  ^ 
it  is  said  :  "  If  an  obligant  be  consulted  as  to  the  propriety 
of  giving  time,  his  silence  may  be  taken  as  consent,  if  the 
delay  be  a  reasonable  one  in  the  circumstances."  It  would 
certainly,  however,  be  safer  for  the  holder  to  require  an  ex- 
plicit answer.  An  ambiguous  reply  should  not  be  relied 
on.*  If  the  holder  give  time  to  a  prior  party,  and  a  subse- 
quent party,  knowing  the  fact,  afterward  promises  to  pay, 
he  waives  his  defence,  and  is  bound  absolutely.^ 

§  1322.  Fifth  :  Reservatiofi  of  remedies  against  surety. — 
The  surety  will  not  be  discharged  by  indulgence  to  the 
principal  when  there  is  an  unqualified  reservation  of  the 
creditor's  remedies  against  the  surety.  Thus  the  drawer  or 
indorscr  would  not  be  discharged  by  time  granted  to  the 
maker  or  acceptor  :  First,  because  it  rebuts  the  implication 
that  the  drawer  or  indorscr  was  meant  to  be  discharged, 
which  is  one  of  the  reasons  why  the  surety  is  ordinarily 
exonerated  by  such  a  transaction  ;  and  secondly,  because  it 
prevents  the  rights  of  the  drawer  or  indorser  against  the 
acceptor  or  maker  being  impaired,  the  injury  to  such  right 
of  the  surety  being  the  other  reason.  For  the  debtor 
(acceptor  or  maker)  can  not  complain  if  the  instant  after- 

'  Norris  v.  Crummey,  2  Rand.,  334  ;  Hunter  v.  Jett,  4  Rand.,  107  ;  Gloucester 
Bank  v.  Worcester,  10  Pick.,  528  ;  Prouty  v.  Wilson,  123  Mass.,  297  ;  Smith  v. 
Hawkins,  6  Conn.,  444;  Bruen  v.  Marquand,  17  Johns,  58;  Smith  v.  Winter,  4 
M.  &  W.,  454;  Mayhew  v.  Crickett,  2  Swanst.,  185;  Gray  v.  Brown,  22  Ala., 
262;  Story  on  Notes,  §  419;  i  Parsons  N.  &  B.,  240;  Edwards,  571  ;  Ludwig 
V.  Iglehart,  43  Md.,  39. 

*  Clark  V.  Devlin,  3  Bos.  &  P.,  363.  See  Prouty  v.  Wilson,  123  Mass.,  297,  for 
circumstances  showing-  surety's  assent. 

'  Wilson's  ed.,  396. 

*  Withall  V.  Masterman,  2  Camp.,  179.  '  Stevens  v.  Lynch,  12  East.,  38. 


^^e  WHAT    DISCHARGES    A    SURETY.  §   1 3 23. 

ward  the  surety  (drawer  or  indorser)  enforces  these  rights 
against  him,  and  his  consent  that  the  creditor  (the  holder) 
shall  have  recourse  against  the  surety  (drawer  or  indorser) 
is  impliedly  a  consent  that  such  surety  shall  have  recourse 
ao-ainst  him.^  The  contrary  doctrine  that  such  reservation 
of  remedies  is  ineffectual,  has  been  adopted  in  some  cases.^ 
Parol  evidence  may  be  given  to  show  that  an  agreement 
which  by  itself  would  discharge  a  surety,  was  not  to  have 
that  effect.^ 

§  1323.  The  reservation  of  the  rights  of  the  surety  should 
appear  on  the  face  of  the  agreement  giving  time,  and  can 
not,  when  such  agreement  is  written,  be  proved  by  parol. 
But  that  is  not  always  necessary  where  the  agreement  to 
preserve  the  surety's  rights  is  distinct  and  collateral.* 

§  1324.  Sixth:  Agreement  mtist  be  made  with  princi- 
pal.— The  agreement  for  indulgence,  in  order  to  discharge 
the  drawer  or  indorser,  must  be  made  with  the  maker  or 
acceptor  who  is  the  principal  debtor ;  and  if  it  be  made 
with  a  third  party,  it  will  not  affect  the  drawer's  or  in 
dorser's  rights  or  remedies,  although  such  third  party  may 
have  his  appropriate  remedy  for  breach  of  the  contract 
with  him.'^ 


'  Muir  V.  Crawford,  2  Scotch  Appeals,  L.  R.,  456  (1875) :  13  Moaks  Eng.  R., 
138;  ex  parte  Carstairs,  i  Buck,  560;  Bouler  v.  Mayor,  19  C.  B.  N.  S.,  70  (1 1 5 
E.  C.-L.  R.) ;  Kearsley  v.  Cole,  16  Mees.  &  W.,  127  (1846),  Parke,  B. ;  ex  parte 
Glendinning,  i  Buck,  517 ;  Boultbee  v.  Stubbs,  18  Ves.,  20 ;  ex  parte  Gifford,  6 
Ves.,  807,  808  ;  Owen  v.  Homan,  3  Eng.  L.  &  Eq.,  125  ;  Nichols  v.  Norris.  3  B. 
&  Ad.,  41  ;  Stewart  v.  Eden,  2  Cai.,  121  ;  Wagman  v.  Hoag,  14  Barb.,  233,  239 ; 
Clagett  V.  Salmon,  5  Gill  &  J.,  314  ;  Morse  v.  Huntington,  40  Vt.,  488  ;  Viele  v. 
Hoag,  24  Vt.,  46;  Hagey  V.  Hill,  75  Penn.  St.,  108  ;  Kenworthy  v.  Sawyer,  125 
Mass.,  28  ;  Story  on  Bills,  §  426  ;  Story  on  Notes,  §  416  ;  Thomson  on  Bills,  387  ; 
I  Parsons  N.  &  B.,  241 ;  Burge  on  Suretyship,  210. 

^  Gustine  v.  Union  Bank,  10  Rob.  (La.),  412  (1845)  ;  Harbert  v.  Dument,  3 
Port.  (Ind.),  246  (1852). 

=  Wyke  V.  Rogers,  i  DeG.  Mac.  «&  G  ,  408. 

♦  Byles  on  Bills  (Sharswood's  ed.)  [*245],  390. 

"  Frazer  V.  Jordan,  8  El.  &  Bl.,  303.,  Coleridge,  J.,  saying:  "We  think  that 
the  doctrine  ought  not  to  be  extended  to  the  case  of  a  contract  with  a  stranger. 
The  principal  debtor  having  given  no  consideration  for  the  promise,  has  no 
ground  to  complain  of  the  breach  of  it,  and  can  not  say  that  faith  has  been 
broken  with  him.  There  is  no  privity  of  contract  with  him  ;  and  we  see  noth- 
ing on  which  any  right,  either  at  law  or  in  equity  (see  Lord  Abinger  s  observa- 


§    132  7'     ACTS  OF  CREDITOR  NOT  DISCHARGING  SURETY.        ^37 

§  1325.  An  ordinary  surety  who  has  been  discharged 
may  certainly  waive  the  discharge,  and  resume  HabiHty  for 
a  consideration.^  And  perhaps  without  any  new  consider- 
ation.^ Undoubtedly  a  waiver  made  with  full  knowledge 
of  the  facts,  by  an  indorser  or  drawer  who  has  been  dis- 
charged, will  bind  him,  although  without  a  new  consider- 
ation.^ 


SECTION   III. 

WHAT   ACTS   OF   CREDITOR   WILL   NOT   DISCHARGE   A   SURETY. 

§  1326.  The  surety  will  not  be  discharged  either  by  (i) 
a  delay  of  the  creditor  to  sue  the  principal  ;  (2)  by  receipt 
of  part  payment  from  the  principal ;  or  (3)  by  receipt  from 
him  of  collateral  security. 

(i)  Mei^e  delay  and  passivity  of  the  creditor  does  not 
discharge  a  drawer  or  indorser,  even  when  the  delay  and 
subsequent  insolvency  of  the  principal  deprives  him  of  all 
means  of  reimbursement  ;*  and  unless  authorized  so  to  do 
by  statute,  he  can  not,  by  request  or  notice,  compel  the 
creditor  to  sue  the  principal  debtor.^ 

§  1327.  (2)  Part  payment  made  to  the  debtor  by  the 
maker  or  acceptor,  either  before,  or  at,  or  after  maturity  of 

tions  in  Lyon  v.  Holt,  5  Mees.  &  W.,  250,  253,  254),  for  him  to  insist  on  such 
a  contract  can  be  founded.  The  stranger  may  have  some  private  reason  of  his 
own  to  wish  for  some  indulgence  to  be  shown  ;  and  if  he  has  given  a  good  con- 
sideration, may  be  entitled  to  damages,  nominal,  or  large  or  small,  according  to 
any  legal  interest  he  may  have ;  but  surely  he  is  the  only  person  to  take  advan- 
tage of  his  contract."  Lyon  v.  Holt,  5  Mees.  &  W.,  543  ;  Sterling  v.  Marietta, 
etc.,  Co.,  II  Serg.  &  R.,  179  ;  2  Parsons  N.  &  B.,  241  ;  Thomson  on  Bills,  394. 

'  N.  H.  Savings  Bank  v.  Colcord,  15  N.  H.,  119. 

"  Fowler  v.  Brooks,  13  N.  H.,  420 ;  i  Parsons  N.  &  B.,  242. 

'  See  ante,  §  1222,  and  chapter  xxxv,  vol.  2. 

*  Powell  V.  Waters,  17  Johns,  176  ;  Wood  v.  Jefferson  Co.  Bank,  9  Cow.,  194; 
Bank  of  S.  C.  v.  Myers,  i  Bailey,  412  ;  Sterling  v.  Marietta  Co.,  11  Serg.  &  R., 
179;  Freeman's  Bank  v.  Rollins,  13  Me.,  202  ;  Worsham  v.  Goar,  4  Port.  (Ala.), 
441  ;  English  v.  Darley,  2  B.  &  P.,  61.  A  different  rule  applies  as  to  notes  not 
negotiable,  see  ante,  §  13 16. 

'See/tfoV,  §  1339. 

Vol.  II. — 22 


338  WHAT    DISCHARGES    A    SURETY.  §    1 328. 

the  note  or  bill,  will  not  discharge  the  drawer  or  indorsers, 
except  to  the  amount  of  the  sum  so  paid,  unless  the  part 
payment  is  accompanied  with  some  stipulation  which  may 
be  hurtful  to  their  interests.  In  itself  it  is  only  an  extin- 
guishment of  the  debt  J>ro  taiito,  which  relieves  the  drawer 
or  indorsers  to  that  extent,  and  is  therefore  beneficial.^  It 
appears  to  have  been  once  holden  that  if,  on  presentment 
for  payment,  the  holder  took  less  than  the  whole  amount 
from  the  acceptor  or  indorser,  in  part  satisfaction,  he  thereby 
discharged  the  other  parties  who  did  not  assent.^  But  it  is 
now  settled  that  the  holder  may  take  part  payment  from 
any  party,  and  sue  the  others  for  the  residue.*^  Even  an 
agreement  that  part  payment  shall  discharge  the  debt,  will 
not  discharge  any  party  to  the  instrument,  unless  some  other 
circumstance  entered  into  the  consideration.'* 

§  1328.  (3)  The  receipt  of  a  mortgage,  deed  of  trust,  or 
other  collateral  security  by  the  holder,  from  the  maker  or 
acceptor,  with  agreement  to  apply  the  proceeds  to  payment 
of  the  bill  or  note,  will  not  in  anywise  affect  the  rights  of 
the  holder  against  the  drawer  or  indorsers,  if  it  be  unac- 
companied with  any  stipulation  for  indulgence  or  delay  ; 
for  he  is  not  incapacitated  to  pursue  his  remedy  against 
any  of  the  parties  at  any  time,  and  the  security  taken  oper- 
ates for  the  benefit  of  the  drawer  or  indorsers,  who  are  the 
better  protected  against  loss.^     And  it  matters  not  that  he 

1  Greenavvalt  v.  McDowell,  65  Penn.  St.,  464  ;  Hill  v.  Bostick,  10  Yerg.,  410  ; 
James  v.  Badger,  i  Johns'  Cas.,  131  ;  Bank  U.  S.  v.  Hatch,  6  Pet.,  250 ;  Mason 
V.  Peters,  4  Vt.,  loi  ;  English  v.  Darley,  2  B.  &  P.,  61  ;  Edwards  on  Bills,  570; 
Halliday  v.  Hart,  30  N.  Y.,  474 ;  Turnbull  v.  Block,  31  Ohio  St.,  649. 

^  Tassel  v.  Lewis,  2  Ld.  Raym.,  744  (1695),  where  it  is  said  :  "  If  the  indorsee 
of  a  bill  accepts  but  two  pence  from  the  acceptor,  he  can  never  after  resort  to 
the  drawer."     Kellock  v.  Robinson,  2  Stra.,  745  (1727). 

'  Hewitt  V.  Goodrich,  2  Car.  &  P.,  468  (after  dishonor)  ;  Gould  v.  Robson,  8 
East.,  576  ;  Walwyn  v.  St.  Quintin,  i  B.  &  P.,  658  ;  English  v.  Darley,  2  B.  & 
P.,  61  ;  Chitty  on  Bills  (13  Am.  ed.),  472  ;  Story  on  Notes,  §§  385,  422  ;  Byles 
(Sharswood's  ed.),  [^242],  387  ;  Thomson  on  Bills,  386  ;  2  Rob.  Pr.  (N.  ed.),  239. 

*  See  chapter  on  Payment,  and  ante,  §  \'i\']b.  In  Hightcv/er  v.  Ivy,  2  Port. 
(Ala.),  308,  it  was  held  that  the  refusal  of  an  indorsee  who  had  sued  the  maker, 
to  receive  part  payment  from  him,  discharged  the  indorser,  it  appearing  that  it 
could  not  be  afterward  recovered. 

'  Beard  v.  Root,  11  N.  Y.  S.  C.  (4  Hun),  357  ;  Bank  of  Utica  v.  Ives,  17 
Wend.,  502  ;  Gary  v.  White.  52  N.  Y.,  138  ;  Brengle  v.  Bushey,  40  Md.,  141 ; 


§   1329.     ACTS  OF  CREDITOR  NOT  DISCHARGING  SURETY.        339 

afterward  surrenders  up  such  collateral  security,  on  being 
informed  that  the  bill  would  probably  be  paid  by  the 
drawee.^ 

§  1329.  While  taking  a  bill,  note,  or  check  as  collateral 
security  merely,  without  any  express  or  implied  agreement 
for  delay  in  consideration  thereof,  does  not  discharge  the 
drawer  or  indorsers;  yet  if  such  bill,  note,  or  check  so 
taken  by  the  holder  be  payable  at  a  future  day,  there  arises 
an  implication  of  agreement  for  delay  until  its  maturity, 
and,  as  has  been  said,  "such  indulgence  may  be,  and  is  in 
most  cases,  the  very  consideration  upon  which  the  collateral 
security  is  given  and  obtained."^  Undoubtedly  the  holder 
may  show  that  it  was  agreed  that  there  should  be  no  delay, 
or  that  the  remedy  against  the  drawer  or  indorser  was  re- 
served ;  but  that  agreement  for  delay  will  be  presumed,  is 
the  view  sustained  by  weight  of  authority.^     In  England 

Andrews  v.  Marrett,  58  Maine,  539  ;  Thompson  v.  Gray,  63  Maine,  230  ;  York 
V.  Pierson,  63  Maine,  587;  Lincoln  v.  Bassett,  23  Pick.,  154;  Sigourney  v. 
Wetherell,  6  Met.,  553;  Sterling-  v.  Marietta,  etc.,  Co.,  11  Serg.  &  R.,  179; 
Payne  v.  Commercial  Bank,  6  Sm.  &  M.,  24  ;  U.  S.  v.  Hodge,  6  How.,  U.  S., 
279;  Wade  V.  Staunton,  5  How.  (Miss.),  631  ;  Ripley  v,  Greenleaf,  2  Vt.,  129; 
Oxford  Bank  v.  Lewis,  8  Pick.,  458  ;  Suckley  v.  Furse,  15  Johns,  338  ;  Miller  v. 
Knight,  6  Baxter,  503  ;  Twopenny  v.  Young,  3  Barn.  &  C,  208  ;  Bring  v. 
Clarkson,  1  Barn.  &  C,  14;  Bedford  v.  Deakin,  2  B.  &  Aid.,  210;  Story  on 
Notes,  §  416  ;  Story  on  Bills,  §  427  ;  Edwards  on  Bills,  570. 

'  Hurd  V.  Little,  12  Mass.,  502.  '  Okie  v.  Spencer,  2  Whart.,  253  (1836). 

*See  an/e,  §  1259  et  seq.,  and  §  131 2  et  seq.  ;  Beard  v.  Root,  11  N.  Y.  S.  C. 
(4  Hun),  356.  In  this  case  defendant  was  sued  as  indorser  of  a  note  for 
$226.25.  J^he  maker  received  from  the  holder  a  bond  and  mortgage  for  $600, 
after  maturity  of  the  note,  and  advanced  him  $100  thereon.  Under  the  circum- 
stances of  the  case  the  court  held  the  indorser  discharged,  and  E.  Darwin  Smith, 
J.,  said  :  "  It  is  doubtless  true  that  the  mere  taking  of  collateral  security  for  a 
debt  without  an  agreement  to  extend  the  time  of  payment,  does  not  discharge  a 
surety.  But  it  is  not  necessary  that  the  agreement  to  extend  the  time  of  pay- 
ment be  in  express  terms.  The  contract  in  this  case,  unavoidably,  and  by  clear 
implication,  includes  such  an  agreement."  Hubbard  v.  Gurney,  64  N.  Y.,  460; 
Pomeroy  v.  Tanner,  70  N.  Y.,  547;  Armistead  v.  Ward,  2  Pat.  &  H.,  504; 
Bangs  V.  Mosher,  23  Barb.,  478.  In  Okie  v.  Spencer.  2  Whart.,  253,  the  holder 
of  a  note  took  from  the  maker,  at  its  maturity,  a  check  dated  six  days  afterward, 
and  the  indorser  was  held  to  be  discharged.  Myers  v.  Willis,  5  Hill,  463  ;  Fel- 
lows V.  Prentiss,  3  Den.,  512;  Couch  v.  Waring,  9  Conn.,  264;  Eisner  v.  Kelly, 
3  Daly  (N.  Y.),  485  ;  Frois  v.  Mayfield,  33  Tex.,  801.  In  Chitty  on  Bills  (13  Am. 
ed.)  [*4o8],  461,  it  is  said:  "It  is  admitted  that  the  mere  receiving  a  lurther 
security,  payable  at  a  future  day,  would  m  general  imply  an  agreement  to  wait 
till  it  becomes  due."  Chitty,  Jr.,  on  Bills,  100  w,  and  100  x,  note  ;  2  Parsons 
N.  &  B.,  247  ;  2  Am.  Lead.  Cas.,  272 ;  Thomson  on  Bills  (Wilson's  ed.),  392, 
393,  note  a\  contra,  Ripley  v.  Greenleaf,  2  Vt.,  129,  now  overruled;  Michigan 
State  Bankv.  Leavenworth,  28  Vt.,  215. 


340 


WHAT    DISCHARGES    A    SURETY.  §   I33O. 


it  was  at  one  time  held  that  where  the  holder  of  a  bill  took 
a  second  bill  of  the  acceptor,  after  notifying  the  drawer  of 
dishonor,  payable  at  a  future  day,  without  any  express 
agreement,  and  without  surrendering  the  first  bill,  the 
second  bill  should  be  regarded  as  collateral  security  merely, 
although  money  had  been  raised  upon  it ;  and  that  the 
drawer  was  not  discharged.^  And  there  is  authority  to  the 
same  effect  in  the  United  States.^  But  this  decision  is 
now  overruled,  and  the  English  doctrine  conforms  to  the 
text.* 

§  1330.  When  the  bill,  note,  check,  or  other  security, 
which  is  taken  by  the  holder,  is  payable  immediately,  or 
what  is  the  same  thing,  on  demand,  there  can  arise  no  pre- 
sumption for  delay  on  the  part  of  the  holder,  and  conse- 
quently it  will  not  operate  in  itself  as  a  discharge  of  the 
drawer  or  indorser.'^  Yet  the  holder,  by  neglecting  to  col- 
lect the  amount  of  the  bill,  note,  or  check  with  due  dili- 
gence, may  discharge  the  maker  or  acceptor  who  passed  it 
to  him  ;  and  thus  by  discharging  the  principal  discharge 
the  drawer  or  indorse r.  It  is  his  duty  to  present  a  check 
on  the  same  day  if  it  be  on  a  bank  in  the  place  where  re- 
ceived, and  to  forward  it  by  mail  of  the  next  day  if  in 
another;^  and  he  must  exercise  diligence  in  presenting  a 
bill  or  note  payable  on  demand.  What  due  diligence  is,  is 
elsewhere  considered. 


'  Pi-ing  V.  Clarkson,  i  Barn.  &  C,  14;  2  Dow.  &  R.,  78  (1882)  ;  followed  in 
Galen  v.  Niemcewicz,  16  Johns,  321  (1833).  This  case  may  now  be  regarded  as 
overruled.  But  see  also  Austin  v.  Curtis,  31  Vt.,  64;  Whitney  v.  Going,  20  N. 
H.,  354. 

^  See  preceding  note. 

'  Kendrick  v.  Lomax,  2  Cromp.  &  J.,  405  (1832) ;  see  Michigan  State  Bank  v. 
Leavenworth,  28  Vt.,  215  (1856) ;  Baker  v.  Walker,  14  M.  &  W.,  464  (1845). 

'  Crafts  V.  Beale,  11  C.  B.,  172  ;  2  Am.  Lead.  Cas.,  273.  See,  on  this  point. 
Board  of  Education  v.  Fonda,  77  N.  Y.,  362,  Folger,  J. :  "  Taking  of  the  draft 
(which  was  payable  on  demand)  as  a  means  of  getting  payment  of  the  debt,  and 
the  unavailing  use  of  it  for  that  purpose,  without  laches,  worked  no  suspension 
of  remedy  against  Wolcott,  the  principal,  that  will  discharge  defendants  if  they 
are  his  sureties." 

*  Smith  V.  Miller,  43  N.  Y.,  171  (1870)  ;  52  N.  Y.,  546  (1873).  See  vol.  2, 
§  1590- 


^   1332.  JOINT    PARTIES    AS    SURETIES.  34I 

§  1 33 1.  Cojnpositioii  with  principal. — Any  composition 
with  the  maker  or  acceptor,  whereby  a  certain  per  cent,  is 
agreed  to  be  taken  in  discharge  of  the  whole  amount,  upon 
receiving  collateral  security  from  a  third  person  for  the 
composition  money,  and  it  were  given  accordingly,  would 
discharcre  the  drawer  or  indorser,  whether  he  were  an  ac- 
commodation  party  or  not ;  for  it  would  amount  to  an  ex- 
tinp-uishment  and  satisfaction  of  the  instrument  as  to  all 

o 

the  parties  thereto.^ 

This  doctrine  was  first  introduced  in  courts  of  equity,' 
but  it  is  now  universally  applied  by  courts  of  law.  A  dis- 
charge of  the  maker  in  bankruptcy  does  not  release  an  in- 
dorser.^ 


SECTION    IV. 

LATENT    SURETIES  ;    ACCOMMODATION,    AND     JOINT    PARTIES   AS 

SURETIES. 

§  1332.  There  is  no  doubt  that  if  the  party  add  the  word 
"surety"  to  his  name  upon  the  face  of  the  paper,  it  is  a 
distinct  indication  of  the  character  in  which  he  signs,  and 
that  he  will  be  treated  as  a  surety  as  against  all  parties.* 
And  it  is  equally  well  settled  that  if  the  party  signing  add 
the  word  "  principal "  to  his  name,  or  expressly  describe  him- 
self as  principal  on  the  face  of  the  paper,  all  parties  may  so 

'  Lewis  V.  Jones,  4  Barn.  &  C,  506 ;  Steinman  v.  Magrius,  1 1  East.,  390 ;  Story 
on  Notes,  §§  426,  427.  In  Story  on  Bills,  §  430,  it  is  said  :  "  Perhaps  it  is  ques- 
tionable, even  if  the  holder  has  the  consent  of  the  other  parties,  that  he  may  ac- 
cept the  composition,  and  hold  them  liable,  without  resorting  to  the  compound- 
ing creditor,  whether  he  will  not  still  be  deprived  of  his  remedy  against  them, 
if  the  composition  operates  as  a  release  of  the  debt,  inasmuch  as  it  will  be  a 
fraud  upon  the  other  creditors,  if  they  have  supposed  that  they  had  contracted 
with  each  other  on  equal  terms.  On' the  other  hand,  the  holder's  compounding 
with,  or  releasing,  the  drawer,  will  not  discharge  the  acceptor  of  a  bill,  although 
he  has  accepted  it  for  the  accommodation  of  the  drawer,  unless  it  is  expressly  so 
stipulated." 

""  Melvill  V.  Glendinning,  7  Taunt.,  126.  '  Pratt  v.  Chase,  122  Mass.,  26i>. 

*  Hunt  V.  Adams,  5  Mass.,  358;  Robison  v.  Lyle,  10  Barb.,  512  ;  Edwards  on 
Bills,  572.     See  §  1338a. 


342  WHAT    DISCHARGES    A    SURETY.  §  1332^. 

regard  and  treat  him.^  But  there  are  other  cases  in  which 
the  parties  signing  do  not  expressly  describe  in  what  char- 
acter they  are  to  be  bound,  which  claim  especial  attention. 
What  we  have  heretofore  said  in  respect  to  the  discharge 
of  those  parties  to  bills  and  notes  who  are  regarded  as  occu- 
pying the  relation  of  sureties,  by  indulgence  to  or  discharge 
of  their  principals,  was  said  under  the  assumption  that  the 
bill  or  note,  as  the  caSe  might  be,  was  executed  upon  a 
valuable  consideration,  and  that  all  parties  were  bound  in 
all  respects  to  the  holder  in  like  manner  as  they  appeared 
to  be. 

§  1332(3;.  Parties  signing  as  principals  for  accommodation. 
— Where  the  parties  ostensibly  principal  were  in  reality 
mere  parties  for  the  accommodation  of  others,  it  has  been 
held,  by  authorities  of  high  consideration,  that  different  and 
peculiar  principles  apply,  and  that  in  such  cases,  if  the  holder 
grant  time  to  or  release  the  party  for  whose  accommoda- 
tion another  became  acceptor  or  maker,  the  acceptor  or 
maker  was  thereby  discharged. 

§  1333.  English  decisions. — Thus  it  was  held  at 
nisi  prius,  by  Lord  Ellenborough,  that  where  the  in- 
dorsee of  a  bill,  who  received  it  knowing  that  it  was  ac- 
cepted for  accommodation  of  the  drawer,  gave  time 
to   the    drawer  when    it  became   due   upon   his   paying  a 


'  Sprigg  V.  Bank  of  Mount  Pleasant,  10  Pet.,  265,  Thompson  J.,  saying :  "  In 
ordinary  cases,  when  sureties  sign  an  instrument  without  any  designation  of  the 
character  in  which  they  become  bound,  it  may  be  reasonable  to  conclude  that 
they  understood  that  their  liability  was  conditional,  and  attached  only  in  default 
of  payment  by  the  principal.  And  hence  the  reasonableness  of  the  rule  of  law, 
which  requires  of  the  creditor  that  his  conduct  with  respect  to  his  debtor  should 
be  such  as  not  to  enlarge  the  liability  of  the  surety,  and  make  him  responsible 
beyond  what  he  understood  he  had  bound  himself.  But  when  one  who  is  in 
reality  only  surety  is  willing  to  place  himself  in  the  situation  of  a  principal  by  ex- 
pressly declaring  upon  his  contract  that  he  binds  himself  as  such,  there  can  not 
be  any  hardship  in  holding  him  to  the  character  in  which  he  assumes  to  place 
himself.  As  to  that  particular  contract,  he  undertakes  as  a  partner  with  the 
debtor,  and  has  no  more  right  to  disclaim  the  character  of  principal  than  the 
debtor  would  have  to  treat  him  as  principal  if  he  had  set  out  in  the  obligation 
that  he  was  only  surety."  See  also  S.  C.,  14  Pet.,  201.  Harris  v.  Brooks,  21 
Pick.,  195. 


5   1333-  JOINT    PARTIES    AS    SURETIES.  343 

part,  the  acceptor  was  thereby  discharged.^  And  subse- 
quently, by  the  same  judge,  that  giving  time  to  an  accom- 
modation acceptor  would  not  discharge  the  accommodated 
drawer,  on  the  ground  that  the  latter  had  no  remedy  over 
against  the  acceptor  which  could  be  materially  affected  ;*  in 
both  cases  regarding  the  acceptor  as  a  surety,  and  the  drawer 
as  the  principal  debtor.  The  doctrine  of  Lord  Ellen- 
borough  was  soon  doubted,  and  held  not  to  apply  where 
the  acceptor  promised  to  pay  the  bill  when  demand  was 
made  at  maturity;^  and  Lord  Mansfield  declared  in  the 
ensuing  year  that  "  except  in  the  case  cited  from  Campbell 
(Laxton  v.  Peat),  it  never  was  known  that  anything  pass- 
ing between  other  parties  could  discharge  an  acceptor."* 
Lord  EUenborough  himself,  it  appears,  had  applied  a  differ- 
ent doctrine  from  that  held  by  him  in  the  cases  above 
referred  to,  in  an  earlier  case,  where  a  similar  question  was 
presented  between  the  indorsee  and  the  maker  of  a  note 
for  accommodation  of  the  payee.^  Upon  the  question 
arising;  in  the  Court  of  Common  Pleas,  in  a  case  where  it 
appeared  that  the  indorsee  of  a  bill  accepted  for  the 
accommodation  of  the  drawer  took  a  cognovit  from  the 

» Laxton  v.  Peat,  2  Camp.,  185  (1809),  Lord  EUenborough  saying:  "  This  being 
an  accommodation  hill  within  the  knowledge  of  all  the  parties,  the  acceptor  can 
only  be  considered  a  surety  for  the  drawer,  and  in  the  case  of  simple  contracts 
the  surety  is  discharged  by  time  being  given,  without  his  concurrence,  to  the 
principal.  The  defendant's  remedy  over  is  materially  affected  by  the  new  agree- 
ment into  which  the  plaintiff  entered  with  the  drawer  after  the  bill  was  due. 
The  case  is  exactly  the  same  as  if  the  bill  had  been  drawn  by  the  defendant  (the 
acceptor),  and  accepted  by  Hunt  (the  drawer),  in  consideration  oi  a  debt  due." 
See  Edwards  on  Bills,  573. 

*  Collett  V.  Haigh,  3  Camp.,  281  (1812). 

'  Kerrison  v.  Cooke,  3  Camp.,  362  (181 3),  Gibbs,  J. 

*  Raggett  V.  Axmore,  4  Taunt.,  730  (1813). 

"^  Mallet  V.  Thompson,  5  Esp.,  178  (1804).  The  indorsee  of  the  payee,  for 
whose  accommodation  the  note  was  made,  knowing  that  it  was  an  accommoda- 
tion note,  covenanted  in  a  composition  deed  not  to  sue  or  molest  the  payee  on 
account  of  the  debt  for  ninety-nine  years,  and  received  a  dividend  of  the  payee's 
estate.  Lord  EUenborough  held  that  the  maker  was  not  discharged,  in  a  suit 
against  him  by  the  indorsee,  and  said :  "  It  is  true  that  the  plaintiff,  recovering 
on  the  defendant  (the  maker)  in  this  case,  he  (the  maker)  may  have  his  action 
over  against  Twigg  (the  payee),  but  it  will  be  for  money  paid  to  his  use  at  the 
defendant's  suit ;  the  payment  creates  a  new  debt,  but  the  old  debt  is  satisfied 
as  between  Twigg  and  the  plaintiff." 


344  WHAT    DISCHARGES    A    SURETY.  §   1 334. 

drawer  payable  by  instalments,  it  was  unanimously  held 
that  the  acceptor  was  not  discharged,  and  the  circumstance 
that  the  holder  did  not  know  it  was  an  accommodation 
acceptance  when  he  took  it,  was  considered  by  Lord 
Mansfield  entirely  immaterial.^ 

§  1334.  The  doctrine  of  the  Court  of  Common  Pleas, 
enforced  by  the  great  name  and  cogent  reasoning  of  Lord 
Mansfield,  may  be  regarded  as  the  settled  doctrine  of  the 
courts  of  common  law  in  England,  in  cases  where  the 
holder  did  not  know  that  the  note  or  acceptance  was  for 
accommodation  at  the  time  when  he  took  the  instrument, 
although  he  may  have  afterward  acquired  information  of 
Its  true  character.^  And  even  where  the  holder  knew  that 
the  apparent  principal  party  was  really  signing  for  the 
accommodation  of  another,  at  the  time  when  he  received 
the  instrument,  the  better  opinion  is  that  that  circumstance 
does  not  alter  his  rights  or  duties,  as  such  party  has  held 
himself  out  and  obligated  himself  in  a  certain  character, 
and  has  no  just  ground  to  demand  or  expect  greater  con- 
sideration than  that  legally  incident  to  that  character  which 
he  has  assumed,^  If  he  intended  to  insist  on  the  privileges 
of  a  surety,  he  should  have  refused  to  bind  himself  save 
in  a  recognized  form  of  suretyship.  Furthermore,  it 
may  be  observed,  that  while  the  indulgence  or  release  of  an 

'  Fentum  v.  Pocock,  5  Taunt.,  192  ;  i  Marsh,  14  (1813). 

«  Carstairs  v.  Rolleston,  5  Taunt.,  551  ;  i  Marsh,  257  (1814).  The  holder  re- 
leased the  payee  who  had  indorsed  to  him  an  accommodation  note.  He  did  not 
know  when  he  received  it  that  it  was  accommodation  paper.  Held,  the  maker 
was  not  discharged.  Nichols  v.  Norris,  3  Barn.  &  Ad.,  41.  Parke,  J.,  said : 
"  I  am  of  opinion  that  Fentum  v.  Pocock  is  sound  law."  Price  v.  Edmunds,  10 
Bam.  &  C,  578  (1830),  Parke,  J.:  "I  think  that  the  decision  in  Fentum  v. 
Pocock,  where  it  was  held  that  the  acceptor  of  an  accommodation  bill  was  not 
discharged  by  giving  time  to  the  drawer,  was  good  sense  and  good  law."  Rolfe 
V.  Wyatt,  5  Car.  &  P.,  181  (1831).  Held,  giving  time  to  drawer,  on  receiving 
part  payment  of  bill  accepted  for  his  accommodation,  did  not  discharge 
acceptor.  The  holder  did  not  know  it  was  an  accommodation  bill.  Harrison 
V.  Courtauld,  3  Bam.  &  Ad.,  37  (1832).  Held,  that  holder  who  knew  at  the 
time  of  the  agreement,  but  not  when  he  took  the  bill,  that  it  was  accepted  for 
accommodation,  by  releasing  drawer  did  not  discharge  acceptor.  Story  on  Bills, 
§§  253,  268. 

2  Fentum  v.  Pocock,  5  Taunt.,  192;  i  Marsh,  14(1813),  Lord  Mansfield. 


§   1334*  JOINT    PARTIES    AS    SURETIES.  345 

acceptor  (or  other  principal)  materially  affects  the  remedies 
of  the  drawer  (or  other  surety)  who  is  thereby  delayed  or 
entirely  deprived  of  recourse  against  the  acceptor  upon  the 
bill  itself,  to  which  he  would  be  entitled,  and  upon  which 
he  might  sue  the  acceptor  on  mal^ng  payment,  no  such 
injury  can  possibly  be  inflicted  on  the  acceptor  for  accommo- 
dation by  indulgence  to  or  release  of  the  drawer.  The  ac- 
ceptor may,  at  any  time  at  or  after  maturity  of  the  bill,  pay 
it,  and  no  matter  what  may  be  the  arrangements  between 
the  holder  and  the  drawer,  sue  the  latter,  not  upon  the  bill, 
but  for  money  paid  to  his  use.^  But  now  in  courts  of 
equity  in  England,  and  in  courts  of  law  where  equitable 
pleas  are  admissible,  the  opposite  doctrine  prevails,  and  was 
enforced  a  few  years  since  in  a  well-considered  casc.^ 

'See  Mallet  V.  Thompson  supra,  §1333,  notes;  Thomson  on  Bills,  237; 
Story  on  Bills,  §  268. 

«  Ewin  V.  Lancaster,  6  Best  &  S.  Q.  B.,  572  (118  E.  C.  L.  R.),  1865.  Bill  ac- 
cepted for  drawer's  accommodation,  and  agreement  of  compensation  entered  into 
between  holder  and  drawer,  the  holder  knowing  then  that  the  acceptance  was  for 
accommodation.  Crompton,  J. :  "  Originally. the  cases  at  law  were  extremely 
strong  that  the  position  of  parties  to  a  bill  of  exchange  or  promissory  note  could 
not  be  reversed  by  making  the  party  who  appeared  on  the  face  of  the  instrument 
to  be  the  principal  debtor  surety  for  the  other.  They  proceeded  on  the  principle 
that  parol  evidence  is  not  allowed  to  alter  a  written  contract.  Thai  principle  is 
a  sound  one,  and  has  governed  many  cases  in  courts  of  law.  But  cases  in  equity 
establish,  that  when  one  or  both  of  two  parties  to  an  instrument  are  primarily 
liabk,  as  in  the  instance  of  a  common  bond  where  several  join  as  obligors,  and 
the  creditor  may  sue  any  one  of  them  at  any  time,  it  is  competent  for  him  to 
show  that  the  relation  of  principal  and  surety  exists  between  the  parlies.  Lord 
Cottenham,  in  HoUier  v.  Eyre,  9  CI.  &  F.,  I,  45,  referred  to  in  Pooley  v.  Harra- 
dine,  7  E.  &  B.,  431,  435  (90  E.  C.  L.  R.),  explained  that  the  doctrme  on  which 
the  courts  of  equity  proceed  arose  from  its  being  inequital)le  that  the  creditor 
should  prejudice  the  rights  of  the  surety  against  the  principal.  In  Strong  v. 
Foster,  17  C.  B.,  201  (84  E.  C.  L.  R.),  which  was  after  ple.re  on  equitable 
grounds  had  been  introduced,  the  evidence  failed  to  support  the  ecjuitable  de- 
fence, and  it  was  not  necessary  to  pronounce  an  opinion  on  the  validity  of  it.  In 
Pooley  V.  Harradine,  7  E.  &  B.,  431  (90  E.  C.  L.  R.),  this  court  upheld  a  plea 
on  equitable  grounds,  which  stated  that  the  defendant  made  the  note  jointly, 
with  A.  as  surety  only  for  him,  of  which  the  plaintiff  had  notice  at  the  time,  and 
that  the  plaintiff  gave  time  to  A.  without  the  defendant's  knowledge.  That  de- 
cision was  adopted  by  the  Court  of  Exchequer  in  Taylor  v.  Burgess,  5  H.  &  N.,  i, 
and  was  held  to  be  law  by  the  Exchequer  Chamber,  in  Greenough  v.  McClelland, 
2  E.  &  E.,  424,  429  (105  E.  C.  L.  R.)  But  Pooley  v.  Harradine  left  one  matter 
in  doubt,  viz.,  whether  the  creditor  must  have  had  notice  of  the  suretyship  at 
the  time  of  taking  the  notes,  or  whether  notice  at  the  time  of  the  dealing, 
alleged  to  amount  to  a  discharge  of  the  surety,  was  sufficient.  That  case  came 
before  this  court  in  Baily  v.  Edwards,  4  B.  &  S.,  761  (i  16  E.  C.  L.  R.),  which 
is  very  analogous  to  the  present ;    and  the  law  accurately  laid  down  by  my  brother 


346  WHAT   DISCHARGES   A   SURETY.  §   1 335. 

§  1335.  A^nerican  decisio7is. — In  the  United  States  the 
rule  is  generally  sustained  that  the  parties  to  a  bill  or  note 
are  bound  by  the  character  which  they  assume  upon  its 
face,  and  that  they  are  liable  to,  and  may  be  treated  by  the 
holder  according  to  tiieir  ostensible  relations  to  the  instru- 
ment, especially  when  he  had  no  knowledge  that  any  of 
them  were  accommodation  parties  at  the  time  when  he  be- 
came a  holder  for  value. ^  And  the  observation  of  Story 
may  be  quoted  with  approval,  that  "the  strong  tendency  of 
the  more  recent  authorities  is  to  hold  that,  in  all  cases,  the 
holder  has  a  right  to  treat  all  the  parties  to  a  bill  as  liable 
to  him  exactly  to  the  same  extent,  and  in  the  same  manner, 
whether  he  knows  or  not  the  note  to  be  an  accommodation 
note  ;  for,  as  to  him,  all  the  parties  agree  to  hold  themselves 
primarily  or  secondarily  liable,  as  they  stand  on  the  note  ; 
and  that  they  are  not  at  Hberty,  as  to  him,  to  treat  their 
liability  as  at  all  affected  by  any  accommodation  between 
themselves.^ 

§  1335^.  Knowledge  of  creditor  of  party  s  accofrnjioda- 
tion  character. — There  is  strong  authority  for  what  seems 
to  us  the  better  doctrine,  that  even  if  the  holder  knew  at 
the  time  he  received  the  bill  or  note  that  it  was  accepted  or 


Blackburn,  in  that  case,  applies  here.  There  the  plaintiffs,  when  they  executed 
the  deed  by  which  time  was  given,  had  notice  that  the  bill  was  accepted  for  the 
accommodation  of  their  debtor  ;  and  that  is  the  time  to  be  looked  at,  because  it 
is  the  time  when  the  equity  arises.  It  is  clear  that  a  creditor  is  not  bound  to  sue 
either  the  principal  or  the  surety.  No  delay  in  suing  the  surety  will  prejudice 
him,  but  he  must  not  make  a  binding  agreement  by  which  he  ties  up  his  hands 
from  suing  the  principal.  If  he  does  so,  the  surety  is  discharged,  on  the  prin- 
ciple explained  bv  Williams,  J.,  in  Strong  v.  Foster,  17  C.  B.,  201,  219  (84  E.  C. 
L.  R.)  Here  the  plaintiff  made  a  contract  with  the  principal,  upon  good  con- 
sideration, to  give  up  the  bills  to  be  cancelled.  Whether  that  is  a  waiver  of  the 
right  of  action  agamst  the  surety  may  be  doubtful ;  for  a  waiver  can  only  be  to 
the  party  himself  who  relies  upon  it.  But  by  that  contract  the  plaintiff,  for  a 
good  consideration,  tied  up  his  hands  from  suing  the  principal  debtor.  It  may 
be  shown  by  parol  evidence,  that  in  the  transaction  between  the  creditor  and  his 
debtors,  according  to  truth  and  for  the  purposes  of  equity,  one  of  the  debtors 
was  surety  for  the  other ;  and  then  the  creditor  is  within  the  rule  by  which,  if  he 
gives  time  to  the  principal  debtor,  the  surety  is  discharged." 

'  Farmers',  etc..  Bank  v.  Rathbone,  26  Vt.,  19  ;  Gano  v.  Heath,  36  Mich.,  441  ; 
Summerhiil  v.  Tapp,  52  Ala.,  227. 

""  Story  on  Promissory  Notes,  §  418;  see  Story  on  Bills,  §  253  ;  contra,  see 
Edwards  on  Bills,  573. 


5   1336.  JOINT    PARTIES    AS    SURETIES.  347 

made  for  accommodation,  his  rights  and  duties  are  in  no 
respect  altered  ;  and  no  indulgence  to  or  release  of  a  drawer 
or  indorser  will  discharge  the  acceptor  or  maker.*  But  there 
arc  weighty  American  authorities  which  concur  with  the 
English  view,  that  whenever  it  is  known  that  a  party  who 
signs  as  maker  or  acceptor,  is  in  fact  a  party  for  accom- 
modation, he  is  entitled  to  be  regarded  and  treated  as  a 
surety.^  If  the  holder  knew  the  acceptance  was  for  a 
particular  purpose,  which  had  been  accomplished  when  he 
took  the  bill,  he  could  not  recover.^ 

§  1336.  Whether  or  not  it  may  be  shown  by  parol  that  a 
joint  proinisor  was  in  fact  a  surety,  and  kiiown  to  be  such 
by  the  holder. — There  is  no  doubt  that  where  the  relation  of 
suretyship  exists  between  joint  promisors  upon  a  bill  or 

'  Stephens  v.  Monongahela  N.  B.,  88  Penn.  St.,  157  ;  Bank  of  Montgomery  v. 
Walker,  9  S.  &  R.,  229 ;  s.  C,  12  S.  &:  R.,  382.  The  case  of  Fentum  v.  Pocock 
was  approved.  White  v.  Hopkins,  3  W.  &  S.,  loi  ;  Lewis  v.  Hanchman,  2 
Barr,  416;  Murray  v.  Judah,  6  Cow.,  484;  holder  knowing  acceptor  of  check 
was  for  accommodation,  gave  time  to  drawer ;  held  acceptor  not  discharged. 
Copper's  Adm'r  v.  Union  Bank,  7  Har.  &  J.,  92  ;  Yates  v.  Donaldson,  5  Md., 
389;  Lambert  v.  Sandford,  2  Blackf.,  137  ;  Hansborough  v.  Gray,  3  Grat.,  356; 
Claremont  Bank  v.  Wood,  10  Vt.,  182;  2  Robinson's  Practice  (N.  ed.),  241  ; 
Stiles  V.  Eastman,  i  Kelly,  205  ;  Cronise  v.  Kellogg,  20  111.,  13  (1858),  Caton,  J. : 
"  The  wider  the  door  is  opened  to  admit  defences  to  bills  of  exchange,  the  more 
is  their  general  value  impaired,  and  the  more  are  commerce  and  exchange  em- 
barrassed. The  acceptor  of  a  bill  of  exchange  has  always  been  considered  the 
party  primarily  liable  to  pay  it.  He  expressly  agrees  to  pay  it,  whether  he  has  funds 
of  the  drawer  in  his  hands  or  not,  even  though  he  expects  to  be  in  funds  from 
the  drawer.  An  accommodation  acceptor  occupies  precisely  the  same  position 
as  one  who  accepts  with  funds,  as  to  all  persons  who  receive  the  bill  for  value, 
whether  they  know  that  it  was  an  accommodation  acceptance  or  not.  And  it 
is  a  general  maxim,  that  an  acceptor  of  a  bill  of  exchange  can  never  be  dis- 
charged, except  by  payment  or  a  release."  But  see  Parks  v.  Ingram,  2  Fost., 
283  ;  Adle  v.  Metroger,  i  La.  Ann.,  254.  See  on  this  subject,  Story  on  Bills, 
§§  425,  432,  and  435,  where  it  is  said  :  "  There  seems  a  strong  inclination  in  the 
more  recent  authorities  to  the  doctrine,  that  the  rights  of  all  the  parties  to  the 
note  are,  in  respect  to  the  holder  and  his  acts,  governed  by  precisely  the  same 
rule,  whether  the  note  be  one  for  the  accommodation  of  all  the  parties  or  not." 
Also  §  253.  In  2  American  Lead.  Cas.,  435,  it  is  well  said :  "  He  who  makes  a 
note  or  accepts  a  bill  for  the  accommodation  of  another,  virtually  authorizes 
those  who  take  the  instrument  subsequently  to  make  such  terms  or  arrange- 
ments with  the  drawer  or  indorsers,  as  may  be  most  conducive  to  their  mutual 
interests,  and  can  not  revoke  the  authority  thus  given,  to  the  injury  of  others 
who  have  acted  upon  it." 

'  See  the  English  cases  in  §  1334,  and  notes.  Meggett  v.  Baum,  57  Miss.,  22, 
held  that  if  party  knew  acceptance  was  for  accommodation,  extension  of  time 
would  discharge  acceptor.     To  same  effect  Guild  v.  Butler,  127  Mass.,  3S6. 

•  Fletcher  v.  Heath,  7  B.  &  C,  517  ;  Cartwright  v.  Williams,  2  Stark.,  340. 


348  WHAT    DISCHARGES    A    SURETY.  ^    1337- 

note,  their  true  relation  may  be  shown  as  between  them- 
selves;^ but  upon  the  question  whether  or  not  it  may  be 
shown  in  an  action  against  them  by  the  payee,  the  English 
and  American  cases  exhibit  great  contrariety  and  vacilla- 
tion of  opinion.  In  Byles  on  Bills,^  it  is  stated  as  the  re- 
sult of  the  English  authorities  that:  "When  of  a  joint 
and  several  note  one  maker  is  in  reality  principal  and  the 
other  surety,  yet  it  is  no  defence  at  law  that  one  is  princi- 
pal and  the  other  is  surety,  that  this  was  known  to  the 
creditor  at  the  time  of  the  contract,  and  consequently  that 
the  surety  is  discharged  by  time  given  to  the  principal.^ 
But  such  a  defence  is  plainly  available  in  equity,"*  and 
therefore  may  be  the  ground  of  an  equitable  plea,"  the 
equitable  plea  being  allowed  in  England  by  the  statute  of 
17  and  18  Victoria,  c.  125. 

§  1337.  In  the  Court  of  Queen's  Bench,  one  maker  of  a 
note,  who  was  known  to  the  payee  to  be  only  an  accommo- 
dation maker  or  surety  for  the  others,  was  held  to  be  dis- 
charged by  the  payee's  contracting  to  give  time,  and  giving 
it,  to  the  other  makers,  although  on  the  face  of  the  note  he 
was  a  joint  principal ;  the  decision  being  rendered  upon  an 
equitable  plea  allowed  by  the  English  statute,  and  based 
upon  the  ground  that  extraneous  evidence  to  show  that  the 
defendant  was  surety  for  the  other  joint  promisors  did  not 
and  could  not  vary  his  contract ;  but  that  when  it  was  estab- 
lished that  he  was  a  surety,  and  that  the  plaintiff  knew  it 
when  he  took  the  note,  an  equity  was  created  which  entitled 
him  to  insist  on  such  a  course  of  conduct  by  the  plaintiff  as 
would  work  him  no  injury.^     More  recent  decisions  have 


'M'Gee  v.  Prouty,  9  Mete,  547 ;  Harris  v.  Brooks,  21  Pick.,  195. 

"  Byles  (Sliarswood's  ed.)  [*238],  381. 

"  Price  V.  Edmunds,  10  B.  &  C  578  ;  Perfect  v.  Murgrave,  6  Price,  in;  Man- 
ley  V.  Boycot,  2  El.  &  B.,  46;  Rees  v.  Berrington,  2  Ves.,  Jr.,  540. 

*  Hollier  v.  Eyre,  9  C.  &  P.,  45  ;  Davies  v.  Stainbank,  6  DeG.  M.  &  G.,  679 
Pooley  V.  Harradine,  7  El.  &  B.,  431  ;  Greenough  v.  McClelland,  30  L.  J.  O.  B.,  15, 

'Pooley  V.  Harradine,  7  El.  &  BL,  431  ;  40  Eng.  L.  &  Eq.,  96.     In  Manley  v. 
Boycot,  2  El,  &  Bl.,  46  (1853),  an  action  by  the  payee  of  a  joint  and  several  note 


§   133^-  JOINT    PARTIES    AS    SURETIES.  349 

gone  a  step  further,  and  held  that  if  the  creditor  knew  the 
relation  of  suretyship  when  he  granted  the  indulgence,  the 
surety  would  be  discharged.^  This  may  be  regarded  as  the 
law  of  England  on  the  subject ;  but  the  cases  which  have 
held  that  the  holder  has  a  right  to  treat  all  the  parties  to  a 
bill  or  note  as  continually  bound  in  the  character  which 
they  have  assumed  upon  the  instrument,  and  that  by  assum- 
ing such  character  they  consent  and  contract  that  they  may 
be  so  treated  (unless  the  holder  agreed  to  regard  them  as 
sureties),  seem  to  us  to  embody  the  true  principles  which 
should  be  respected  and  followed.^ 

§  1338.  Authorities  i7i  U.  S.  as  to  admissibility  of  parol 
evidence  to  show  that  joint  party  is  siirety. — In  the  United 


against  one  of  the  makers,  the  defendant  pleaded  that  he  was  in  reality  a  surety, 
and  the  court  held  the  plea  bad  because  it  did  not  allege  that  the  note  was  de- 
livered by  the  defendant  to  the  plaintiffs  as  surety,  and  that  they  agreed  so  to 
receive  it  from  him,  Lord  Campbell,  C.  J.,  saying:  "No  parol  evidence  can  be 
received  of  any  agreement  inconsistent  with  what  appears  on  the  face  of  the  in- 
strument, as  that  a  bill  drawn  payable  at  three  months  shall  not  be  payable  till 
the  expiration  of  four  months  ;  but  evidence  may  be  given  by  parol  of  an  agree- 
ment at  the  time  a  bill  is  drawn  and  indorsed  which  is  consistent  with  the  writ- 
ten instrument  ;  as,  for  example,  that  a  bill  is  indorsed  and  handed  over  for  a 
particular  purpose,  without  giving  the  bailee  the  usual  rights  of  indorsee  of  the 
bill.  But  if  the  payee  of  a  joint  and  several  promissory  note,  made  in  the  com- 
mon form  by  two,  may  be  placed  in  the  situation  of  treating  the  one  as  surety 
for  the  other,  this  can  only  be  done  by  his  express  assent  to  do  so  when  the  note 
was  delivered  to  him." 

'  Bailey  v.  Edwards,  4  Best  &  S.  Q.  B.,  761  (1864)  (116  E.  C.  L.  R.);Ewin  v. 
Lancaster,  6  Best  &  S.  Q.  B.,  572  (1865)  (i  18  E.  C.  L.  R.) ;  see  ante,  p.  345,  note 
2.  In  Swire  v.  Redman,  i  O.  B.  Uiv.,  536  (1876),  Cockburn,  C.  J.,  speakmg  of 
the  doctrine  that  any  act  which  impairs  the  rights  of  the  surety  discharges  him, 
says:  "As  it  depends  on  the  supposed  inequity  of  interfering  with  the  rights 
which  the  suretv  has  as  between  him  and  the  principal  debtor,  it  is  not  material 
that  the  knowledge  on  the  part  of  the  creditor  that  the  surety  was  from  the  be- 
ginning, such  was  not  acquired  till  after  the  surety  had  become  liable  to  the 
creditor." 

"In  Strong  v.  Foster,  17  Com.  B.  (8  J.  Scott),  204  (84  E.  C.  L.  R.)  (1855), 
Willes,  J.,  said :  "  You  can  not  show,  by  parol  evidence,  that  the  contract  of  a 
partv  to  the  bill  or  note  was  intended  at  the  time  it  was  made,  to  be  other  than 
that'which  is  apparent  on  the  face  of  the  instrument  itself.  ....  A  person  who 
signs  a  note  as  a  principal  debtor  must,  in  proceedings  upon  the  note,  undergo 
all  the  liabilities  of  a  principal  debtor,  although  as  between  himself  and  the  party 
at  whose  instance  he  signs  it,  he  is  in  fact  a  surety  only,  and  that  fact  was  known 
to  the  creditor  at  the  time  the  note  was  handed  over."  And  after  commentmg 
on  the  cases,  he  adds  :  "  The  result  seems  to  be  that  here,  if  evidence  is  admissi- 
ble to  show  that  the  defendant  signed  the  note  as  surety,  it  must  also  be  shown 
that  the  bankers  agreed  to  accept  him  as  such;  and  consequently  that  in  the 
present  case,  where  there  was  no  such  evidence,  the  defendant  is  not  entitled  to 
be  treated  as  a  surety,  and  the  defence  does  not  arise." 


350  WHAT    DISCHARGES   A   SURETY.  §   1 338 

States,  we  think,  the  weight  of  authority  is  in  favor  of 
allowing  evidence  to  show  that  one  of  the  joint  promisors 
signed  as  surety,  and  that  this  was  known  to  the  payee  or 
indorsee  when  he  took  the  instrument/  And  there  are 
cases  which  hold  that  if  he  knew  the  fact  that  one  of  the 
promisors  was  surety  at  the  time  when  he  granted  indul- 
gence to  the  other,  it  will  be  equally  as  effectual  as  a  dis- 
charge of  the  surety  promisor.^  But  the  authorities  are  by 
no  means  harmonious  ;  and  in  the  midst  of  conflicting 
opinions  we  strongly  incline  to  concur  with  those  which 
look  only  to  the  face  of  the  instrument  to  ascertain  the 
rights  and  liabilities  of  all  the  parties.  If  a  party  intends 
to  insist  on  a  surety's  rights,  he  should  sign  the  instrument 
in  a  form  which  will  carry  notice  of  the  fact  to  those  deal-, 
inof  with  it.^  And  if  the  holder  treats  him  in  a  manner 
consistent  with  his  ostensible  relation  to  the  paper,  it  tends 
to  disappoint  his  reasonable  and  just  expectations  to  per- 
mit such  party  to  set  up  defences  based  upon  extraneous 

'■  Rose  V.  Williams,  5  Kans.,  489  (1870)  ;  Perry  v.  Hadnett,  38  Ga.,  104 ;  Hub- 
bard V.  Gurney,  64  N.  Y.,  460  ;  Harmon  v.  Hale,  I  Wash.  Ten,  423  ;  Grafton  Bank 
V.  Kent,  4  N.  H.,  221  ;  Garrett  v.  Ferguson,  9  Mo.,  125  ;  Stillwell  v.  Aaron,  69 
Mo..  539;  Irvine  v.  Adams,  48  Wis.,  468;  Barron  v.  Cady,  40  Mich.,  259;  i 
Parsons  N.  &  B.,  233,  234,  note  e. 

"^  Wheat  V.  Kendall,  6  N.  H.,  504,  Parker,  J.,  saying :  "  The  injury  to  the 
surety  is  the  same  as  if  the  creditor  had  possessed  the  knowledge  at  the  time 
the  note  was  taken."  Branch  Bank  v.  James,  9  Ala.,  949  ;  but  the  party  might 
show  that  the  defendant  undertook  to  deal  as  principal  and  not  as  surety.  In  i 
Parsons  N.  &  B.,  233,  it  is  said  :  "  On  the  question  whether  parol  evidence  is  admis- 
sible to  show  that  one  who  signed  a  note  as  a  joint  or  joint  and  several  maker 
was  only  a  surety  for  his  comaker,  in  an  action  by  the  holder  against  such 
surety,  the  authorities  are  conflicting  and  uncertain.  It  seems  to  be  settled  that 
where  the  fact  was  not  known  to  the  holder  previous  to  the  maturity  of  the  note, 
such  evidence  is  inadmissible  ;  but  where  this  relation  was  known  to  the  holder 
at  the  time  of  entering  into  the  contract,  the  evidence  is  admissible  in  equity. 
But,  at  law,  it  is  urged,  on  the  one  hand,  that  this  is  an  attempt  to  vary  the  con- 
tract ;  that  the  parties,  having  called  themselves  joint  or  joint  and  several  prom- 
isors in  the  contract,  can  not  assume  a  different  relation  or  character  by  extra- 
neous evidence.  On  the  other  hand,  it  is  contended  that  the  note  does  not  ex- 
press the  whole  contract,  since  it  depends  materially  upon  delivery,  and  the 
purposes  for  which  delivery  is  made  ;  that  the  terms  of  the  note  only  offer  a 
presumption  of  the  relation  in  which  the  parties  stand  to  each  other  ;  that  this 
is  a  mere  collateral  fact  which  can  be  proved,  and  the  presumption  rebutted  by 
parol  evidence.  We  consider  the  weight  of  authority  and  principle  is  in  favor  of 
the  admission  of  such  evidence." 

'Claremont  Bank  v.  Wood,   10  Vt.,  582;  Dunham  v.  Donner,  31  Vt.,  249 
Benedict  v.  Cox,  52  Vt.,  250,  as  to  form  of  action. 


§  1339'  surety's  remedies.  351 

circumstances.^  It  will  be  seen  that  some  of  the  cases, 
both  in  England  and  America,  take  the  view  that  it  may 
be  shown  that  the  payee  agreed  to  regard  the  copromisor 
as  surety,  and  that  nothing  short  of  such  an  agreement  will 
justify  his  claiming  a  surety's  privileges  in  any  respect. 
This  intermediate  ground  has  much  to  commend  it  ;  and  if 
any  departure  is  made  from  the  face  of  the  instrument,  it 
seems  to  be  far  more  equitable  and  just  than  those  which 
make  mere  knowledge  of  the  suretyship  the  criterion.^ 

§  1338^;.  In  New  York,  where  a  joint  and  several  note 
was  signed  by  three  persons  as  makers,  the  last  adding  the 
word  "  surety  "  to  his  signature,  it  was  held  that  the  pre- 
sumption was  that  he  signed  as  surety  for  the  other  two, 
but  that  it  might  be  shown  that  he  was  surety  for  only  one, 
and  that  the  other  signer  was  also  surety.^ 


SECTION  V. 

surety's  remedies. 

§  1339-  ^^^^  have  already  seen  that  mere  passivity  of  a 
creditor  does  not  discharge  the  surety.  Even  when  the 
delay  of  the  creditor  and  the  subsequent  insolvency  of  the 
principal  deprive  the  surety  of  all  means  of  reimbursement, 
he  must  still  submit  to  it;"*  for  the  duty  of  performance 
rests  upon  those  who  make  contracts.     And,  in  the  absence 

'  Benjamin  v.  Arnold,  9  N.  Y.  S.  C.  (2  Hun),  447  (1874).  In  this  case  payee 
of  a  joint  and  several  note  sued  the  four  signers.  Three  of  the  defendants 
offered  to  prove  that  they  signed  as  sureties  only  for  the  accommodation  of  the 
fourth,  which  fact  was  known  to  the  plaintiff  at  the  time  she  took  the  note,  and 
that  after  its  maturity,  she,  without  their  consent,  extended  the  time  of  pay- 
ment. Held,  that  the  evidence  was  inadmissible.  To  same  effect,  see  Camp- 
bell V.  Tate,  7  Lans.,  370.  But  these  cases  in  New  York  are  now  overruled  in 
Hubbard  v.  Gurney,  64  N.  Y.,  460. 

"  See  cases  supra,  '  Sayles  v.  Sims,  73  N.  Y.,  552  ;  see  ante,  1332. 

■*  Alcock  V.  Hill,  4  Leigh,  622  ;  U.  S.  v.  Simpson,  2  Penn.,  427  ;  Carr  v.  How- 
ard, 8  Blackf,  199;  Adams  Bank  v.  Anthony,  18  Pick.,  238. 


352  WHAT   DISCHARGES   A    SURETY.  §  1339' 

of  Statutory  provision,  the  surety  can  not  by  notice  or  re- 
quest compel  the  creditor  to  commence  a  suit  against  his 
principal  debtor.^  The  surety  has  his  own  efficient  and  ap- 
propriate remedies  :  (i)  He  may  pay  the  debt  and  institute 
an  action  for  money  paid  to  his  use,  against  the  principal, 
and  recover  it  back.^  In  some  States,  as  in  Virginia,  he 
may  recover  it  back  by  motion.  Or  (2)  he  may  file  a  bill 
in  chancery  against  the  principal  to  compel  him  to  make 
payment  to  the  creditor.^  Or  (3)  the  surety  may  file  a  bill 
in  chancery  to  compel  the  creditor  to  bring  his  action 
against  the  principal,  upon  being  indemnified  against  the 
consequences  of  risk,  delay,  and  expense.*  And  (4)  if  he 
pays  the  debt,  and  then  be  a  cosurety,  he  may  file  a  bill 
against  him  for  contribution.  These  are  the  principles 
which  apply  to  ordinary  sureties.  While  an  accommoda- 
tion indorser  may  be  regarded  as  a  surety  in  some  cases, 
and  under  some  circumstances,  and  has  all  the  rights  at- 
taching to  that  relationship,  yet  as  between  him  and  a  bona 
fide  holder  of  the  paper,  where  his  liability  has  become 
fixed,  he  becomes  a  principal  debtor ;  and  he  can  not  com- 
pel the  holder  to  sue  the  maker,  or  to  enforce  a  security  he 
possesses.     If  he  desires  the  benefit  of  any  security  held  by 


'  Croughton  v.  Duvall,  3  Call.  73  :  Humphrey  v.  Hitt,  6  Grat.,  509  ;  5  Rob. 
Prac  (N  ed.),  781  ;  i  Parsons  N.  &  B.,  237  ;  2  Id.,  243,  note.  In  Pain  v.  Pack- 
ard 13  Johns,  174,  it  was  held  that  neglect  to  sue  the  solvent  principal  by  the 
holder,  at  the  request  of  the  surety,  and  the  subsequent  insolvency  and  abscond- 
ing- of  the  principal,  discharged  the  surety.  This  doctrine  was  denied  by  Chan- 
cellor Kent,  in  King  v.  Baldwin,  2  Johns  Ch.,  554  ;  but  was  reaffirmed  by  the 
Court  of  Errors,  in  the  same  case,  reported  in  17  Johns,  384.  The  courts  of  New 
York  follow  this  latter  decision,  but  within  strict  limits.  The  opinion  of  Chan- 
cellor Kent  is  now  admitted  to  be  the  sounder  view  (see  2  Am.  Lead.  Cas.,  339)  ; 
and  in  Herrick  v.  Borst,  4  Hill,  450,  Cowen,  J.,  said  of  the  doctrine  of  Pain  v. 
Packard,  that  it  "  came  into  this  court  without  precedent,  was  afterward  repu- 
diated even  by  the  Court  of  Chancery,  as  it  has  always  been  held  at  law  and  in 
equity  in  England,  but  was  restored  on  a  tie  by  the  casting  vote  of  a  layman. 
But  even  in  New  York  (as  we  have  already  seen  in  section  i,  ante),  the  indorser, 
while  regarded  in  the  nature  of  a  surety,  is  not  a  surety  in  the  sense  of  the  cases 
above  quoted,  who  has  a  right  to  require  the  creditor  to  sue  the  maker.  Beards- 
ley  V,  Warner,  6  Wend.,  613  ;  Trimble  v.  Thorn,  16  Johns,  152. 

^  Humphrey  v.  Hitt,  6  Grat.,  524  ;  Story  on  Notes,  §  419. 

'  Humphrey  v.  Hitt,  6  Grat.,  524. 

*  Humphrey  v.  Hitt,  6  Grat.,  524  ;  King  v.  Baldwin,  17  Johns,  324. 


^  1 341.  surety's  remedies.  353 

the  creditor  he  must  pay  the  debt  and  claim  the  right  of 
subrogation  to  his  position.^ 

§  1340.  As  to  contribution. — An  indorser  is  a  surety  to 
the  holder  for  all  parties  liable  prior  to  him,  and  each  one 
of  them  (except  acceptor)  is  a  surety  to  him.  But  indors- 
ers  are  not  cosureties  (unless  their  indorsement  is  joint), 
but  are  severally  and  successively  liable.''^  Where  the  sure- 
ties are  not  as  between  themselves  principal  and  surety  (as 
are  prior  and  subsequent  indorsers),  but  are  merely  cosure- 
ties, as  are  two  or  more  joint,  or  joint  and  several,  makers 
of  a  note,  if  one  be  required  to  pay  the  whole  debt,  the 
others  are  bound  to  contribute  in  equal  proportions,  and 
the  cosurety  may  recover  of  the  others  their  aliquot  shares.^ 
And  this  right  of  contribution  arises  though  the  same  debt 
be  secured  by  different  instruments,  executed  by  different 
sureties  ;  and  though  one  portion  of  the  debt  be  secured 
by  one  instrument,  and  one  portion  by  another ;  ^  and  ev^en 
though  the  surety  demanding  contribution  did  not  at  the 
time  of  the  contract  know  that  he  had  any  cosureties.^ 

§  1 34 1.  The  cosurety,  in  order  to  sustain  his  suit  for  con- 
tribution, must  have  made  payment  under  a  legal  and  fixed 
obligation,^  but  not  necessarily  under  compulsion  of  suit  or 
legal  process."^  The  right  to  contribution  arises  out  of  an 
implied  promise  amongst  cosureties  to  share  equally  the 
burdens  of  cosurctyship,^  and  therefore  does  not  exist  where 
there  is  an  express  understanding  to  the  contrary. 

The  right  of  a  cosurety  to  contribution  is  not  prejudiced 

'  Ross  V.  Jones,  22  Wallace,  576.  In  re.  Babcock,  3  Story,  C.  C,  393  ;  First 
National  Bank  v.  Wood,  71  N.  Y.,  411. 

^  See  ante,  §  703,  vol.  i  ;  M'Neilly  v.  Patchin,  23  Mo.   40. 

'  Byles  on  Bills  (Sharswood's  ed.),  P247],  392  ;  2  Parsons  N.  &  B,  253  ;  Davis 
V.  Emerson,  17  Me.,  64;  Fletcher  v.  Jackson,  23  Vt.,  581  ;  Pitt  v.  Purssord,  8 
M.  &  W.,  538  ;  Frevert  v.  Henry,  14  Nev.,  191. 

^  Deering-  v.  Earl  of  Winchelsea,  2  Bos.  &  P.,  270 ;  Mayhew  v.  Crickett,  2 
Swanst.,  184. 

'  Craythorn  v.  Swinburne,  14  Ves.,  169. 

'  Pitt  V.  Purssord,  8  M.  &  W.,  538  ;  Davies  v.  Humphreys,  6  Id.,  153. 

'2  Parsons  N.  &  B.,  253.  '  Kemp  v.  Finden,  12  M.  &  W.,  521. 

Vol.  II. — 2-1 


354  WHAT    DISCHARGES    A    SURETY.  ^   1.342. 

by  his  possessing  a  security  against  the  principal,  which  the 
defendant  neither  has  nor  knows  anything  about. ^ 

§  1342.  Extent  of  surety  s  recovery, — A  surety  who  pays 
a  bill  or  note,  or  other  obligation  of  his  principal,  is  en- 
titled to  indemnity  from  him,  and  may  recover  back  the 
amount  with  legal  interest  thereon.^  But  the  Hmit  of  the 
surety's  recovery  is  simply  the  amount  necessary  to  indem- 
nify him,  and  therefore,  even  though  he  take  an  assign- 
ment of  the  creditor's  claim,  he  can  not  recover  the  amount 
that  the  creditor  was  entitled  to  receive,  but  only  the 
amount  which  he  paid.^  If  he  compromises  the  debt,  he 
can  only  recover  back  the  amount  accepted  by  the  creditor 
in  compromise  of  it;*  and  if  he  pays  in  a  depreciated  cur- 
rency, he  can  not  recover  a  dollar  in  legal  tender  for  every* 
dollar  of  such  currency,  but  only  the  value  of  the  currency 
paid.^ 

It  has,  however,  been  held  in  Massachusetts,  that  where 
an  accommodation  indorser,  who  is  the  payee  of  a  note 
which  had  been  negotiated  by  the  maker  for  the  full 
amount,  took  it  up,  paying  only  half  of  the  sum,  he  could 
sue  the  maker  as  payee,  and  recover  the  full  amount  there- 
of.^ In  Virginia  the  accommodation  indorser  who  makes 
payment  has  (and,  as  we  think,  justly)  been  held  to  stand 
on  no  higher  footing  than  any  other  surety,  and  there  he 
can  only  recover  the  amount  paid  by  him.''' 

§  1343.  Subrogation  to  principaFs  rights. — The  surety 


*Done  V.  Walley,  2  Exch.,  198. 

*Blow  V.  Maynard,  2  Leigh,  54;  Kendrick  v.  Forney,  22  Grat.,  750;  Pace  v. 
Robertson,  65  N.  C,  550;  Barnett  v.  Cecil,  21  Grat.,  95  ;  Burton  v.  Slaughter, 
26  Grat.,  920. 

^  Blow  V.  Maynard,  2  Leigh,  54. 

*Blovv  V.  Maynard,  2  Leigh,  54;  Kendrick  v.  Forney,  22  Grat.,  753  ;  ex  parte 
Rushforth,  10  Ves.,  409,  420 ;  Butcher  v.  Churchill,  14  Ves.,  567  ;  Read  v. 
Norris5  14  Cond.,  E.  C.  R.,  362,  375. 

''Kendrick  v.  Forney,  22  Grat.,  748 ;  Pace  v.  Robertson,  65  N.  C,  550. 

'Fowler  v.  Strickland,   107   Mass.,  552;  contra,  Vs^cq  v.  Robertson,  65  N 

C,  550- 

'Burton  v.  Slaughter,  26  Grat.,  920;  Barnett  v.  Cecil,  21  Grat.,  95. 


§  1343-  surety's  remedies.  355 

making  payment  is  subrogated  to  all  the  rights  of  the 
holder,  and  to  the  enjoyment  of  all  the  securities  which  his 
principal  was  entitled  to  for  the  payment  of  the  debt,  being 
substituted  into  his  place  when  he  pays  the  debt  for  him  ;  ^ 
and  where  the  maker  of  a  note  executes  a  mortgage  to  se- 
cure an  indorsee,  the  payee  of  the  note,  on  making  pay- 
ment, becomes  entitled  to  the  benefit  of  the  mortgage.^ 

*  See  ante,  §  1312  ;  Babcock  v.  Blanchard,  86  111.,  165  (guarantor). 

*  O'Hara  v.  Haas,  46  Miss.,  374. 


CHAPTER  XLII. 

THE    FORGERY    OF    NEGOTIABLE    INSTRUMENTS. 


.      SECTION  I. 

THE   DEFINITION   AND   NATURE   OF   FORGERY. 

§  1344.  Forgery  is  the  cou7iterfeit  iiiaking  or  altering  of 
any  writing  with  intent  to  defraud} — The  most  usual 
species  of  forgery  is  fraudulently  writing  the  name  of  an 
existing  person  ;  but  where  one  is  in  possession  of  a  paper 
containing  a  genuine  signature,  and  fraudulently  fills  it  up 
so  as  to  make  it  appear  to  be  signed  as  maker,^  or  indorser,^ 
or  other  party  to  bill  or  note,*  it  is  as  much  a  forgery  as  if 
the  signature  itself  had  been  forged.  So  where  one  has  au- 
thority to  fill  up  a  bill  or  note  in  blank,  with  a  particular 
sum,  and  he  fraudulently  inserts  a  larger  sum,  it  is  as 
much  a  forgery  as  if  he  had  acted  without  any  authority 
at  all.^ 

§  1345.  Illustrations  of  forgery. — Passing  a  note  signed 
by  one  person  in  his  own  name,  as  the  note  of  another  per- 
son of  the  same  name,  if  done  with  intent  to  defraud,  is  a 
forgery  ;  ^  and  so  appending  to  one's  own  name  a  false  ad- 
dition of  description,  as  by  residence  or  occupation,  of 
another  person  of  the  same  name  ; '  or  indorsing  a  note  by 

'Byles  on  Bills  (Sharswood's  ed.),  [*3i7].  483. 

^  Rex  V.  Hales,  17  St.  Trials,  161.  '  Ibid. 

*  Powell  V.  Commonwealth,  1 1  Grat.,  822. 

'  Regina  v.  Wilson,  17  L.  J.  M.  C,  82  ;  Rex  v.  Hart,  7  C.  &  P.,  652. 
'Rex  V.  Parke,  2  Leach  Cr.  L.,  614. 

^  Rex  V.  Webb,  Russ.  &  R.   C.  C,  72;  Rex  v.  Parke,  -2,  Leach,  775  ;  Rex  V 
Rogers,  8  Car.  &  P.,  629. 
(356) 


^   1346.  DEFINITION  AND  NATURE  OF  FORGERY.  357 

another  person  of  the  same  name  with  the  real  payee,  or 
special  indorser.^  So,  one  who,  with  intent  fraudulently 
to  utter  a  promissory  note  as  a  note  of  a  person  other  than 
the  signer,  procures  to  it  the  signature  of  an  innocent  party 
who  does  not  thereby  with  intent  to  bind  himself,  is  guilty 
of  forgery.^  But  where  a  person  falsely  represents  himself 
to  be  the  indorser  of  a  bill,  but  writes  nothing  falsely  him- 
self, if  there  be  a  real  person  who  did  indorse  the  bill  in  his 
own  proper  name,  the  offence  will  not  be  forgery,  but  ob- 
taining goods  or  money  upon  false  pretences,^  And  so  as 
to  any  other  genuine  signature,  though  it  be  passed  for 
another ;  yet  if  there  be  nothing  upon  the  bill  or  note  to 
apply  it  to  that  person,  it  is  not  a  forgery.* 

Where  a  party  habitually  uses  an  assumed  name,  the 
signing  of  it  is  not  a  forgery  ;  but  if  a  party  assumes  a 
name  for  the  purpose  of  fraud,  a  bill  or  note  under  the  as- 
sumed signature  will  be  a  forgery. 

The  signature  of  a  fictitious  name  or  firm,  if  made  with 
intent  to  defraud,  constitutes  forgery.^  Thus  uttering  a 
forged  order  for  the  payment  of  money,  signed  "  Rt. 
Venest,"  there  being  no  such  person  in  existence,  is  a  for- 
gery.^ So  indorsing  a  bill  in  the  fictitious  name  of  "  John 
Williams."^ 

§  1346.  A  mere  inforinality  in  the  language  of  a  bill  or 
note,  such  as  the  omission  of  a  word,  or  a  misspelling,  or 
other  grammatical  error,  as  where  "pounds"  was  omitted;^ 
or  "pound"  was  used  for  "pounds";^  or  "I  promised  "for 
"I  promise,"^"  does  not  impair  its  validity;  and,  therefore, 


^Mead  v.  Young,  4T.  R.,  28. 

''Commonwealth  v.  Foster,  114  Mass.,  311. 

'  Hevey's  Case,  i  Leach,  229;  Chitty  on  Bills  [*78o]. 

*  Chitty  on  Bills  [*78o]. 

'Chitty  on  Bills  [^782]  ;  Commonwealth  v.  Chandler,  Thatcher  Crim.   Cas.. 
187  ;  State  v.  Givens,  5  Ala.,  747. 
•Lockett's  Case,  i  Leach,  94.  '  Taft's  Case,  i  Leach,  172. 

*  Chisholm's  Case,  Russ.  &  R.,  297.  •  Rex  v.  Post,  Russ.  &  R.,  loi. 
"Perkins  v.  Commonwealth,  6  Grat.,  651. 


358  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §   1 347 

the  making  or  altering  of  such  an  instrument  is  a  forgery, 
But  if  a  paper  were  made  or  altered  in  such  a  way  as  to 
be  upon  its  face  void,  or  fatally  defective  in  law,  it  would 

seem  to  be  otherwise.^    Thus  a  bill  drawn  payable  to  " ■ 

or  order,"  and  signed  with  a  forged  signature,  is  not  a 
forgery,  because  without  a  payee,  and  therefore  a  mere 
nullity.^  But  if  payable  to  bearer  it  would  be  different.^ 
A  note  without  a  signature  is  the  same  as  a  mere  blank, 
and  can  not  be  deemed  a  forgery.^  But  the  total  absence 
of  any  stamp,  or  defect  in  the  proper  stamp,  will  not  pre- 
vent the  instrument  from  being  a  forgery.^ 

§  1347.  Alteration  is  forgery. — The  alteration  of  a  com- 
pleted instrument,  by  a  material  change  in  its  terms,  with 
intent  to  defraud,  is  as  plain  a  forgery  as  the  making  of  it 
altogether  ;  for  it  fraudulently  assumes  to  bind  the  parties 
to  a  contract  to  which  their  consent  is  wanting.®  Thus, 
where  a  clerk  broke  the  seal  of  a  letter,  and  altered  a  check 
which  it  contained  to  a  larger  amount,  it  was  deemed  a 
forgery ;  ''■  and  so  any  fraudulent  material  change  in  the 
terms  of  the  paper,  whether  in  amount,^. place  of  payment,^ 
or  time  of  payment.^^ 

§  1348.  What  frazid  is  not  forgejy. — The  making  of  the 
bill  or  note  must  be  counterfeit  and  false  in  order  to  amount 
to  a  forgery,  and  if  real,  though  fraudulently  procured,  it 
will  be  a  fraud,  but  not  a  forgery.     Thus,  where  a  person 


*  See  Clarke  v.  State,  8  Ohio  St.,  630;  State  v.  Humphreys,  10  Humph.,  442 ; 
Rex.  V.  Burke,  Russ.  &  R.,  496  ;  Wall's  Case,  2  East.  P.  C,  953  (a  will)  ;  Chitty 
on  Bills  [*774]. 

*  Rex  V.  Richards,  Russ.  «&  R.  C.  C,  193. 
3  People  V.  Brigham,  2  Mich.,  550. 

*  Rex  V.  Pateman,  Russ.  &  R.  C.  C,  496  ;  Regina  v.  Keith,  29  Eng.  L.  &  Eq., 
558. 

^  Rex  V.  Reculist,  2  Leach,  703  ;  Rex  v.  Hall,  3  Stark.,  67  ;  Chitty  on  Bills 
[*779]. 

*Wheelock  v.  Freeman,  13  Pick.,  165  ;  see  §  1373  et  seq. 

'  Belknap  v.  National  Bank,  100  Mass.,  379. 

« Rex  V.  Post,  Russ.  &  Ry.,  loi.  '  Rex  v.  Treble,  2  Taunt.,  328. 

"  Rex  V.  Atkinson,  7  Car.  &  P.,  669. 


§    1350.  DEFINITION  AND  NATURE  OF  FORGERY.  359 

writes  a  note  for  a  certain  sum,  and  procures  another  to 
sign  it  as  maker,  under  the  false  representation  that  it  is  for 
a  smaller  sum,  it  is  not  a  forgery.^ 

§  1 349.  TJie  intent  to  dcfraitd  is  essetitial  to  constitute 
forgery  ;  and  although  a  bill  or  note  will  not  be  binding 
upon  those  whom  it  purports  to  bind  if  their  names  have 
been  signed  to  it,  or  it  has  been  altered  without  authority, 
the  party  who  has  ignorantly  or  innocently  executed  or 
altered  it  under  a  supposed  authority,  will  not  be  deemed 
guilty  of  a  forgery.^  Nor  will  the  mere  imitation  of  another's 
writing,  the  assumption  of  a  name,  or  the  alteration  of  a 
written  instrument,  where  no  person  can  be  injured  thereby, 
amount  to  forgery.^ 

§  1350.  Utterijig  instrtime7tt  essential  to  forgery. — The 
delivery  of  a  bill  or  note,  or  other  written  contract,  is  neces- 
sary to  its  validity  ;  and  so  the  "  uttering,"  which  is  the 
term  used  to  describe  the  delivery  by  a  forger  or  counter- 
feiter to  some  person  of  the  forged  instrument,  is  necessary 
in  order  to  complete  the  crime  of  forgery.  Giving  the  bill 
or  note  to  a  confederate  to  utter  is  an  uttering  thereof.* 
But  merely  displaying  forged  instruments  with  fraudulent 
intent,  or  handing  them  ov^er  to  another  without  designing 
to  pass  them  off,  is  not.^  If  the  note  be  payable  to  the 
forger's  order,  his  transfer  of  it  without  indorsement  is  an 
uttering  thereof.^  When  forgery  of  a  signature  is  alleged, 
it  will  not  be  competent  to  prove  that  the  party  charged  to 
be  guilty  has  committed  a  forgery  of  a  similar  character, 
and  absconded  on  that  account.''' 


'  Commonwealth  v.  Sankejf,  22  Penn.  St.,  390 ;  People  v.  Getchell,  6  Mich., 

496  ;  Regina  v.  Coulsen,  i  Eng.  L.  &  Eq.,  550  ;  i  Parsons  N.  &  B.,  586,  note  x. 

"  Roscoe's  Crim.  Evidence,  505.  '  Chitty  on  Bills  (13  Am.  ed.)  P785]. 

*  Rex  V.  Palmer,  Riiss.  &  R.  C.  C,  72.         ^  Rex  v.  Shukard,  Russ.  &  R.,  200, 

•  Rex  V.  Beckett,  Russ.  &  R.,  86 ;  Rex  v.  Post,  Russ.  &  R.,  loi. 
'  Balcetti  v.  Ser^m"   p^n'"-    ' '  - 


360  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §   1 35 1. 


SECTION     II. 

LIABILITY    OF    PARTY  WHO    ADOPTS    A    FORGED   SIGNATURE    AS 

HIS   OWN. 

§  135 1.  When  a  person's  signature  is  forged  as  maker, 
acceptor,  drawer,  or  indorser,  it  is,  as  a  general  rule,  a  mere 
nullity  as  to  him.  And  ordinarily  such  person  may  deny 
the  genuineness  of  his  signature,  or  show  that,  although  the 
signature  be  genuine,  the  writing  attached  to  it  has  been 
materially  altered  ;  in  which  cases  he  would  not  be  bound. 
But  if  the  person  whose  signature  has  been  forged  pro- 
nounces it  genuine,  or  the  instrument  valid,  the  question 
arises  whether  or  not  such  declaration  renders  him  liable  as 
if  he  were  a  party  to  a  genuine  instrument  ;  and  a  variety 
of  circumstances  affect  its  just  solution. 

In  the  fii'st  place,  when  third  parties  buy  the  paper  on 
his  assurances  or  representations  of  the  genuineness  of 
his  signature,  or  of  the  validity  of  the  instrument,  or  are 
induced  to  act  upon  such  assurances  or  representations,  and 
would  suffer  loss  if  he  were  permitted  to  set  up  forgery  as 
a  defence,  it  is  quite  clear  upon  principles  of  estoppel  that 
such  defence  can  not  be  made.^  If  he  tells  the  holder  of 
the  paper  to  "  hold  on  "  and  that  "  he  will  pay  him,"  there- 
by inducing  delay,  during  which  other  parties  to  the  paper 
become  insolvent  and  abscond,  these  principles  would  ap- 
ply ;^  and  so  if,  confiding  in  the  admission  of  genuineness, 
the  holder  loses  an  opportunity  of  obtaining  security  or  at- 
taching property  and  sustains  injury  thereby.-'^ 


'  Workman  v.  Wright,  33  Ohio  St.,  405  ;  s.  C.  31  Am.  Rep.,  546  ;  Woodruft 
V.  Munroe,  33  Md.,  158;  Casco  Bank  v.  Keene,  53  Me.,  104;  Greenfield  Bank 
V.  Crafts,  4  Allen,  447  ;  Dow  v.  Sperry,  29  Mo.,  390  ;  Crout  v.  De  Wolf,  i  R.  I., 
393;  Beeman  v.  Duck,  11  M.  &  W.,'251  ;  Leach  v.  Buchanan,  4  Esp.,  226; 
Rudd  V.  Mathews,  S,  C.  of  Ky.,  Oct,  1881,  reported  in  Central  L.  J.,  Nov.  18, 
188 1,  p.  387 ;  37  Am.  Rep.,  704  ;  see  ante,  §  859. 

^  Hefner  v.  Dawson,  63  111.,  403.  '  Casco  Bank  v.  Keene,  53  Me.,  103 


§  1352-    LIABILITY  FOR  ADOPTING  A  FORGED  SIGNATURE.      36 1 

§  1352.  Second:  Acknowledgment  of  genuineness  or 
validity  by  mistake. — When  no  principle  of  estoppel 
applies,  and  when  through  mistake  a  party  states  that  his 
signature  is  genuine,  and  aftenvard  discovering  his  error 
speedily  corrects  it — that  is  to  say,  before  the  holder  has 
changed  his  relations  to  the  paper,  or  any  one  has  dealt 
with  it  upon  the  faith  of  his  admissions,  we  know  of  no  prin- 
ciple of  law  which  prevents  the  forgery  from  being  pleaded.^ 
No  innocent  person  can  suffer,  and  simple  justice  is  done 
the  party  whose  name  has  been  forged  by  allowing  him 
under  such  circumstances  to  prove  the  truth  of  the  case. 
But  as  mere  matter  of  testimony,  a  prior  admission  of  the 
genuineness  of  a  signature  would  weigh  heavily ;  and  a  sub- 
sequent denial,  as  it  seems  to  us,  should  be  supported  by 
very  satisfactory  explanations  in  order  to  overcom.e  it. 

§  1352^.  Third:  Deliberate  adoption  of  forged  sigjia- 
ture. — Where  the  party  knowing  his  signature  to  be  a 
forgery  deliberately  adopts  it  as  his  own,  a  more  difficult 
question  arises,  a  question  which  has  divided  the  courts, 
and  upon  which  the  decisions  are  in  conflict.  There  are 
authorities,  both  English  and  American,  which  hold  that  the 
party  under  such  circumstances  is  bound.  Where  the 
holder  of  a  bill  in  an  English  case  went  to  a  father  whose 
son  had  signed  his  name  and  said:  "We  shall  proceed 
against  your  son;  is  this  your  acceptance?"  and  the 
father  said,  "  It  is,"  he  was  held  liable,  being  regarded  as 
estopped  to  deny  it.'^  In  New  York,  where  the  name  of  a 
person  had  been  forged  as  joint  maker  of  a  note,  and  after 
delivery  he  told  the  payee  of  a  note  it  was  all  right  he  was 
bound,  and  Mullen,  P.  J.,  said  :  "  I  can  not  perceive  any 
reason  why  a  person  whose  name  has  been  forged  may  not 
adopt  and  afhrm  the  signature  as  his  own  act,  and  thereby 
subject  himself  to  whatever  civil  liability  may  follow  from 

'  Woodruff  V.  Munroe,  33  Md„  158. 

«  Ashpitel  V.  Bryan,  3  B.  &  S.,  492  ;  32  L.  J.,  91,  Q.  B.  ;  7  L.  R.  T.  (N.  S.) 
706. 


o 


62  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.         §    1352^. 


it."  ^  In  Massachusetts  the  ruling  has  been  to  the  same 
effect,  the  court  declaring  that  such  admissions  or  declara- 
tions are  acts  of  ratification,  that  such  ratification  is  binding 
though  there  had  been  no  pretence  of  agency,  and  that  no 
principle  of  public  policy  applies  to  forbid  it  unless  there  be 
an  agreement  not  to  prosecute  the  forger.^  On  the  other 
hand,  the  view  has  been  forcibly  presented  that  though  a 
voidable  act  may  be  ratified,  as  where  an  agent  has  exceeded 
his  powers,  or  there  has  been  an  assumption  of  agency 
without  proper  authority,  it  is  otherwise  when  the  act  was 
originally  and  in  its  inception  void.  A  distinction  has 
also  been  made  between  civil  acts  which  may  be  made,  it  is 
said,  good  by  subsequent  recognition,  and  a  criminal  offence 
which,  it  is  said,  is  not  capable  of  ratification.  And 
where  the  status  of  parties  has  not  been  changed  by  the 
adoption  of  the  signature,  it  has  been  urged  that  there  is  no 
consideration  for  it,  and  that  it  is  therefore  null  and  void. 
And  a  number  of  cases  resting  on  these  views  in  whole  or 
in  part  have  held  that  the  mere  adoption  or  ratification  of  a 
forged  signature,  without  additional  circumstances  of 
estoppel  or  consideration,  is  void.'^     Chief  Baron  Kelly  in 

^  Howard  v.  Duncan,  3  Lansing-,  175. 

"^  Greenfield  Bank  v.  Crafts,  4  Allen,  447,  the  court  saying :  "  It  was  clearly 
competent,  if  duly  authorized,  thus  to  sign  the  note.  It  is,  as  it  seems  to  us, 
equally  competent  for  the  party,  he  knowing  all  the  circumstances  as  to  the  sig- 
nature and  intending  to  adopt  the  note,  to  ratify  the  same,  and  thus  confirm 
what  was  originally  an  unauthorized  and  illegal  act It  is  difficult  to  per- 
ceive why  such  adoption  should  not  bind  the  party  whose  name  is  placed  on  the 
note  as  promisor  as  effectually  as  if  he  had  adopted  the  note  when  executed  by 
one  professing  to  be  authorized,  and  to  act  as  an  agent,  as  indicated  by  the  form 
of  the  signature,  but  who  in  fact  had  no  authority.  It  is,  however,  urged  that 
public  policy  forbids  sanctioning  the  ratification  of  a  forged  note  as  it  may  have 
a  tendency  to  stifle  a  prosecution  for  the  criminal  offence.  It  would  seem,  how- 
ever, that  this  must  stand  upon  the  general  principles  applicable  to  other  con- 
tracts, and  is  only  to  be  defeated  where  the  agreement  was  upon  the  under- 
standing that  if  the  signature  was  adopted,  the  guilty  party  was  not  to  be 
prosecuted  for  the  criminal  offence."  See  this  case  cited  in  31  Am.  Rep.,  555. 
See  also  31  Am.  Rep.,  551,  552;  and  the  dissenting  opinion  of  Martin,  B.,  in 
Brook  v.  Hook,  there  quoted;  Wellington  v.  Jackson,  121  Mass.,  157  ;  Hefner  v. 
Vandolah,  483  ;  Casco  Bank  v.  Keene,  53  Me.,  103  ;  Forsythe  v.  Bonta,  5 
Bush,  547. 

'  Shisler  v.  Van  Dyke,  92  Penn.  St.,  449;  31  Amer.  Rep.,  553,  the  court  said: 
"  The  question,  however,  remains  :  could  the  forged  indorsem.ent,  conceding  it 
to  be  such,  be  ratified  and  thus  made  good  ?     This  question  must  be  answered 


§  1 352'^-    LIABILITY  FOR  ADOPTING  A  FORGED  SIGNATURE.    36 


O 


an  English  case  has  clearly  analyzed  and  well  presented 
this  question.^ 

§  1352^.  Observations  07i  confiicting  views. — It  is  essen- 
tial in  order  to  charge  a  party  upon  a  forged  signature  on 
the  ground  of  ratification  or  adoption,  as  in  other  cases  of 
ratification,  that  he  should  have  known  all  the  facts  affect- 
ing his  rights  in  the  premises.^  And  if  the  adverse  party 
has  acted  in  bad  faith,  or  there  be  actual  fraud  practiced  on 
the  party  sought  to  be  charged,  he  is  not  bound  by  his  rati- 
fication or  adoption  of  the  forgery.^  It  is  also  quite  clear 
that  if  there  be  an  agreement,  express  or  implied,  to  suppress 


in  the  negative  if  we  accept  as  authority  the  case  of  McHugh  v.  Schuylkill  County, 
7  P.  F.  S.,  391  ;  S.  C,  5  Am.  Rep.,  447.  This  case  is  in  point ;  there  as  here 
the  question  was  whether  there  could  be  an  after  ratification  of  a  forged  obliga- 
tion, and  it  was  held  that  there  could  be  no  such  ratification.  It  is  true  the  dicta 
of  this  case,  going  as  it  does  beyond  the  point  ruled,  indicate  that  no  contract, 

vitiated  by  fraud  of  any  kind,  is  the  subject  of  subsequent  ratification 

Where  the  fraud  is  of  such  a  character  as  to  involve  a  crime,  the  ratification  of 
the  act  from  which  it  springs  is  opposed  to  public  policy,  and  hence  can  not  be 
permitted  ;  but  where  the  transaction  is  contrary  only  to  good  faith  and  fair 
dealing,  where  it  affects  individual  interests  and  nothing  else,  ratification  is 
allowable."  To  same  effect  see  Pearsoll  v.  Chapin,  8  Wright,  9 ;  Negley  v.  Lind- 
say, 17  P.  F.  Smith,  217.  In  Workman  v.  Wright,  32  Ohio  St.  (405),  1878;  s. 
C,  31  Am.  Rep.,  547,  it  was  held  that  a  simple  promise  to  pay  a  forged  note 
made  to  the  holder  after  he  acquired  it  was  not  binding,  being  without  con- 
sideration. 

'  Brook  V.  Hook,  3  Albany  L.  J.,  255  ;  24  Law  Times,  34;  31  Am.  Rep.,  549. 
In  this  case  defendant  denied  his  signature,  and  said  it  must  be  a  forgery  of  J.'s, 
upon  which  plaintiff  said  he  should  consult  a  lawyer,  with  a  view  to  proceeding 
criminally  against  J.  The  defendant  said  rather  than  that  he  would  pay  the 
money,  and  wrote  as  follows  :  "  Memorandum,  that  I  hold  myself  responsible  for 
a  bill  dated  Nov.  7th,  1869,  for  _£20,  bearing  my  signature  and  J.'s,  of  Mr.  Brook," 
and  signed  his  name  to  it.  Held,  he  was  not  bound.  Chief  Baron  Kelly  (with 
whom  Channelland  Piggatt,  B.B.,  concurred)  placed  his  opinion  on  the  grounds: 
I.  That  defendant's  agreement  to  treat  the  note  as  his  own  was  in  consideration 
that  plaintiff  would  not  prosecute  the  forger;  and  2.  That  there  was  no  ratifica- 
tion as  to  the  act  done,  the  signature  to  the  note  was  illegal  and  void,  and  that 
though  a  voidable  act  may  be  ratified  by  matter  subsequent,  it  is  otherwise 
when  an  act  is  originally  and  in  its  inception  void.  Martin,  B.,  dissented.  See 
also  McKenzie  v.  British  Linen  Co.,  44  L.  T.  R.,  431  (1881).  In  Kernan  v. 
London  Discount  and  M.  Bank,  4  Victorian  R.,  279,  the  defendant  said  the 
signature  was  his.     It  was  forged.     The  Supreme  Court  of  Victoria  said  :  "His 

telling  a  falsehood  is  not  a  ratification Had  the  defendant  previously  paid 

a  forged  note,  and  thereby  misled  an  innocent  holder,  possibly  the  case  might 
have  been  different." 

"  Gleason  v.  Henry,  71  III,  109. 

^  Chamberlain  v.  McClurg,  8  Watts  &  S.,  36 ;  McHugh  v.  County  of  Schuyl 
kill,  67  Penn.  St.,  391, 


364  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.         §   1352/5. 

a  criminal  prosecution  of  the  forger,  it  would  render  the 
ratification  or  adoption  void  ;  ^  and  also  clear,  as  already 
seen,  that  such  ratification  would  bind  the  party  making  it 
to  any  third  innocent  party  who  has  been  induced  to  act 
upon  the  faith  of  it  in  such  a  way  as  to  suffer  loss  by  its 
repudiation,^  But  in  the  absence  of  other  circumstances 
the  question  is  difficult.  If  A.,  without  any  authority 
whatsoever,  but  with  intent  to  defraud,  sign  the  name  of  B. 
to  a  promissory  note,  or  other  obligation,  A.  is  simply  a 
forger,  liable  to  prosecution,  and  B.  is  not  bound.  But 
suppose  that  C,  the  payee  and  holder  of  the  note,  present 
the  note  to  B.  for  payment,  and  B.  with  knowledge  of 
all  the  facts  answers,  "  All  right,  that  is  my  note,  and  I 
will  pay  it  to-morrow,"  and  on  the  morrow  discloses  that  it 
is  forged  and  refuses  to  pay,  is  B.  then  bound  ?  It  is  clear 
that  unless  C,  the  holder,  has  lost  some  recourse  that  he 
would  have  had  against  A.,  the  forger,  or  his  property,  to 
secure  the  debt,  he  is  in  the  same  status  that  he  would  have 
been  if  B.  had  instantly  repudiated  his  signature.  It  is 
clear  also  that  B.,  unless  some  new  consideration  has  moved 
to  him,  is  under  no  additional  obligation  to  pay  except  that 
which  arises  out  of  a  false  acknowledgment.  Is  that  alone 
sufficient  to  hold  him  ?  If  the  original  act  were  innocent 
in  itself  he  would  be  bound,  because  ratification  under- 
standingly  made  is  equivalent  to  a  previous  authority,  and 
in  cases  of  agency  is  nothing  more  than  confirmation  of 
previously  assumed  authority.  But  when  the  act  without 
authority  constitutes  a  crime,  it  is  difficult  to  attribute  any 
motive  to  the  ratifying  party  but  that  of  concealing  it,  and 
suppressing  its  prosecution  ;  for  why  would  any  man  pay 
money  without  consideration  when  he  himself  had  been 
wronged,  unless  constrained  by  desire  to  shield  the  guilty 
party  ?  For  these  reasons  public  policy  would  seem  to  in- 
terdict the  ratification  of  a  forged  signature,  except  as  to 

'See  §196.  '§1351- 


J    1354.  ESTOPPEL    AS    TO    FORGERY.  365 

those  who,  acting  innocently,  so  charge  their  relations  upon 
its  faith  as  to  estop  the  party  from  pleading  the  truth  of 
the  matter. 

§  1353.  Liability  upon  forged  paper  by  course  of  con- 
duct.— So  a  party  may,  by  his  acts  and  course  of  conduct, 
be  bound,  although  his  signature  be  forged.  Thus,  if  it  be 
shown  against  an  acceptor  who  proves  his  signature  a 
forgery,  that  he  has  customarily  paid  similar  drafts  of  the 
party  forging,  knowing  the  forgery,  he  will  be  held  liable 
upon  the  bill,  as  having  adopted  such  acceptances.*  If  the 
acceptor,  upon  presentment  of  the  bill,  gives  the  holder 
another  bill  in  payment,  he  can  not  show  in  a  suit  on  the 
second  bill  that  the  first  was  a  forgery,  for  he  is  bound  to 
know  his  own  signature.^  But  a  party  would  not  be  bound 
upon  a  bill,  by  a  forged  acceptance  in  his  name,  by  the 
mere  fact  that  he  had  previously  paid  another  bill  similarly 
accepted,  if  he  had  not  led  the  holder  to  believe  that  the 
second  bill  was  genuine.^ 


SECTION   III. 

WHEN  ONE  PARTY   IS   ESTOPPED   FROM   DENYING  THE   GENUINE- 
NESS OF  another's  signature. 

§  1354.  The  relation  of  one  party  to  a  bill  or  note  is 
often  such  that  he  can  not  deny  the  genuineness  of  an- 
other's signature — for  having  treated  it  himself  as  genuine, 
it  would  be  a  fraud  to  permit  him  to  assert  the  contrary. 

'  Barber  v.  Gingell,  3  Esp.,  60 ;  Grout  v.  DeWolf,  i  R,  I.,  393. 

'  Mather  v.  Lord  Maidstono,  18  C.  B.  N.  S.,  273  (1856)  ;  37  E.  L.  &  Eq.,  335. 

•  Morris  v.  Bethell,  Law  R.  5  Com.  P.,  47  (1869),  Bovill,  C.  J.,  saying :  "  If  it 
had  been  made  to  appear  that  there  had  been  a  regular  course  of  mercantile 
business,  in  which  bills  have  been  accepted  by  a  clerk  or  agent  whose  signature 
has  been  acted  upon  as  the  signature  of  the  principal,  there  would  be  evidence, 
and  almost  conclusive  evidence,  against  the  latter,  that  the  acceptance  was 
written  by  his  authority.  That  was  the  case  of  Barber  v.  Gingell.  It  would 
have  been  idle  to  contend  there  that  the  defendant  was  not  responsible  for  the 
signature." 


^66  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §   1 355. 

And  first,  in  respect  to  the  maker  of  a  7iote,th\s  doctrine  is 
not  often  applicable  to  him.  If  he  makes  and  delivers  the 
note  to  the  payee,  and  there  is  no  signature  upon  it  but  his 
own,  it  is  obvious  that  should  it  come  into  the  hands  of  a 
do7m  fide  holder  thereafter,  bearing  at  the  time  the  forged 
indorsement  of  the  payee  to  whose  order  it  was  made  pay- 
able, the  maker  could  not  be  regarded  as  responsible  for 
the  forgery,  or  as  warranting  the  genuineness  of  the  signa- 
ture, and  no  recovery  could  be  had  against  him  by  such 
holder,  as  he  would  be  unable  to  trace  his  legal  title  to  the 
instrument.^  Nor,  indeed,  would  the  maker  be  at  all  justi- 
fied in  making  payment  to  him,  as  the  payee,  not  having 
indorsed  the  note,  still  holds  the  legal  title,  and  could  re- 
quire payment  to  be  made  again  to  him,  if  without  his  in- 
dorsement it  were  paid  to  another.^  But  if  the  forged 
name  of  the  payee  were  indorsed  upon  the  note,  or  the 
name  of  the  payee  were  fictitious  and  were  indorsed  upon 
the  note,  at  the  time  when  it  was  delivered  by  the  maker, 
the  case  would  be  different.  Having  issued  the  note  as 
genuine  in  all  respects,  it  would  be  unjust  and  fraudulent 
upon  others  to  permit  him  to  deny  it ;  and  proof  of  his 
having  so  issued  it  would  be  sufficient  to  entitle  the  holder 
to  recover  against  him.^ 

§  1355.  Under  such  circumstances — that  is,  where  the 
foro-ed  indorsements  were  on  the  note  when  he  issued  it — 
the  maker  could  not,  of  course,  recover  back  the  amount 
paid  to  the  holder ;  for,  in  addition  to  the  reasons  already 
given,  such  payment  could  not  be  regarded  as  having  been 
made  under  a  mistake.  Under  other  circumstances,  how- 
ever, the  maker  may  recover  back  the  amount  from  the 
party  to  whom  he  paid  it,^  for  the  holder,  by  the  very  act 

*  Story  on  Notes,  §§  379,  380,  387. 

""  2  Parsons  N.  &  B.,  596  ;  Story  on  Notes,  §§  379,  380,  387. 

'  Meacher  v.  Fort,  3  Hill  (S.  C),  227  (1837)  ;  Hortsman  v.  Henshaw,  II  How., 
177  (1850) ;  see  also  Beeman  v.  Duck,  11  M.  &  W.,  251  ;  Redfield  &  Bigelow's 
Lead.  Cas.,  62. 

*  See  fost,  §  1359,  as  to  Acceptor  ;  Stoiy  on  Notes,  §§  379,  380,  387. 


§  1357-  ESTOPPEL    AS    TO    FORGERY.  ^Sy 

of  assuming  ownership  and  demanding  its  payment,  im- 
pliedly asserts,  even  though  it  be  without  his  indorsement, 
that  he  has  clear  title  and  is  entitled  to  receive  payment.^ 

§  1356.  Secondly,  i7i  respect  to  the  drawer  of  a  bill,  his 
relation  to  other  parties  is  ordinarily  like  that  of  the  maker 
of  a  note.  If  he  issues  the  bill,  as  is  generally  the  case, 
without  any  other  name  upon  it  but  his  own,  he  can  not  be 
made  responsible  for  the  subsequent  forgery  of  an  indorse- 
ment or  acceptance  ;  and  if  the  name  of  the  payee  to  whose 
order  the  bill  is  payable,  or  of  a  special  indorsee,  be  forged, 
no  recovery  can  be  had  against  him.^  But  if  the  drawer 
puts  the  bill  in  circulation  with  the  name  of  the  payee 
indorsed  upon  it,  he  will  be  understood,  by  so  doing,  as 
affirming  that  the  indorsement  is  in  the  handwriting  of  the 
payee,  or  written  by  his  authority ;  and  if  it  be  forged,  the 
amount  paid  under  such  indorsement  may  be  credited  against 
him  by  the  acceptor,  or  recovered  against  him  by  the  holder 
of  the  bill.'' 

§  1357-  Thirdly,  in  respect  to  the  t7idorser  of  a  negotiable 
instrument,  upon  which  the  name  of  the  drawer,  maker,  ac- 
ceptor, or  of  a  prior  indorser  is  forged,  he,  by  indorsing  it, 
warrants  that  he  has  clear  legal  title  thereto,  and  that  the 
instrument  is  the  genuine  article  it  purports  to  be,  and  he  is, 
therefore,  bound  by  his  indorsement  to  all  parties  subsequent 
to  him,*  even  though  the  paper  has  been  discounted  for  a 
prior  party.^  He  is  like  the  drawer  of  a  bill  who  issues  it 
with  such  names  upon  it.  But  if  all  the  names  of  parties 
antecedent  to  his  own  are  genuine,  he  is  then  like  the  drawer 


'  See  §  1361,  infra.  '  See  §  735,  vol.  I  ;  znApost,  §  1361. 

'  Hortsman  v.  Henshaw,  11  How.,  177  ;  Meacher  v.  Fort,  3  Hill  (S.  C),  227 ; 
Coggill  V.  American  Exchange  Bank,  i  Comst.,  113;  ante,  §  1354. 

*  MacGregor  v.  Rhodes,  6  EI.  &  B.,  266  (indorser  can  not  deny  indorsement  to 
himself).  See  chapter  xxi,  on  Transfer  by  Indorsement,  §§672,  bjietseq., 
vol.  I  ;  Bigelow  on  Estoppel,  429  ;  Story  on  Notes,  §  380. 

*  State  Bank  v.  Fearing,  16  Pick.,  533.  Note  was  offered  for  discount  by 
maker.  The  name  of  the  payee  who  was  first  indorser  was  forged.  /AvV/thit 
the  bank  could  recover  of  the  second  rndorser,  whose  indorsement  was  genuine. 


o 


68  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §   1 358. 


of  a  bill  who  issues  it  without  any  names  upon  it ;  and  if  he 
pays  it  to  any  one  holding  under  a  forged  indorsement 
subsequent  to  his  own,  he  may  recover  back  the  amount* 

§  1358.  1)1  the  fourth  place,  as  to  the  transferrer  by  de- 
livery, the  act  of  transfer  by  delivery  of  a  negotiable  in- 
strument falls  under  the  general  rule  of  law,  that  in  every 
sale  of  personal  property  the  vendor  impliedly  warrants  that 
the  article  is  in  fact  what  it  is  described  and  purports  to  be, 
and  that  the  vendor  has  a  good  title  or  right  to  transfer  it.^ 
Therefore,  if  the  signature  of  the  indorser  be  forged,  the 
bank  discounting  the  bill  or  note  offered  for  discount  with 
such  indorsement  upon  it  may  recover  back  the  amount 
from  the  party  from  whom  it  received  it.^  And  on  the 
same  principle,  the  maker  of  a  note,  or  the  acceptor  of  a 
bill,  making  payment  to  a  holder  under  a  forged  indorse- 
ment, would  be  entitled  to  recover  back  the  money.  And 
this  principle  would  apply  even  if  the  holder  who  transfers 
the  paper  is  an  agent,  unless  he  discloses  his  principal.^ 
As  to  the  holder  of  a  bill  who  presents  it  to  the  drawee  for 
payment,  "  He,"  says  Allen,  J,,  "is  held  to  a  knowledge  of 
his  own  title,  and  the  genuineness  of  the  indorsements,  and 
of  every  part  of  the  bill  other  than  the  signature  of  the 
drawers,  within  the  general  principle  which  makes  every 
party  to  a  promissory  note  or  bill  of  exchange  a  guarantor 
of  the  genuineness  of  every  preceding  indorsement,  and  of 
the  genuineness  of  the  instrument."  ^  How  far  he  may 
warrant  the  drawer's  signature  we  shall  presently  consider.^ 

§  1359.  When  drazveeor  acceptor  boundy  though  drawer's 
name  be  forged. — Fifthly  :   In  respect  to  the  drawee  or  ac- 


^  Ante,  §§  1225,  1355. 

"^  See  ante,  §  731,  Smith  v.  McNair,  19  Kansas,  330. 

^  Burgess  v.  Northern  Bank  of  Kentucky,  4  Bush  (Ky.),  600  (1868)  ;  Cabol 
Bank  v.  Morton,  4  Gray,  157;  see  chapter  xxil,  on  Transfer  by  Assignment 
vol.  I,  §§  731,  732  et  seq. 

^  Lyons  v.  Miller,  6  Grat.,  439. 

'  White  V.  Continental  Nat.  Bk.,  64  N.  Y.,  320.  *  §  1361. 


}   1360.  ESTOPPEL   AS    TO    FORGERY.  369 

ceptor  of  a  bill,  it  is  obvious  that  his  relation  to  the  instru- 
ment is  very  different  from  that  of  the  parties  who  issued 
it.  He  should  know  his  own  correspondent's  handwriting  ; 
and  therefore  the  doctrine  is  laid  down  by  numerous 
authorities  that  if  he  accepts  the  bill,  or  pays  it,  he  can  not 
afterward,  on  discovering  that  the  signature  of  the  drawer 
was  a  forgery,  revoke  the  acceptance,  or  recover  back  the 
amount  paid  under  mistake  from  the  holder  to  whom  he 
paid  it.^ 

§  1360.  A  leading  case  on  this  subject,  which  is  often 
quoted  as  authority,  is  Price  v.  Neal,^  which  was  an  action 
by  Price  to  recover  from  Neal  the  amount  paid  him  on  two 
bills  of  exchange,  of  which  Price  was  the  drawee.  One  of 
the  bills  had  been  paid  by  Price  without  acceptance,  and 
the  other  was  duly  accepted  and  paid  at  maturity.  Both 
bills  had  been  forged.  It  was  held  the  action  could  not  be 
maintained,  chiefly  upon  the  ground  that  the  acceptor  is 
presumed  to  know  the  drawer's  handwriting,  although  there 
were  intimations  that  there  had  been  laches  in  notifying  the 
holder  of  the  forgery. 

There  are  other  English  cases  which  maintain  this  doc- 
trine,^ and  in  the  United  States  Mr.  Justice  Story  has  de- 
clared, in  an  opinion  of  the  Supreme  Court,  that  "  after 
some  research  we  have  not  been  able  to  find  a  single  case 
in  which  the  general  doctrine,  thus  asserted,  has  been  shaken 
or  even  doubted  ;  and  the  diligence  of  the  counsel  for  the 
defendants  on  the  present  occasion  has  not  been  more  suc- 
cessful than  our  own."  ^     And  in  commenting  on  the  case 

'  Byles  on  Bills  (Sharswood's  ed.)  [''■324],  491  ;  2  Parsons  N.  &  B.,  590,  591  ; 
Story  on  Bills,  §  411  ;  Howard  v.  Mississippi  Valley  Bank,  28  La.,  728-9,  the 
drawee  bank  having  other  genuine  drafts  of  the  drawer  in  his  hands,  and  the 
means  of  comparing  signatures. 

^  3  Burr,  1355  (1763).  See  Allen  v.  Fourth  Nat.  Bank,  59  N.  Y.,  12,  for  ex- 
planation and  limitation  of  this  case. 

^  Smith  V.  Mercer,  6  Taunt.,  76  ;  i  Marsh,  453  (181 5).  There  had  been  de- 
lay of  a  week  in  returning  the  bill,  but  this  was  not  the  ground  of  decision.  See 
Smith  V.  Chester,  i  Term.  R.,  654  (1787). 

'  Bank  of  U.  S.  v.  Bank  of  Georgia,  10  Wheat.,  333  (1825). 

Vol.  II. — 24 


370  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §   1 36 1. 

of  Price  v  Neal,  he  observed  :  "  In  regard  to  the  first  bill, 
there  was  no  new  credit  given  by  any  acceptance,  and  the 
holder  was  in  possession  before  the  time  it  was  paid  or  ac- 
knowledged. So  that  there  is  no  pretence  to  allege  that 
there  is  any  legal  distinction  between  the  case  of  a  holder 
before  or  after  the  acceptance.  Both  were  treated  on  this 
judgment  as  being  in  the  same  predicament  and  entitled  to 
the  same  equities." 

§  1 36 1.  Notwithstanding  these  high  authorities,  and 
numerous  other  cases  which  decide  that  the  drawee  paying 
a  forged  draft  can  not  recover  back  the  amount  from  the 
party  to  whom  he  paid  it,  whether  such  party  received  it 
before  acceptance,^  or  afterward,^  a  distinction  has  been 
taken  between  the  two  cases  which  is  clearly  philosophical, 
and,  as  it  seems  to  us,  much  better  calculated  to  effectuate 
justice  than  the  doctrine  of  Mansfield  and  Story.^ 

When  the  holder  has  received  the  bill  after  its  accept- 
ance, the  acceptor  stands  toward  him  as  the  warrantor  of 
its  genuineness,  and  receiving  the  bill  upon  faith  in  the 
acceptor's  representation,  there  is  obvious  propriety  in 
maintaining  his  right  to  hold  the  acceptor  absolutely  bound. 
Indeed  the  acceptor,  being  the  primary  debtor,  stands  just 
as  the  maker  of  a  genuine  promissory  note.  But  when  the 
holder  of  an  unaccepted  bill  presents  it  to  the  drawee  for 
acceptance  or  payment,  the  very  reverse  of  this  rule  would 
seem  to  apply  ;  for  the  holder  then  represents,  in  effect,  to 
the  drawee,  that  he  holds  the  bill  of  the  drawer,  and  de- 
mands its  acceptance  or  payment,  as  such.     If  he  indorses 

■  National  Park  Bank  v.  Ninth  National  Bank,  46  N.  Y.,  81  ;  Gloucester  Bank 
V.  Salem  Bank,  17  Mass.,  43,  Parker,  C.  J. ;  Bank  of  Commerce  v.  Union  Bank, 
3  Corns.,  235,  Ruggles,  J. ;  Goddard  v.  Merchants'  Bank,  4  Coms.,  149,  Bronson, 
C.  J.  ;  Canal  Bank  v.  Bank  of  Albany,  i  Hill  (N.  Y.),  239,  Cowen,  J.  ;  Bern- 
heimer  v.  Marshall,  2  Minn.,  81  ;  Stout  v.  Benoist,  39  Mo.,  280;  see  also  Na- 
tional Bank  of  Commerce  v.  National  M.  B.  Assoc'n,  55  N.  Y.,  213  ;  White  v. 
Cent.  N.  B.,  64  N.  Y.,  322. 

'  Ellis  V.  Ohio  Life  Ins.,  etc.,  Co.,  4  Ohio  St.,  632,  Ranney,  J. 

'  See  an  able  article  on  this  subject  in  American  Law  Review  for  April,  1875, 
p.  411. 


§   1362.  ESTOPPEL    AS    TO    FORGERY.  37I 

it,  he  warrants  its  genuineness  ;*  and  his  very  assertion  of 
ownership  is  a  warranty  of  genuineness  in  itself.^  There- 
fore, should  the  drawee  pay  it  or  accept  it  upon  such  pre- 
sentment, and  afterward  discover  that  it  was  forged,  he 
should  be  permitted  to  recover  the  amount  from  the  holder 
to  whom  he  pays  it,  or  as  against  him  to  dispute  the  bind- 
ing force  of  his  acceptance,  provided  he  acts  with  due  dili- 
gence. 

§  1362.  Qicestions  of  negligence  in  mistaken  payments — 
Amounts  paid  by  mistake  recoverable  tmless  situation  of 
parties  changed. — In  all  the  cases  which  hold  the  drawee 
absolutely  estopped  by  acceptance  or  payment  from  deny- 
ing genuineness  of  the  drawer's  name,  the  loss  is  thrown 
upon  him  on  the  ground  of  negligence  on  his  part  in  ac- 
cepting or  paying,  until  he  has  ascertained  the  bill  to  be 
genuine.^  But  the  holder  has  preceded  him  in  negli- 
gence, by  himself  not  ascertaining  the  true  character  of 
the  paper  before  he  received  it,  or  presented  it  for  ac- 
ceptance or  payment.  And  although,  as  a  general  rule, 
the  drawee  is  more  likely  to  know  the  drawer's  handwrit- 
ing than  a  stranger  is,  if  he  is  in  fact  deceived  as  to  its 
genuineness,  we  do  not  perceive  that  he  should  suffer  more 
deeply  by  a  mistake  than  a  stranger,  who,  without  knowing 
the  handwriting,  has  taken  the  paper  without  previously  as- 
certaining its  genuineness.  And  the  mistake  of  the  drawee 
should  always  be  allowed  to  be  corrected,  unless  the  holder, 
acting  upon  faith  and  confidence  induced  by  his  honoring 
the  draft,  would  be  placed  in  a  worse  position  by  according 
such  privilege  to  him.     This  view  has   been  applied^  in  a 

'  National  Bank  v.  Bangs,  106  Mass.,  445.  ^  See  §§  731,  732,  vol.  i. 

'  Ellis  V.  Ohio  Life  Ins.,  etc.,  Co.,  4  Ohio  St.,  662. 

*  McKleroy  v.  Southern  Bank  of  Ky.,  14  La.  Ann.,  458.  In  this  case  the 
drawees,  McK.  &  B.,  accepted  the  draft  about  the  ist  of  December,  and  paid  it 
on  the  1 8th.  It  turned  out  that  the  drawer's  signature  was  forged.  The  South- 
em  Bank  of  Kentucky  had  purchased  the  draft  before  acceptance,  and  had  re- 
ceived payment  of  it ;  and  McK.  &  B.  sued  the  bank  to  recover  back  the  amount. 
The  court  said  :  "  The  defendant  became  the  holder  of  the  draft  before  it  was 
accepted  by  the  plaintiffs,  and  before  thev  had  any  knowledge  of  its  e.xistence, 


372  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §   1 362 

well-considered  case,  and  is  intimated  in  another;^  and  is 
forcibly  presented  by  Mr.  Chitty,  who  says  it  is  going  a 
great  way  to  charge  the  acceptor  with  knowledge  of  his 
correspondent's  handwriting,  "unless  some  dona  ^de  holder 
has  purchased  the  paper  on  the  faith  of  such  an  act."^ 
Negligence  in  making  paper  under  a  mistake  of  fact  is  not 
now  deemed  a  bar  to  recovery  of  it,^  and  we  do  not  see 
why  any  exception  should  be  made  to  the  principle,  which 
would  apply  as  well  to  release  an  obligation  not  consum- 
mated by  payment. 

and  consequently  before  the  defendant  had  any  right  of  action  against  them  for 
its  recovery.  The  plaintiffs  therefoie  had  done  no  act  which  induced  the  defend- 
ant to  believe  the  signature  of  the  drawer  to  be  genuine  at  the  time  the  bill  was 
purchased.  How,  then,  can  it  be  said  that  the  defendant  purchased  the  bill  on 
the  faith  of  the  plaintiff's  acceptance,  or  on  their  guarantee  of  the  genuineness 
of  the  drawer's  signature  ?  Or  how  can  it  be  said  that  the  plaintiffs  misled  the 
defendant  at  the  time  of  the  purchase  of  the  bill,  or  were  then  guilty  of  the 
omission  of  any  duty  toward  the  defendant  as  the  purchaser  of  the  bill  ?  If  the 
defendant  had  purchased  the  bill  on  the  faith  of  the  acceptance  of  plaintiffs,  or 
had  sustained  any  loss  in  consequence  of  their  negligence,  or  would  have  no 
difificulty  in  affirming  the  judgment  of  the  lower  court  ;  but  such  are  not  the 
>facts  made  known  to  us  by  the  record.  The  defendant  purchased  the  bill  on 
•the  faith  of  the  indorsement  of  Shotwell  &  Son,  which  was  a  warranty  of  the 
genuineness  of  the  drawer's  signature  to  the  bank ;  and  there  was  no  gooa 
reason  why  the  accidental  payment  made  by  the  plaintiffs  should  inure  to  the 
benefit  of  the  defendant." 

'  Canal  Bank  v.  Bank  of  Albany,  i  Hill,  287,  Cowen,  J. 

"Chitty  on  Bills  (13  Am.  ed.)  [*43i],  485,  where  it  is  said:  "It  has  been 
contended  that  if  the  party  paid  was  a  bona  fide  holder,  ignorant  of  the  forgery, 
then  he  ought  not  to  be  obliged  to  refund  under  any  circumstances,  although  he 
could  not  have  enforced  payment,  and  although  he  had  immediate  notice  of  the 
forger}',  because  the  drawee  was  bound  to  know  the  handwriting  of  the  drawer, 
and  the  genuineness  of  the  bill,  and  because  the  holder  being  ignorant  of  the 
forgery,  ought  to  have  the  benefit  of  the  accident  of  such  payment  by  mistake, 
and  not  to  be  compelled  to  refund.  But  on  the  other  hand,  it  may  be  observed, 
that  the  holder  who  obtained  payment  can  not  be  considered  as  having  alto- 
gether shown  sufficient  circumspection  ;  he  might  before  he  discounted  or  re- 
ceived the  instrument  in  payment,  have  made  more  inquiries  as  to  the  signatures 
and  genuineness  of  the  instrument  even  of  the  drawer  or  indorsers  themselves ; 
and  if  he  thought  fit  to  rely  on  the  bare  representation  of  the  party  from  whom 
he  took  it,  there  is  no  reason  why  he  should  profit  by  the  accidental  payment, 
when  the  loss  had  already  attached  upon  himself,  and  why  he  should  be  allowed 
to  retain  the  money,  when  by  an  immediate  notice  of  the  forgery  he  is  enabled 
to  proceed  against  all  other  parties  precisely  the  same  as  if  the  payment  had  not 
been  made,  and,  consequently,  the  payment  to  him  has  not  in  the  least  altered 
■his  situation,  or  occasioned  any  delay  or  prejudice.  It  seems,  that  of  late,  upon 
questions  of  this  nature,  these  latter  considerations  have  influenced  the  court  in 
determining  whether  or  not  the  money  shall  be  recoverable  back  ;  and  it  will  be 
found,  in  examining  the  older  cases,  that  there  were  facts  affording  a  distinction, 
and  that  upon  attempting  to  reconcile  them,  they  are  not  so  contradictory  as 
might,  on  first  view,  have  been  supposed." 

^Setjiost,  §  1369,  and  chapter  XLIX,  on  Checks,  sections  xiii  and  xiv. 


^   1363.  ESTOPPEL    AS    TO    FORGERY.  ;^'/;^ 

§  1363.  T/ie  ad^nission  of  the  acceptor  extends  only  to 
the  signature  of  the  drawer,  and  not  to  the  terms  of  the  in- 
strument itself.  And  when  the  signature  is  genuine,  but  the 
amount  in  the  body  of  it  has  been  altered  after  it  left  the 
drawer's  hand,  and  he  has  paid  the  excessive  amount  to  a 
bo7ia  fide  holder,  he  may  recover  it  back  from  him,  provided 
he  was  not  himself  negligent  in  disregarding  evidences  that 
the  instrument  had  been  tampered  with,  which  appeared 
upon  its  face.^  And  as  the  holder  demanding  payment  war- 
rants the  genuineness  of  the  instrument  under  which  such 
demand  is  made,  we  should  say  that  the  negligence  of  the 
payor  should  be  very  great  and  positive,  to  deprive  him  of 
the  risrht  of  restitution.  But  if  the  drawer  had  drawn  the 
bill  so  carelessly  as  to  afford  an,  opportunity  for  the  altera- 
tion to  be  made  without  disfiguring,  marring,  or  marking 
the  instrument  in  such  a  way  as  to  attract  the  attention  of 
a  prudent  man,  it  has  been  held  that  he  would  then  be 
charg-eable  in  his   account  with    the  drawee;^  and  there- 

'  White  V.  Continental  N.  B..  64  N.  Y.,  317  ;  Kingston  Bank  v.  Eltinge,  40  N. 
Y.,  323;  Young  V.  Lehman,  63  Ala.,  519.  See  ante,  §  540,  vol.  i;  Bank  of 
Commerce  v.  Union  Bank,  3  Comst.,  230.  The  draft  in  this  case  was  originally 
drawn  upon  the  bank  plaintiff,  payable  to  order  of  J.  Durand,  for  one  hundred 
and  five  dollars.  The  name  of  Durand  was  altered  to  Bennet,  and  the  word 
hundred  to  thousand  ;  and  as  altered  was  paid.  And  the  plaintiff  sued  the  in- 
dorsee to  whom  it  had  been  paid,  to  recover  back  the  whole  amount.  Ruggles, 
J.,  delivering  the  opinion  of  the  court  that  the  plaintiff  should  recover,  said  : 
"There  is  no  ground  for  presuming  the  body  of  the  bill  to  be  in  the  drawer's 
handwriting,  or  in  any  handwriting  known  to  the  acceptor.  In  the  present 
case,  that  part  of  the  bill  is  in  the  handwriting  of  one  of  the  clerks  of  the  canal 
and  banking  company  in  New  Orleans.  The  signature  was  in  the  name  and 
handwriting  of  the  cashier.  The  signature  is  genuine.  The  forger)-  was  com- 
mitted by  altering  the  date,  number,  amount,  and  payee's  name.  No  case  goes 
the  length  of  saying  that  the  acceptor  is  presumed  to  know  the  handwriting  of 
the  body  of  the  bill,  or  that  he  is  better  able  than  the  indorsers  to  detect  an 
alteration  in  it.  The  presumption  that  the  drawee  is  acquainted  with  the  draw- 
er's signature,  or  able  to  ascertain  whether  it  is  genuine,  is  reasonable.  In 
most  cases  it  is  in  conformity  with  the  fact.  But  to  require  the  drawee  to  know 
the  handwriting  of  the  residue  of  the  bill  is  unreasonable.  It  would,  in  most 
cases,  be  requiring  an  impossibility.  Such  a  rule  would  be  not  only  arbitrary 
and  rigorous,  but  unjust.  The  drawee  would  be  answerable  for  negligence  in 
paying  an  altered  bill,  if  the  alteration  were  manifest  on  its  face."  See  chapter 
on  Checks. 

^  Young  V.  Grote,  4  Bing.,  253  (see  chapter  XLix,  on  Checks,  section  xiv). 
This  case  does  not  conflict  with  the  case  of  Bank  of  Commerce  v.  Union 
Bank,  cited  above,  as  in  that  case  there  was  no  negligence  on  the  part  of  the 
drawer. 


374  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §   1 3  64. 

fore  he  could  not  recover  back  the  amount  paid  to  the 
holder.* 

§  1364.  Acceptance  710  admission  of  indorsers  sig7iature. 
— But  the  drawee  who  accepts  or  pays  a  bill  is  never  regarded 
as  thereby  admitting  the  genuineness  of  the  signature  of  an 
indorser  ;  for  although  it  is  true  that  every  indorser  is  in 
respect  to  his  liability  the  same  as  a  new  drawer  to  the  bill, 
yet  the  acceptor  can  not  be  presumed  to  have  any  such 
knowledge  of  this  signature  as  he  has  of  the  drawer's,  and 
therefore  he  is  not  presumed  to  admit  it.^  If  the  drawee  or 
acceptor  of  a  bill  were  to  pay  it,  and  it  turned  out  that  the 
indorsement  of  the  payee  or  a  special  indorsee  were  forged, 
the  result  would  be  that  he  could  not  charge  the  amount  in 
account  against  the  drawer,  and  that  the  payment  would  be 
invalid  ;  but  as  his  act  implies  no  admission  of  the  genuine- 
ness of  the  indorser's  signature,  he  could  recover  back  the 
amount  from  the  holder  to  whom  he  paid  it'  "  Neither 
acceptance  nor  payment,"  says  Cowen,  J.,  in  a  case  cited 
below,  "  at  any  time  nor  under  any  circumstances,  is  an  ad- 
mission that  the  first  or  any  other  indorser's  name  is  genu- 
ine."* The  payee,  or  indorsee  of  a  bill,  or  note,  whose  sig- 
nature has  been  forged  to  an  indorsement  upon  it,  may  re- 
cover upon  it  ;  and  such  a  payee  or  indorsee  of  a  check  paid 
by  a  bank  upon  his  forged  indorsement  may  recover  the 
amount  of  the  bank.^ 

§  1365.  The  distinction  between  the  acknowledgment 
of  the  drawer's  and  of  the  indorser's  signature  is  carried  so 
far,  that,  if  the  bill  be  made  payable  to  the  drawer's  own 

'Bank  of  Commerce  v.  Union  Bank,  3  Comst.,  230.  See  Hortsman  v.  Hen- 
shaw,  II  How.,  177. 

*See  ante,  %  538,  vol.  i  ;  Story  on  Bills,  §§  262,  412;  Edwards,  190.  290,  400; 
2  Parsons  N.  &  B.,  590 ;  White  v.  Continental  Nat.  Bank,  64  N.  Y.,  320. 

'  Ibid. ;  Canal  Bank  v.  Bank  of  Albany,  i  Hill  (N.  Y.),  287  ;  United  States  v. 
National  Park  Bank,  6  Fed.  R.,  852  :  Smith  v.  Chester,  i  T.  R.,  654;  Robinson 
V.  Yarrow,  7  Taunt.,  455  ;  2  Parsons  N.  &  B.,  590. 

*  Canal  Bank  v.  Bank  of  Albany,  supra. 

'Johnson  v.  First  Nat.  Bank,  13  N.  Y.  S.  C.  (6  Hun),  124  ;  Talbot  v.  Bank  of 
Rochester,  i  Hill,  295. 


§   1366.  ESTOPPEL    AS    TO    FORGERY.  375 

order,  and  indorsed  by  him,  the  acceptance  is  regarded  as 
admitting  the  drawing  only,  and  not  the  indorsement,  al- 
though the  name  is  the  same,  and  they  profess  to  be,  and 
apparently  are,  written  by  the  same  party. ^  If,  however, 
the  name  of  the  drawer  be  fictitious,  and  the  indorsement 
is  in  the  same  name  and  handwriting,  it  would  be  different  ; 
for  then  acceptance  by  acknowledging  the  drawing  would 
impliedly  acknowledge  the  indorsing  also.^ 

§  1 366.  When  money  paid  on  forged  indorsement  can  not 
be  recovered. — Yet  there  may  be  circumstances  under  which 
the  acceptor,  who  has  paid  a  bill  under  a  forged  indorsement, 
could  not  recover  the  amount  from  the  holder.  Thus,  if  the 
forged  indorsement  were  upon  the  bill  at  the  time  when  the 
bill  was  issued  by  the  drawer,  the  drawer  or  acceptor  paying 
it  could  not  maintain  an  action  to  recover  the  amount  from 
the  holder,  for  the  reason  why  such  actions  are  generally 
allowed  would  not  apply.  The  holder  could  himself  recover 
from  the  drawer,  as  the  latter  could  not  deny  the  genuineness 
of  signatures  which  he  had  himself  sent  into  the  world.  For 
the  like  reason  the  drawer  or  acceptor  could  charge  the 
amount  in  account  against  the  drawer.  And  the  rule  would 
not  be  altered  where  the  acceptor  had  no  funds  of  the 
drawer  in  his  hands ;  for  if  he  chose  to  accept  for  the  draw- 
er's accommodation,  that  is  no  reason  why  he  should  re- 
cover from  the  holder.^  This  view  has  been  taken  by  the 
United  States  Supreme  Court,  and  seems  also  to  obtain  in 
New  York  ;  but  in  that  State  it  is  confined  in  its  applica- 
tion to  cases  where  the  payee  whose  name  is  forged  had  no 
interest  in  the  bill.^ 

•Beeman   v.  Duck,  11   M.  &  W.,  251  ;  Robinson  v.  Yarrow,  7  Taunt.,  455  ; 
Williams  v.  Drexel,  14  Md.,  366;  Story  on  Bills,  §§  412,  538,  vol.  i. 
"  Cooper  V.  Meyer,  10  B.  &  C,  468  ;  5  Man.  &  G.,  387. 

*  Hortsman  v.  Henshaw,  11  How.,  177  (1850)  ;  Coggill  v.  American  Exchange 
Bank,  i  Corns.,  113  (1847).  It  is  not  stated  in  this  case  that  the  bill  was  put  in 
circulation  by  the  drawer. 

*  In  Bigelow  on  Estoppel,  432,  and  in  Redfield  &  Bigelow's  Leading  Cases, 
61,  it  is  said,  in  remarking  on  the  case  of  Hortsman  v.  Henshaw  :  "  A  similar 
case  arose  in   1847,  in  Coggill  v.  American  Exchange  Bank.     In  that  case  one 


^f'jd  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §    1 367. 

If  the  acceptor  of  a  bill  accept  and  negotiate  the  bill  with 
knowledge  that  there  is  a  forged  indorsement  upon  it,  he 
would  be  thereby  estopped  to  deny  its  genuineness.^ 

§  1367.  Recognized  exceptions  to  general  rule  that  dramee 
or  acceptor  can  not  recover  where  drawer  s  signature  is 
forged. — Several  exceptions  are  taken,  even  where  the  gen- 
eral rule  is  recognized,  to  the  doctrine  that  the  drawee  or 
acceptor  is  precluded  from  recovering  back  the  amount 
paid  on  a  forgery  of  the  drawer's  signature.  First :  Where 
payment  is  made  to  the  payee  ;  for  it  is  said  the  payee  can 
be  no  loser  by  refunding  money  paid  under  such  a  forgery. 
His  debt  against  the  one  whose  name  was  forged  as  drawer, 
if  the  latter  owed  the  payee  anything,  would  remain — it 
could  not  be  paid  by  a  forgery.  He  could  still  recover  it, 
whether  he  refunded  to  the  acceptor  or  not.  And  so,  not 
being  involved  in  any  loss  by  being  required  to  refund,  it 
would  be  great  injustice  to  the  acceptor  to  allow  the  payee 
to  retain  the  money.^  Secondly :  It  has  been  considered 
that  the  general  rule  would  not  apply  where  either  by  ex- 
press agreement,  or  a  settled  course  of  business  between 


of  the  drawers  of  the  bill  forged  the  payee's  name,  and  then  procured  it  to  be 
discounted,  and  at  maturity  the  plaintiff  (the  drawee)  paid  it.  On  discovering 
the  forgery,  he  sued  the  defendant,  a  bona  fide  holder,  to  whom  he  had  paid  the 
h)ill,  to  recover  the  sum  paid.  The  court  held  that  the  action  could  not  be  main- 
tained, but  based  their  decision  on  the  fact  stated  in  the  report  that  the  payee 
had  no  interest  in  the  bill,  comparing  it  to  a  bill  payable  to  a  fictitious  person, 
such  a  bill  being  in  effect  payable  to  bearer.  The  point  made  in  Hortsman  v. 
Henshaw  was  not  noticed — that  in  such  cases  the  drawer  is  estopped  to  deny 
the  genuineness  of  the  indorsement  ;  that  he  is  thus  liable  to  a  bona  fide  \io\^&x  ; 
and  that,  therefore,  the  drawee  is  entitled  on  payment  to  a  credit  against  the 
drawer.  Whence  it  would  follow  that  it  is  immaterial  that  the  payee  had  no  in- 
terest in  the  bill,  when  the  drawee  himself  puts  it  into  circulation  bearing  the 
payee's  indorsement.  But,  according  to  Coggill  v.  American  Exchange  Bank, 
explaining  on  this  point  Canal  Bank  v.  Bank  of  Albany,  i  Hill  (N.  Y.),  287,  if 
the  payee  owned  the  forged  bill,  the  acceptor  would  be  entitled  to  recover  the 
sum  paid  to  the  holder.  The  two  cases  can  not  be  reconciled,  unless  the  language 
of  the  court  in  Hortsman  v.  Henshaw  is  used  with  reference  to  the  case  of  a 
payee  having  no  interest  in  the  bill.  But  that  can  not  be  true  ;  for  how,  then, 
could  it  be  said  that  in  such  case  the  drawee  has  paid  to  one  not  entitled  to  re- 
ceive the  money  ?  The  case  clearly  covers  the  whole  ground  of  a  payee  who 
owned  the  bill,  and  of  one  who  had  no  interest  in  it." 

'  Beeman  v.  Duck,  1 1  Mees.  &  W.,  251. 

'  Redfield  &  Bigelow's  Leading  Cases,  664. 


§    1369.  MONEY  PAID  ON  FORGED  INSTRUMENTS.  ^ 

the  parties,  or  by  a  general  custom  in  the  place  applicable 
to  the  business  in  which  both  parties  are  engaged,  the  holder 
takes  upon  himself  the  duty  of  exercising  some  material 
precaution  to  prevent  the  fraud,  and  by  his  negligent  fail- 
ure to  perform  it  has  contributed  to  induce  the  drawee  to 
act  upon  the  paper  as  genuine,  and  to  advance  the  money 
upon  it.  And  so,  also,  where  the  parties  are  mutually  in 
fault.^  We  think  it  far  better  not  to  recognize  the  gen- 
eral principle  at  all  save  in  favor  of  a  holder  who  has  taken 
the  paper  on  the  faith  of  the  drawee's  recognition  of  it  as 
genuine. 

§  1368.  Where  a  party  jjtakes  payment  for  the  honor  of 
the  drawer,  without  having  first  seen  the  bill,  and  without 
negligently  omitting  to  do  so,  he  would  not  be  precluded 
from  recovering  back  the  amount  upon  discovering,  as  soon 
as  he  saw  the  bill,  that  it  was  a  forgery,  and  pronouncing  it 
such  ;  and  it  would  make  no  difference  that  it  was  too  late 
to  send  due  notice  of  dishonor  to  the  indorser.* 


SECTION    IV. 

RECOVERY   OF   MONEY   PAID   UPON    FORGED   INSTRUMENTS. 

§  1369.  It  is  a  general  principle  of  law  that  money  paid, 
under  a  mistake  of  fact  may  be  recovered  back.'^     And  ac- 

*  Redfield  &  Bigelovv's  Leading  Cases,  665  ;  Bigelow  on  Estoppel,  428,  note  2, 
445  ;  Ellis  V.  Ohio  Lite  Ins.,  etc.,  Co.,  4  Ohio  St.,  628.  Tn  this  case  it  was  shown 
that,  by  the  course  of  dealing  between  banks  in  Cincinnati,  checks  presented  by 
one  bank,  drawn  by  individuals  on  other  banks,  were  always  recei\ed  from  the, 
bankers  presenting  them  in  bundles,  with  a  ticket  mark  on  the  back  stating  thej 
amount  of  the  checks,  and  that,  when  such  checks  were  pre.sented,  the  banks 
were  not  accustomed  to  exercise  that  scrutiny  which  was  usual  when  the  checks 
were  presented  by  a  stranger,  it  being  presumed  that  caution  had  already  been 
exercised  by  the  bank  taking  the  check.  The  check  in  this  case  had  been  added 
up  against  the  drawer,  and  the  forgery  was  not  discovered  for  ten  days.  It  was 
held  that,  under  the  circumstances,  the  bank  on  which  it  was  drawn  could  re- 
cover the  amount  from  the  bank  which  presented  the  check.  See,  also.  National 
Bank  of  N.  A.  v.  Bangs,  106  Mass.,  441. 

^  Goddard  v.  Merchants'  Bank,  4  Coms.,  149. 

'  Louisiana  V.  Wood,  102  U.  S.  (12  Otto),  298;  Moses  v.McTerlar,  2Burr,  1005, 
Carpenter  v.  Northborough  Nat.  Bank,  123  Mass.,  69;  Nat.  Bank  of  N.  A.  v. 


378  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §    I369. 

cordingly,  where  one  pays  money  on  forged  paper  by  dis- 
counting or  cashing  it,  he  can  always  recover  it  back,  pro- 
vided he  has  not  himself  contributed  materially  to  the  mis- 
take by  his  own  fault  or  negligence,  and  provided  that  by 
an  immediate  or  sufficiently  early  notice  he  enables  the  party 
to  whom  he  has  paid  it  to  indemnify  himself  as  far  as  pos- 
sible.* And  now  the  doctrine  is  favored  that  even  negli- 
gence in  making  the  mistake  is  no  bar  to  recovery,  unless 
it  results  in  loss  or  damage.^  This  rule  is  of  general  appli- 
cation ;  but  in  order  to  understand  it,  it  will  be  necessary  to 
consider  the  circumstances  and  relations  of  the  parties  who 
contend  for  or  against  it ;  and  this  we  shall  presently  pro- 
ceed to  do. 

It  follows  from  the  rule  as  stated,  that  if  a  valid  instru- 
ment be  rendered  up,  and  one  that  is  forged  given  in  place 
thereof,  it  will  constitute  no  valid  payment ;  ^  and  even  an 
indorser  of  the  note  surrendered  up  will  not  be  discharged 
— his  liability  having  been  fixed  by  due  demand  and  notice.^ 
In  Massachusetts,  where  A.,  through  fraud,  obtained  a 
promissory  note  from  B.,  signed  by  him,  payable  to  the 
order  of  C,  and  then  forged  the  indorsement  of  C.  and  got 
the  note  discounted  at  a  bank,  and  B.  paid  the  note  at  ma- 
turity to  the  bank,  it  was  held  that  B.  could  maintain  an 
action  for  money  had  and  received  against  the  bank,  al- 
though it  acted  in  good  faith  in  taking  the  note.^    A  party 

Bangs,  106  Mass.,  441  ;  Boylston  Nat.  Bank  v.  Richardson,  loi  Mass.,  287  ; 
Merriam  v.  Wolcott,  3  Allen,  258  ;  Welch  v.  Goodwin,  123  Mass.,  71  ;  Young  v. 
Lehman,  63  Ala.,  523  ;  see  §  1655  ^/  seq. 

'Allen  V.  Sharpe,  37  Ind.,  73  ;  2  Parsons  N.  &  B.,  597. 

"  Lawrence  v.  American  Nat.  Bank,  54  N.  Y.,  435  ;  National  Bank  of  Com- 
merce V.  National  M.  B.  A.,  55  N.  Y.,  211  ;  Young  v.  Lehman,  63  Ala.,  523  ; 
Fraker  v.  Little,  24  Kansas,  599  ;  U.  S.  v.  National  Park  Bank,  6  Fed.  R„  852; 
see  ante,  %  1362. 

'Allen  V.  Sharpe,  37  Ind.,  68;  Bell  v.  Buckley,  11  Exch.,  631  ;  Goodrich  v. 
Tracy,  43  Vt.,  319;  Ritter  v.  Singmaster,  73  Penn.  St.,  400. 

*Ritter  v.  Singmaster,  73  Penn.  St.,  400. 

^  Carpenter  v.  Northborough  National  Bank,  123  Mass.,  69,  Lord,  J. :  "  This 
is  simply  the  payment  of  a  note  to  a  party  who  has  no  legal  or  equitable  right 

interest  in  the  promise  of  the  maker The  money  having  been  paid  by 

mistake  to  a  person  who  has  no  right  to  demand  it,  the  case  is  within  the  gen- 
eral rule,  and  the  party  paying  may  recover  back  the  amount  thus  paid." 


$   I370-  MONEY  PAID  ON  FORGED  INSTRUMENTS.  379 

making  payment  upon  a  security  bearing  a  forged  signature 
of  hunself,  supposing  it  to  be  genuine,  may  recover  back 
the  amount  if  he  is  diligent  in  giving  notice,  and  if  rights 
of  third  parties  have  not  intervened  to  estop  him.^  And  if 
his  signature  be  genuine,  but  the  instrument  has  been  so 
altered  as  to  render  it  void,  the  accommodation  party,  who 
pays  it  by  mistake  in  ignorance  of  the  alteration,  may  re- 
cover back  the  amount.^  And  so,  if  a  party  execute  a  note 
in  renewal  of  one  that  was  materially  altered  no  recovery 
can  be  had  against  him  if  he  was  ignorant  of  the  fact,  ex- 
cept by  a  bona  fide  holder  without  notice.^ 

§  1370.  Bank  paying  forged  paper  of  depositor. — When 
a  bank  pays  forged  paper  of  a  depositor,  and  returns  it  to 
him  with  his  check-book  or  account-book,  such  depositor 
may,  of  course,  immediately  repudiate  the  charge  entered 
up  against  him,  as  it  has  been  improperly  made.'*  And  it 
seems  further  that  the  depositor  owes  the  bank  no  duty 
which  requires  him  to  examine  his  pass-book  or  vouchers, 
with  a  view  to  detection  of  forgeries  of  his  name,  and  may 
therefore  repudiate  such  a  charge  whenever  the  forgery  is 
discovered.  And  accordingly,  where  it  appeared  that 
checks  were  forged  by  the  confidential  clerk  of  the  deposi- 
tor, paid  by  the  bank,  and  charged  to  the  depositor  on  his 
bank-book,  the  book  balanced,  and  the  forged  checks  re- 
turned to  the  clerk,  who  examined  the  account  at  the  prin- 
cipal's request,  and  reported  it  correct,  and  the  principal  did 
not  discover  the  forgery  until  several  months  afterward, 

'  Welch  V.  Goodwin,  123  Mass.,  ']'],  Lord,  J.,  saying- :  "  The  question  we  are 
called  upon  to  decide  is  whether,  under  any  circumstances,  a  party  may  recover 
back  money  paid  upon  a  security  bearing  a  forged  signature  of  himself,  supposing^ 
il,  at  the  time  of  payment,  to  be  his  genuine  signature.  We  can  have  no  doubt 
that  he  may.  This  is  entirely  clear  in  case  he  was  induced  to  make  the  payment 
by  fraud  or  misrepresentation.  Nor  is  it  necessary  that  fraud  or  misrepresenta- 
tion should  exist.  An  innocent  mistake,  whether  arising  from  natural  or  tem- 
porary infirmity,  or  otherwise,  made  without  fault  upon  his  part,  entitles  him  to 
the  same  relief." 

"  Fraker  v.  Little,  24  Kansas,  598.  '  Fraker  v.  Cullum,  21  Kansas,  555. 

*  Mackintosh  v.  Eliot  National  Bank,  123  Mass.,  393.  //t-/^/,  bank  not  ab- 
solved from  liability  to  depositor,  because  his  name  was  forged  by  a  clerk  on 
a  blank  form  taken  from  depositor's  check-book,  and  stamped  with  his  office 
stamp. 


380  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.  §    1 371. 

when  he  immediately  informed  the  bank,  it  was  held  that  the 
amount  could  not  be  retained  by  the  bank,  as  the  depositor 
had  done  nothing  to  contribute  to  or  facilitate  the  fraud.^ 
Where  forged  commercial  paper  is  paid  without  inspection, 
under  circumstances  giving  the  party  paying  no  previous 
opportunity  for  inspection,  he  is  not  precluded  from  receiv- 
ing back  the  amount  paid.  But  he  is  bound  to  use  due 
diligence  in  making  the  inspection,  as  soon  as  he  has  the 
opportunity,  and  in  giving  notice  of  the  forgery.^ 

§  1 37 1.  When  notice  of  forgery  must  be  gzveji,  and  de- 
mand for  restitution  made. — It  is  undoubtedly  necessary 
that  the  maker,  acceptor,  or  other  party  who  demands  res- 
titution of  money  paid  under  a  forged  indorsement,  or 
under  a  forged  signature  of  the  drawer  of  a  bill,  should 
make  the  demand  without  unreasonable  delay.  Where 
there  is  an  indorser  upon  the  instrument,  which  was  surren- 
dered up  by  the  holder,  who  was  entitled  to  notice,  the 
return  of  the  instrument  and  demand  for  the  money  must 
be  made  in  time  for  the  holder  to  notify  the  indorser,  ac- 
cording to  the  English  authorities.  And  a  delay  until  the 
day  after  payment  has  been  considered  fatal.^     Seven,"*  ten,^ 

'  Weisser  v.  Dennison,  10  N.  Y.,  69 ;  Welsh  v.  German-American  Bank,  73 
N.  Y.,  424 ;  National  Bank  v.  Tappan,  6  Kansas,  465  ;  see  §  1655  ei  seq.,  and 
Hardy  v.  Chesapeake  Bank,  51  Md.,  562. 

^  Allen  V.  Fourth  National  Bank,  59  N.  Y.,  12. 

"  Cocks  V.  Masterman,  i  B.  &  C,  902  (17  E.  C.  L.  R.)  In  this  case,  bankers 
who  had  paid  a  forged  bill  gave  notice  of  the  forgery,  and  demanded  the  money 
by  one  o'clock  on  the  following  day.  The  court  said  :  "  In  this  case  we  give  no 
opinion  on  the  point  whether  the  plaintiffs  would  have  been  entitled  to  recover 
if  notice  of  the  forgery  had  been  given  to  the  defendants  on  the  very  day  on 
which  the  bill  was  paid,  so  as  to  enable  the  defendants  on  that  day  to  have  sent 
notice  to  the  other  parties  to  the  bill.  But  we  are  all  of  opinion  that  the  holder 
of  a  bill  is  entitled  to  know,  on  the  day  when  it  became  due,  whether  it  is  an 
honored  or  dishonored  bill ;  and  that,  if  he  receives  the  money,  and  is  suffered 
to  retain  it  during  the  whole  of  that  day,  the  parties  who  paid  it  can  not  recover 
it  back.  The  holder,  indeed,  is  not  bound  by  law  (if  the  bill  be  dishonored  by 
the  acceptor)  to  take  any  other  steps  against  the  other  parties  to  the  bill  till  the 
day  after  it  is  dishonored.  But  he  is  entitled  so  to  do  if  he  thinks  fit  ;  and  the 
parties  who  pay  the  bill  ought  not,  by  their  negligence,  to  deprive  the  holder  of 
any  right  to  take  steps  against  the  parties  to  the  bill  on  the  day  when  it  becomes 
due."     Mather  v.  Maidstone,  18  Com.  B.,  273  ;  Bigelow  on  Estoppel,  442. 

*  Smith  V.  Mercer,  6  Taunt.,  76. 

*  Ellis  V.  Ohio  Life,  etc.,  Co.,  i  Handy,  97,  overruled  in  same  case,  4  Ohio 
St.,  648. 


^   1372.  MONEY  PAID  ON  FORGED  INSTRUMENTS.  38 1 

fourteen,^  fifteen^  days  have  been  held  to  be  too  great 
delays,  independent  of  any  question  in  regard  to  an  indorser, 
whom  it  was  then  too  late  to  notify  of  dishonor. 

8  1372.  Dema7id  for  restitution  may  be  made  in  reason- 
able time.— But  there  is  high  authority  for  the  more  liberal, 
and,  we  think,  wiser  and  juster  doctrine,  that  the  demand 
for  restitution  may  be  made  within  a  reasonable  time  after 
the  forgery  is  discovered,  and  that  the  mere  space  of  time 
is  not  important,  provided  it  be  clearly  shown  that  the 
holder  will  be  put  to  no  more  liability,  trouble,  or  expense 
by  a  restoration  then,  than  if  it  had  been  called  for  on  the 
day  of  payment.^  Nor  does  the  circumstance  that  there 
are  genuine  indorsers  prior  to  the  holder,  but  subsequent 
to  the  forged  name,  seem  to  us  to  alter  the  case.  Their 
indorsement  of  the  instrument  being  a  warranty  of  its  genu- 
ineness, they  would  not  be  entitled  to  notice,  as  it  was  not 
genuine  in  all  respects ;  *  and  besides  the  right  to  sue  them 
as  indorsers,  the  holder,  on  being  compelled  to  refund  the 
money,  could  recover  back  the  amount  paid  by  him  to  his 
predecessor,  and  so  on,  until  the  instrument  rested  where 
the  loss  should  fall.  This  view  was  most  forcibly  presented 
in  New  York,  where  the  drawee  paid  the  bill  upon  which 
the  payee's  name  had  been  forged  ;  and  it  was  held  that  he 
could  recover  back  the  amount,  although  over  two  months 
had  elapsed  before  notice  of  the  forgery  was  given,  and 
there  were  indorsers  prior  to  the  holder,  whom  it  was,  of 
course,  too  late  to  notify  of  dishonor  in  due  form.^ 

'  Davies  v.  Watson,  2  Nev.  &  M.,  709. 

''  Gloucester  Bank  v.  Salem  Bank,  17  Mass.,  33. 

'  Third  Nat.  Bank  v.  Allen,  59  Mo.  ;  Koontz  v.  Central  Nat.  Bank.,  51  Mo., 
275  ;  2  Parsons  N.  &  B.,  598.  See  White  v.  Continental  Nat.  Bank,  64  N.  Y., 
316;  Welch  V.  Goodwin,  123  Mass.,  77. 

*  See  chapter  XXXIII,  on  Excuses  for  Want  of  Notice,  §  1113  ;  Goddard  v. 
Merchants'  Bank,  4  Comst.,  149 ;  Ellis  v.  Ohio  Life,  etc.,  Ins.  Co.,  4  Ohio  St., 
658. 

"  Canal  Bank  v.  Bank  of  Albany,  i  Hill  (N.  Y.),  291  (1841),  Cowen,  J.,  saying: 
"  I  am  not  willing  to  concede  that  delay  in  the  abstract,  as  seems  to  be  supposed, 
can  deprive  the  party  of  his  remedy  to  recover  back  money  paid  under  the  cir- 
cumstances before  us.     It  is  said  the  defendants  had  indorsers  behind  them 


o 


82  FORGERY  OF  NEGOTIABLE  INSTRUMENTS.         §   1372^. 


§  1372(2.  Whe7i  forged  paper  need  not  be  returned. — If 
the  party  has  paid  money  for  or  upon  a  forged  instrument, 
and  some  parties  to  it  are  genuine,  he  must  in  a  reasonable 
time  after  discovering  the  forgery  offer  to  return  the  paper, 
so  as  to  enable  the  party  responsible  to  him  to  make  the 
best  of  it  he  can  ;  but  if  it  be  an  utter  forgery,  with  no 
genuine  party  to  it  but  the  transferrer,  it  would  be  an  idle 
ceremony  to  it,  and  the  consideration  paid  may  be  recovered 
without  doing  so.^ 

§  1372^.  If  a  person  wrongfully  convert  a  bill  or  note 
and  receive  the  amount,  the  owner  may  either  sue  in  tort,  or 
may  waive  the  tort  and  recover  the  money  as  received  to  his 
use.^  And  the  party  wrongfully  collecting,  and  holding  on 
deposit,  the  amount  paid  to  him,  upon  a  check  bearing  a 
forged  indorsement,  is  liable  to  the  owner,  notwithstanding 
he  may  have  forwarded  the  check  in  a  negligent  manner ; 
such  negligence  being  collateral  to  the  transaction,  and 
not  the  proximate  cause  of  leading  the  third  party  into  the 
mistake  committed.^ 


and  by  delay  they  were  prevented  from  charging  them,  by  giving  seasonable 
notice.  Admit  this  to  be  so  ;  the  plaintiffs  did  not  stand  in  the  relation  of  a 
holder.  They  were  the  drawees,  and  advanced  the  money  by  way  of  payment. 
They  would  never,  therefore,  think  of  notice  to  the  defendants  till  they  acciden- 
tally discovered  the  forgery.  If  there  had  been  any  unreasonable  delay  after  such 
discovery,  another  question  would  be  presented.  I  infer  from  the  rigor  of  the 
case  cited  by  the  defendants'  counsel  (Cocks  v,  Masterman,  9  Barn.  &  Cress., 
902),  that  he  would  exact  as  great,  indeed  greater,  diligence  in  giving  notice 
than  is  necessary  to  fix  an  indorser."  .  ..."  I  doubt  whether  this  case  can  be 
sustained,  except  upon  its  own  peculiar  circumstances,  if  it  can  be  sustained  at 
all.  In  all  the  previous  cases,  where  a  recovery  had  been  denied,  there  was 
carelessness  or  delay,  or  both." 

'Brewster  v.  Burnett,  125  Mass.,  68;  Smith  v.  McNair,  19  Kansas,  382; 
First  N.  B.  V.  Peck,  8  Kansas,  660. 

"  Lamine  v.  Dorrell,  Ld.  Raymond,  1216  ;  Neate  v.  Harting,  6  Exch.,  349  J 
Hollins  V.  Fowler,  44  L.  J.  (Q.  B.),  169  ;  Arnold  v.  Cheque  Bank,  i  C.  P.  Div. 
L,  R.,  578. 

» Arnold  v.  Cheque  Bank,  i  C.  P.  Div.  L.  R.,  578  (1876)  ;  18  Moak's  E.R.,  20d. 


CHAPTER  XLIII. 

ALTERATION    OF    NEGOTIABLE    INSTRUMENTS. 


I 


SECTION  I. 

DEFINITION   AND   NATURE   OF  ALTERATION. 

§  "^ZyZ-  Any  change  in  the  terms  of  a  written  contract 
which  varies  its  original  legal  effect  and  operation,  whether 
in  respect  to  the  obligation  it  imports,  or  to  its  force  as 
matter  of  evidence,  wiien  made  by  any  party  to  the  con- 
tract, is  an  alteration  thereof,  unless  all  the  other  parties  to 
the  contract  gave  their  express  or  implied  consent  to  such 
change.  And  the  effect  of  such  alteration  is  to  nullify  and 
destroy  the  altered  instrument  as  a  legal  obligation. 

§  1373^.  Differe^tce  between  Spoliation  and  Altej^ation. — 
This  principle  of  law  is  essential  to  the  integrity  and 
sanctity  of  contracts ;  and  in  Enijland  it  has  been  extended 
to  a  degree  which  has  not  found  favor  in  the  American 
courts.  There  it  has  been  adjudged  that  a  deed,  bill,  note, 
guaranty,  or  other  written  executory  contract  is  avoided  by 
any  material  change  in  the  terms  thereof,  although  that 
change  be  made  by  a  stranger,  upon  the  ground  that  the 
custodian  of  an  instrument  is  bound  to  preserve  its  integrity  ; 
and  as  it  would  be  avoided  if  altered  by  himself,  so  it  should 
be  avoided  if,  through  his  negligence,  it  were  altered  by 
another.^     And  the  like  views  prevail  in  Scotland.^ 


'  Master  v.  Miller,  4  Term  R.,  320 ;  2  H,  Bl.,  140,  where  the  alteration  was 
made  by  a  stranger.     Davidson  v.  Cooper,  11  M.  &  W.,  778  ;  13  M.  &  W.,  243. 

'  Robinson's  Practice  (N.  ed.),  137  ;  Byles  on  Bills  (Sharswood's  ed.),  472; 
Murchie  v.  Macfarlane,  Thomson  on  Bills,  1 10. 

(383) 


384  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.     §1373^. 

In  the  United  States  a  more  liberal  view  prevails  as  to 
the  rights  of  the  beneficiary  of  a  written  contract,  and  if  a 
strancrer,  without  any  complicity  with  him,  intermeddles  and 
changes  its  terms,  he  is  deemed  a  spoliator,  and  the  act  is 
termed  a  spoliation,  being  an  infringement  of  the  right  of 
all  parties ;  but  it  is  considered  more  the  misfortune  than 
the  fault  of  the  holder,  that  a  third  party  should  have  tres- 
passed on  his  property,  and  he  is  not,  therefore,  made  the 
victim  of  his  conduct.  Therefore,  the  term  alteration  in 
this  country  is  understood  to  signify  a  material  change  in 
the  contract  by  a  party  thereto,  and  no  spoliation  will  avoid 
a  bill  or  note  (being  the  act  of  a  stranger),  unless  it  be  so 
great  as  to  render  the  words  unintelligible  or  uncertain,  in 
which  case  it  is  regarded  as  a  virtual  destruction  of  it.^ 

The  English  doctrine  that  spoliation  by  a  stranger 
avoided  the  instrument,  has  been  characterized  by  Judge 
Story  as  repugnant  to  common  sense  and  justice,  and  de- 
serving no  better  name  than  a  technical  quibble.^  In 
California,  where  a  draft  was  delivered  to  S.  for  plaintiff, 
and  S.  altered  it,  it  was  held,  in  the  absence  of  proof,  that 
the  plaintiff  authorized  the  alteration  to  be  a  spoliation,  and 
not  to  vitiate  the  draft.^  Alteration  may  be  made  before 
delivery  to  the  payee  as  well  as  afterward.  Thus  if  a  note 
be  signed  by  a  surety,  or  coparty,  and  left  in  the  hands  of 
a  coprincipal,  be  altered  before  delivery  by  one  of  the 
promisors,  the  surety  copromisor  is  discharged,  although 
the  alteration   be  made  without  the  payee's  knowledge.'' 

'  Piersol  v.  Grimes,  30  Ind.,  129  (1868)  ;  Crockett  v.  Thomason,  5  Sneed,  342  ; 
Bi^elowv  Stephen,  35  Vt.,  521  ;  Terry  v.  Hazlewood,  i  Duvall,  loi  ;  Lubbenng 
V  Kohlbrecher,  22  Mo.,  596  ;  Medlin  v.  Platte  &  Co.,  8  Id.,  235  ;  Ford  v.  Ford, 
17  Pick  ,  418  ;  Lee  v.  Alexander,  9  B.  Mon.,  25  ;  Waring  v.  Smith,  2  Barb.  Ch. 
R.,  119;  Davis  V.  Carlisle,  5  Ala.,  707  ;  Vogle  v.  Ripper,  34  111.,  106  ;  Blakey  v. 
Johnson,  13  Bush  (Ky.),  197  ;  Laugenberger  v.  Kroeger,  48  Cal.,  147  ;  Cochran 
V.  Nebeker,  48  Ind.,  459  ;  Bucklen  v.  Huff,  53  Ind.,  474  ;  Union  N.  B.  v.  Roberts. 
45  Wise,  373. 

""  United  States  v.  Spalding,  2  Mason,  478. 

'  Laugenberger  v.  Kroeger,  48  Cal.,  147. 

*  Greenfield  Savings  Bank  v.  Stowell,  123  Mass.,  196  ;  Draper  v.  Wood,  112 
Mass.,  315  ;  Wood  v.  Steele,  6  Wall.,  80;  Fay  v.  Smith,  i  Allen,  477  ;  Goodman 
V.  Eastman,  4  N.  H.,  455  ;    17  American  Rep.,  92,  97  ;    Blakey  v.  Johnson,   13 


§   1375-       DEFINITION  AND  NATURE  OF  ALTERATION.  385 

And  if  a  note  be  indorsed  by  tlie  payee  for  the  maker's 
accommodation,  be  materially  altered,  however  innocently, 
by  the  accommodation  maker,  and  then  discounted,  the 
holder  can  not  recover.-' 

§  1374.  It  was  insisted  at  onetime  that  the  avoidance  by 
alterations  applied  only  to  deeds,  because  of  their  solemn 
character ;  but  where  the  date  of  a  bill  was  altered  by  the 
payee,  and  then  indorsed  by  him  to  a  holder  for  value  with- 
out notice,  it  was  held  that  the  latter  could  not  recover,  and 
it  was  well  said  by  Ashurst,  J.  :  ^  "  There  is  no  magic  in 
parchment  or  wax,  and  the  principle  to  be  extracted  from 
the  cases  is  that  any  alteration  avoids  the  contract."  And 
such  are  the  constant  and  essential  uses  to  which  negotiable 
instruments  are  put,  that  it  has  been  considered  that  more 
dangerous  consequences  would  flow  from  a  leniency  toward 
alterations  in  bills  and  notes  than  in  deeds.^ 

§  1375.  In  what  alteration  consists. — The  alteration  may 
consist  in  changing  (i)  its  date,  or  (2)  the  time  or  (3)  place 
of  payment,  or  (4)  the  amount  of  principal  or  (5)  interest 
to  be  paid,  or  (6)  the  medium  or  currency  in  which  pay- 
ment is  to  be  made,  or  (7)  the  number  or  the  relations  of 
the  parties,  or  in  (8)  the  character  and  effect  of  the  instru- 
ment as  matter  of  obligation  or  evidence. 

And  the  alteration  may  be  effected  by  adding  to  the  in- 
strument some  new  provision,  or  by  substituting  one  pro- 
vision for  another,  or  by  obliterating  or  subtracting  from  it 
some  provision  incorporated  in  it. 

It  will  be  no  answer  to  a  plea  of  alteration  that  its  opera- 
tion is  favorable  to  the  parties  affected  by  it,  whether  in 
lessening  the  amount  to  be  paid,  enlarging  the  time  of  pay- 


Bush  (Ky.),  202  ;  Bank  of  U.  S.  v.  Russell,  3  Yates,  391  ;  Aldrich  v.  Smith,  37 
Mich.,  470;  Bradley  v.  Mann,  37  Mich.,  i  ;  contra,  Bingham  v.  Reddy,  5  Ben., 
266. 

'  Aldrich  V.  Smith,  37  Mich.,  470. 

^  Master  v.  Miller,  4  Term  R.,  320  ;   2  H.  Bl.,  140. 

'  U.  S.  Bank  v.  Russell,  3  Yeates,  391. 

Vol.  II.— 25 


386  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   1 3  76. 

ment,  or  otherwise.  No  man  has  a  right  to  vary  another's 
obHgations  at  his  discretion,  whether  for  his  good  or  ill.  It 
ceases  when  varied  to  be  that  other's  act,  and  it  suffioes  for 
him  to  say,  '' Non  hcBc  in  foedera  venir  It  may  be  ques- 
tioned whether  or  not  prolongation  of  time,  decrease  of 
amount,  or  other  apparently  beneficial  alteration,  is  really 
so.  A  debtor  may  make  provision  for  payment  on  one 
day,  and  not  be  ready  on  another.  A  decrease  of  the 
amount  destroys  the  identity,  and  confuses  the  traces  of  his 
obligation,  and  every  reason  of  policy  and  principle  forbid 
that  the  laws  should  tolerate  tampering  with  the  rights  and 
engagements  of  others.  In  Indiana,  where  the  note  bore 
interest  at  ten  per  cent.,  and  the  holder  inserted  the  words 
"  after  maturity  "  it  was  held  that  these  words  avoided  it 
"  because  they  changed  in  a  material  matter  the  legal  effect 
of  the  note,"  although  they  did  not  operate  to  the  prejudice 
of  the  maker.-'  An  alteration  of  a  bill  before  acceptance 
discharges  drawer  and  indorsers.^  Evidence  of  alteration  is 
admissible  under  a  plea  of  non  assumpsit,  or  nil  debetf  but 
it  is  safer  to  allege  the  alteration.* 


SECTION  II. 

ALTERATIONS   OF  DATE,  TIME,  PLACE,  AMOUNT,  AND  MEDIUM   OF 

PAYMENT. 

§  1376.  In  \.\\t  first  place,  as  to  the  date  of  the  bill  or 
note,  it  is  obviously  a  most  material  part  of  it,  indicating 
the  time  it  became  a  subsisting  contract,  and  the  time  when 
the  contract  is  to  be  performed  in  many  cases,  and  a  thou- 
sand circumstances  may  arise  adding  additional  consequence 

'  Coburn  v.  Webb,  56  Ind.,  100.  '  Bathe  v.  Taylor,  16  East.,  412, 

'  Boomer  v.  Koon,  13  N.  Y.  S.  C.  (6  Hun),  645  ;  Cook  v.  Coxwell,  2  C.  M.  & 
W.,  291. 

*  Van  Santvoord  on  Pleading  (3d  ed.),  565. 


§   137^-  DATE,    TIME,    PLACE,    AND    AMOUNT.  387 

to  the  question  when  the  instrument  was  issued.  There- 
fore, any  change  in  the  date  imparts  a  new  legal  effect  and 
operation  to  it,  and  is  a  material  alteration,  which  avoids  it 
as  against  prior  parties  and  sureties  even  in  the  hands  of  a 
bona  fide  holder  without  notice.^ 

It  matters  not  that  the  time  of  payment,  by  relation  to 
the  date,  may  be  prolonged,  for  suffice  it  to  say  it  was  not 
the  time  agreed  on.  Thus,  in  a  case  before  the  United 
States  Supreme  Court,  where  the  maker  of  the  note, 
drawn  payable  one  year  from  date,  changed  "  September 
11"  to  "October  ii"  before  delivery,  without  consent  of 
his  surety,  it  was  held  that  the  note  was  avoided  as  to  him.' 

The  alteration  may  be  in  the  year,^  or  the  month,*  or  the 
day  of  the  month,^  or  in  all  three.® 

Even  where  a  note  was  altered  in  date  to  one  day  pre- 
vious, and  the  effect  as  to  its  time  of  maturity  remained 
unchanged,  because  of  the  circumstance  that  originally  it 
would  have  fallen  due,  as  its  face  imported,  on  Sunday,  and 
therefore  would  have  been  legally  due  on  Saturday,  and  by 
the  change  of  date  it  fell  due  on  Saturday,  so  that  in  point 
of  fact  Saturday  in  either  case  was  its  day  of  payment,  it 
was  held  that  it  was  avoided  by  the  alteration. "^     And  the 


'  Master  v.  Miller,  4  Term  R.,  320;  2  H.  Bl,  140;  Owings  v.  Amott,  33 
Miss.,  406;  Britton  v.  Dierker,  46  Mo.,  592;  Brown  v.  Straw,  6  Neb.,  536; 
Overton  v.  Mathews,  35  Ark.,  147.     See  as  to  Checks,  §  1658. 

=  Wood  V.  Steele,  6  Wall.,  80  (1867),  Swayne,  J.,  saying:  "The  grounds  of 
the  discharge  in  such  cases  are  obvious.  The  agreement  is  no  longer  the  one 
into  which  "the  defendant  entered.  Its  identity  is  changed ;  another  is  substi- 
tuted without  his  consent,  and  by  a  party  who  had  no  authority  to  consent  for 
him.  There  is  no  longer  the  necessary  concurrence  of  minds.  If  the  instru- 
ment be  under  seal,  he  may  well  plead  that  it  is  not  his  deed,  and  if  it  be  not 
under  seal,  that  he  did  not  so  promise.  In  either  case  the  issue  must  necessarily 
be  found  for  him.  To  prevent  such  tampering,  the  law  does  not  permit  the 
plaintiff  to  fall  back  upon  the  contract  as  it  was  originally.  In  pursuance  of  a 
stern  but  wise  policy,  it  annuls  the  instrument,  as  to  the  party  sought  to  be 
wronged." 

'  Russel  V.  McNab  (Scotch  case),  Thomson  on  Bills,  in. 

*  Jacob  V.  Hart,  2  Stark.,  45. 

'  Outhwaite  v.  Luntley,  4  Camp.,  179;  Master  v.  Miller,  4  T.  R  ,  320.  See 
tupra. 

'  Walton  V.  Hastings,  4  Camp.,  223. 

^  Stephens  v.  Graham,  7  Serg.  &  R.,  505.  Approved  in  Craighead  v.  McLoney 
S.  C.  Penn.,  January,  1882  ;  Central  L.  J.,  March  10,  1882,  p.  193. 


388  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   1377. 

decision  seems  clearly  right.  The  maker  appeared  to  be 
bound  as  of  a  day  prior  to  his  binding  himself.  The  iden- 
tity of  his  contract  was  destroyed,  and  its  legal  effect 
changed.  Questions  of  his  own  and  of  others'  solvency 
might  arise,  making  a  day  material.  His  memory  and  his 
memoranda  might  be  challenged  or  contradicted.  And 
then,  although  no  actual  injury  might  result,  the  inflexi- 
bility of  the  principle  is  essential  to  prevent  its  possibility. 
It  has  been  held,  that  the  date  of  an  indorsement  or  as- 
signment is  not  a  material  part  of  it,  and  that  an  alteration 
of  it  will  not  vitiate  the  holder's  title  to  the  whole  amount  ;^ 
but  the  date  may  be  very  material  when  the  question  arises 
whether  or  not  the  indorsement  was  made  before  or  after 
maturity,  and  this  doctrine  does  not  seem  to  us  maintain- 
able. 

§  1377.  Alteration  in  time  of  payment. — In  the  second 
place,  as  to  the  time  of  payment,  specified  or  implied  in  the 
bill  or  note,  a  change  of  such  time  is  obviously  of  the  same 
nature  as  a  change  in  the  date,  identical  in  principle  and 
effect ;  and  whether  such  change  delays,  accelerates,  or  pre- 
serves in  legal  effect  the  time  specified  or  implied  for  pay- 
ment, it  constitutes  a  material  alteration.^  Thus,  if  the 
note  be  changed  so  as  to  fall  due  a  year  later,^  or  if  the  bill 
be  payable  on  demand,  and  is  altered  to  read  one  day  after 
date,  it  is  materially  varied;*  so  a  substitution  of  "after 
date"  for  "after  sight ";^  or  the  date  of  day,  or  month,  or 
year,  effects  the  same  result.^  And  where  a  party  gave  au- 
thority to  another  to  draw  a  bill  upon  him  at  "  ninety  days 
from    the    loth  of  April,"  an  alteration   to  the  "  i6th  of 

'Griffith  V.  Cox,  i  Tenn.,  210. 

^Miller  v.  Gilleland,  19  Penn.  St.,  119;  Lesler  v.  Rogers,  18  B.  Mon.,  528; 
Outhwaite  v.  Luntley,  4  Camp.,  179  ;  Bathe  v.  Taylor,  15  East.,  412. 

'  Wyman  v.  Yeomans,  84  111.,  403. 

*  Murdoch  v.  Lee,  4  Pat.  Ap.  Ca.,  261  (Scotch  case),  Thomson  on  Bills,  in, 
the  object  being,  as  the  annotator  observes,  to  make  the  bill  bear  interest. 

'  Long  V.  Moor,  3  Esp.,  155,  note;  Anderson  v.  Langdale,  3  B.  &  Ad.,  660. 

•Thomson  on  Bills  (Wilson's  ed.),  in  ;  Lewis  v.  Kramer,  3  Md.,  265. 


§   137^-  DATE,    TIME,    PLACE,    AND    AMOUNT.  389 

April,"  unauthorized  by  him,  was  held  to  discharge  his  lia- 
bility as  acceptor  under  the  authority,  although  the  time  of 
payment  was  extended  six  days.^ 

§  1378.  Altej'atio7t  in  the  place  of  payment. — In  the  third 
place,  as  to  place  of  payment,  when  the  bill  or  note  has 
been  drawn  payable  at  a  particular  place,  the  obliteration 
of  such  place  so  as  to  make  it  payable  generally  constitutes 
a  material  alteration  as  against  all  parties  not  consenting  ;^ 
and  likewise  where  no  place  is  designated,  it  is  a  material 
alteration  to  insert  one.^  And  a  fortiori  it  is  a  material  al- 
teration to  obliterate  one  place  and  insert  another ;  as,  for 
instance,  to  erase  an  acceptance  payable  at  "  Bloxham  & 
Co.'s,"  and  insert  the  name  of  "  Esdaile  &  Co."  in  lieu.'* 
Where  the  drawer  of  a  bill,  after  acceptance  and  without 
acceptor's  consent,  wrote  after  the  acceptance  "payable  at 
Mr.  B.'s,  Chiswell  street,"  it  was  held  a  material  alteration, 
and  the  acceptor  discharged  ;^  though  in  England  it  was 
formerly  held  otherwise.^  So,  striking  out  "in  London," 
and  thus  making  the  bill  payable  generally.''  So,  adding 
to  a  note  "payable  at  the  Bank  of  Smyrna."^  Even  a  bona 
fide  holder  can  not  recover  upon  an  acceptance  so  altered, 
nor  upon  a  note  so  altered  against  parties  prior  to  the  one 


'  Lewis  V.  Kramer,  3  McL,  265.     See  Benedict  v.  Miner,  58  111.,  19. 

'  McCurbin  v.  TurnbuU  (Scotch  case),  Thomson  on  Bills,  112. 

'  Chitty  on  Bills  (13  Am.  ed.),  [*i83,  184],  209-211;  Nazro  v.  Fuller,  24 
Wend.,  374  ;  Townsend  v.  Star  Wagon  Co.,  10  Nebraska,  615  ;  Whitesides  v. 
Northern  Bank,  10  Bush  (Ky.),  501.  In  this  Kentucky  case  the  indorsee  of  a 
bill,  accepted  generally,  caused  to  be  written  after  the  word  "  accepted  "  the  ad- 
ditional words  "  payable  at  the  First  National  Bank  of  Franklin,"  it  was  held, 
that  all  parties  not  consenting  to  the  alteration  were  discharged. 

*  Tidmarsh  v.  Grover,  i  Maule  &  S.,  735  (1813)  ;  Bank  of  Ohio  Valley  v.  Lock- 
wood,  13  W.  Va.,  392. 

*  Cowie  V.  Halsall,  4  B.  &  Aid.,  197  (E.  C.  L.  R.) ;  3  Stark.,  36  ;  see  also  Tid- 
marsh V.  Grover,  i  Maule  &  S.,  735 ;  Rex  v.  Treble,  2  Taunt.,  328. 

*Trapp  V.  S])earman,  3  Esp.,  57,  in  which  case  the  insertion  in  a  bill  "  when 
due  at  the  Crosskeys,  Blackfriar's  Road,"  was  held  immaterial.  See  also  Marsor 
V.  Petit,  I  Camp.,  82. 

'  Burchfield  v.  Moore,  25  Law  &  Eq.,  123 ;  5  EI.  &  B.,  683. 

'  Sudler  v.  Collins,  2  Hous.,  538.  See  also  Morehead  v.  Parkersburg  Nat 
Bank,  5  W.  Va.  (Hagans),  74. 


390  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   ^379- 

making  the  alteration.*  Changing  the  place  of  date  would 
change  the  rights  of  the  parties,  and  hence  is  an  altera- 
tion.^ 

§  1379-  Effect  of  statutory  provisions  as  to  general 
acceptances  do  not  vary  principles  applicable  to  alteration, 
— In  England,  and  in  many  of  the  United  States,  it  is  pro- 
vided by  statute  that  acceptances  of  bills  drawn  payable  at 
a  banking  house,  or  other  particular  place,  shall  be  deemed 
general  acceptances,  unless  the  drawer  adds  special  words 
limiting  the  payment  to  a  particular  place.  The  effect  of 
these  statutory  provisions  is  that  it  is  not  necessary  to  aver 
or  prove  presentment  at  such  place  in  an  action  against  the 
acceptor,  who,  however,  may  show  any  loss  resulting  from 
non-presentment  there.  But  an  indorser  is  absolutely  dis- 
charged by  failure  to  make  due  presentment  there.' 

These  provisions  do  not  affect  the  rules  applying  to  al- 
terations, because,  though  the  acceptance  be  general,  the 
insertion  of  a  particular  place  induces  the  holder  to  present 
the  bill  there,  instead  of  to  the  acceptor  himself ;  and  the 
bill  might  be  treated  as  dishonored,  and  the  acceptor  put  to 
inconvenience,  when  in  fact  no  presentment  had  been 
made.*  The  acceptor  has  a  right  to  deposit  the  amount  at 
the  particular  place  designated,  and  that  done  his  obligation 
is  discharged.  Therefore,  the  insertion  of  a  particular  place 
by  the  holder  would  materially  vary  his  rights.  Besides,  as 
said  by  Abbott,  C.  J.  :  "  Suppose  a  bill  so  altered  to  be  in- 
dorsed to  a  person  ignorant  of  the  alteration,  his  right  to 
sue  his  indorser  would,  as  the  bill  appears,  be  complete, 
upon  default  made  where  the  bill  is  payable  ;  whereas,  in 
truth,   the  acceptor,  not  having  in  reality  undertaken  to 


'  Nazro  v.  Fuller,  24  Wend.,  374  ;  Sudler  v.  Collins,  2  Hous.,  538. 

*  Mahaiwe  Bank  v.  Douglass,  31  Conn.,  170. 

3  See  I  and  2  Geo.  IV.,  c.  78  ;  chapter  XX,  on  Presentment  for  Payment,  §  641 
etseq.,  vol.  i  ;  Chitty  on  Bills  [*i82],  209  ;  2  Parsons  N.  &  B.,  548  ;  also  chapter 
XVIII,  §  519,  vol.  I. 

♦  Ibid. 


§   1379-  DATE,    TIME,    PLACE,    AND    AMOUNT.  39I 

pay  there,  would  have  committed  no  default  by  such  non- 
payment. I  am  of  opinion,  therefore,  that  the  alteration  is 
in  a  material  part  of  the  bill,  and  the  acceptor  is,  in  conse- 
quence, discharged."^  And  the  principle  has  been  applied 
in  a  number  of  American  cases.^ 

'  Mackintosh  v.  Haydon,  Ry.  &  M.,  362;  to  same  effect,  Desbrowe  v.  Weathcrby, 
I  M.  &  Rob.,  438  ;  Cowie  v.  Halsall,  4  B.  &  Aid.,  497  ;  Taylor  v.  Moseley,  i  M. 
&  Rob.,  439  n.  ;  Gardner  v.  Walsh,  5  El.  &  13.,  S3  ;  Burchficld  v.  Moore,  5  El.  «& 
B.,  683.  In  Burchtield  v.  Moore,  25  Eng.  L.  &  Eq.,  123  ;  5  El.  &  B.,  683.  the 
holder  of  a  bill,  without  the  acceptor's  consent,  altered  it  by  inserting  "  payable  at 
the  Bull  Inn,  Aldgate."  Lord  Campbell,  C.  J.,  said  :  "  By  virtue  of  the  i  &  3 
Geo.  IV.,  c.  78,  these  words,  if  in  the  handwriting  of  the  defendant,  would  still 
leave  the  acceptance  a  general  acceptance.  Nevertheless,  three  very  eminent 
judges  have  successively  held — :Lord  Tenterden,  in  Mackintosh  v.  Haydon  ;  Lord 
Chief-Justice  Tindal,  in  Desbrowe  v.  Weatherby ;  and  Lord  Lyndhurst,  in 
Taylor  v.  Moseley,  6  Car.  &  P.,  273— that  such  words,  although  they  do  not 
alter  the  direct  liability  of  the  acceptor,  do  vary  the  contract  between  others  who 
are  parties  to  the  bill ;  therefore,  that  if  interpolated  without  his  consent,  they 
may  prejudice  the  acceptor;  that  they  amount  to  a  material  alteration  of  the  bill, 
and  that  they  discharge  the  acceptor.  These  decisions  were  only  at  Nisi  Prius,  but 
they  have  been  long  acquiesced  in,  and  we  do  not  disapprove  of  them.  The 
plaintiff  here  is  a  bona  fide  holder  for  value,  without  notice  of  the  alteration  ;  but 
the  bill  must  be  considered  as  vitiated  in  the  hands  of  a  prior  holder.  The  de- 
fendant was  discharged  from  his  liability  as  acceptor  from  the  moment  when  the 
alteration  of  the  bill  had  been  consummated,  and  the  instrument  having  ceased 
in  point  of  law  to  be  an  accepted  bill,  the  indorsee  afterward  could  be  in  no  bet- 
ter situation  than  the  indorser.  As  soon  as  it  is  established  that  there  has  been 
a  material  alteration  in  a  bill  of  exchange,  the  particular  nature  of  the  alteration 
becomes  immaterial,  and  Master  v.  Miller,  4  Term  Rep.,  320 ;  S.  C.,  2  H.  Black, 
140,  becomes  an  authority.  There  a  bill  was  drawn  payable  to  A.  B.  While 
in  his  possession  the  date  was  altered,  and  the  bill  being  subsequently  indorsed  to 
the  plaintiffs,  who  were  (like  the  present  plaintiff)  bona  fide  indorsees  for  value, 
the  judgment  was  that  they  could  not  recover  against  the  acceptor.  Ashurst, 
J.,  says  :  'If  A.  B.  had  brought  the  action,  he  could  not  have  recovered,  because 
he  must  suffer  from  any  alteration  of  the  bill  whilst  in  his  custody  ;  and  the  same 
objection  must  hold  against  the  plaintiffs  who  derive  title  from  him.'  We  con- 
ceive, therefore,  that  in  this  case  the  plaintiff's  remedy  is  confined  to  a  right  to 
recover  the  consideration  for  the  bill,  as  between  himself  and  the  party  from 
whom  he  received  it.  A  similar  remedy  may  be  resorted  to  till  the  party  is  reached 
through  whose  fraud  or  laches  the  alteration  was  made.  He  ought  to  suffer ; 
for  '  a  party  who  has  the  custody  of  an  instrument  made  for  his  benefit,  is 
bound  to  preserve  it  in  its  original  state.'  And  Lord  Denman,  in  delivering  the 
judgment  of  the  Exchequer  Chamber,  in  Davidson  v.  Cooper,  intimates  a  strong 
oi)inion  that  Bigot's  Case,  11  Rep.,  26,  in  which  this  principle  is  acted  upon,  has 
hitherto  been,  and  still  ought  to  be,  upheld.  The  negotiability  of  bills  of  ex- 
change is  to  be  favored  ;  but  with  this  view,  it  is  material  that  their  purity 
should  be  preserved." 

2  Hill  V.  Cooley,  46  Penn.  St.,  259 ;  Oakey  v.  Wilcox,  3  How.  (Miss.),  330 ; 
White  V.  Haas,  32  Ala.,  430 ;  Nazro  v.  Fuller,  24  Wend.,  375.  In  this  case  there 
was  added  to  the  note  the  words  "payable  at  Wayne  County  Bank."  Nelson, 
C.  J.,  delivering  the  opinion  of  the  court,  said  :  "  I  was  at  first  inclined  to  think 
the  addition,  even  if  regarded  as  annexed  to  the  body  of  the  note,  was  not 
such  a  material  alteration  as  invalidated  it,  for  the  reason  that  the  desig- 
nation   of    the    place  of  payment   did   not   affect  the   rights   of  the   makers. 


392  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I380. 

§  1380.  Right  of  drawee  in  particular  city  or  town  to 
desio-nate  place  of  payment  therein. — Where  a  bill  is  ad- 
dressed to  a  drawee  at  a  particular  town  or  city,  but  with- 
out any  designation  of  a  particular  place  of  payment  therein, 
it  has  been  held  that  he  may  name  in  his  acceptance  a  par- 
ticular place  in  the  city,  without  its  having  the  effect  of 


....  But,  upon  further  consideration,  I  am  inclined  to  think,  when  the  courts 
use  the  language  that  the  note  is  payable  generally  and  universally,  though  the 
place  of  payment  be  fixed,  they  only  mean  to  say  that  it  is  so  to  be  regarded  for 
the  purposes  of  the  remedy,  and  that  payment  must  still  be  made  at  the  place  ; 
and  a  tender  elsewhere  is  no  bar.  I  have  found  no  authority  beyond  this  ;  and 
on  speaking  of  the  right  of  discharge  by  tender,  the  language  used  limits  it 
to  the  place  designated."  But  the  contrary  has  been  held  in  American  National 
Bank  v.  Bangs,  42  Mo.,  454.     The  note  sued  on  was  as  follows  : 

"  $1,000.  St.  Louis,  October  10,  1866. 

"  Three  months  after  date,  we  promise  to  pay  to  the  order  of  Fritsch  & 
Simonton,  New  York,  one  thousand  dollars,  for  value  received,  negotiable  and 
payable  without  defalcation  or  discount. 

"Due  at  Goodyear  Bros.  &^  DuramVs,  New  York,  Jan.  10-13. 

"Bangs  &  Deady." 

(Indorsed.)—"  Fritsch  &  SiMONTON." 

The  words  italicised  :  "  Due  at  Goodyear  Bros.  &>  Durand's,  New  York,  Jan. 
10-13,"  were  inserted  after  the  execution  of  the  note,  and  without  knowledge  of 
the  makers.  It  was  held  no  alteration.  And  the  court  said  :  "  The  question, 
then,  is,  whether  these  words  attached  to  the  foot  of  the  instrument  are  to  be 
taken  as  a  part  of  it,  or  only  a  private  memorandum,  which  can  in  no  way  affect 
the  liability  of  the  maker.  It  will  be  found,  upon  an  examination  of  the  authori- 
ties upon  this  question,  that  where  such  words  are  not  incorporated  in  the  body 
of  the  contract  itself,  nor  in  any  manner  annexed  to  the  instrument  by  the  maker, 
for  the  purpose  of  fixing  a  place  of  payment,  they  are  to  be  taken  as  a  mere 
memorandum,  and  therefore  immaterial.  Story  on  Prom.  Notes,  §  49  ;  Exon  v. 
Russell,  4M.  &  S.,  505;  Williams  v.  Waring,  10  Barn.  &  Cres.,  2.  The  same 
doctrine  is  fully  recognized  by  the  American  courts  in  all  the  leading  cases  that 
have  been  examined.  19  Johns,  391  ;  24  Wend.,  374.  It  should  be  kept  in 
mind  that  this  action  is  against  the  makers  themselves.  It  was  not  declared 
upon  as  a  note  payable  at  the  city  of  New  York.  There  is  no  contest  here  as  to 
a  right  to  tender  the  amount  at  any  designated  place  of  payment,  but  simply  as 
to  the  effect  of  the  addition  upon  their  general  liability  to  pay.  The  principle  is 
everywhere  recognized  that  the  maker  is  generally  and  universally  liable,  and  a 
demand  at  the  place  is  not  a  condition  precedent  of  payment.  Nazro  v.  Fuller, 
24  Wend.,  374.  The  memorandum  in  this  case  does  not  increase  or  vary,  in 
any  respect,  the  liability  of  the  defendants,  and  therefore  presents  no  obstacle  to 
the  recovery  of  the  plaintiff".  It  is  admitted  that  m  cases  where  there  was  a 
contest  between  the  holder  and  indorser,  such  an  addition  or  memorandum, 
without  the  knowledge  and  consent  of  the  latter,  has  been  held  sufficient  to  dis- 
charge him.  But  as  to  the  makers  themselves,  the  question  is  altogether  differ- 
ent. This  opinion  has  proceeded  upon  the  idea  that  the  words  in  question  were 
simply  a  memorandum  made  at  the  bottom  of  the  note  after  its  execution,  and 
not  intended  to  be  a  part  of  the  contract  itself.  Such  appears  to  be  the  fact,  so 
far  as  the  case  is  presented  here  by  the  record  ;  but  we  will  not  assume  it  to  be 
so  for  the  purpose  of  entering  up  judgment  in  this  court.  The  case  proved  at 
the  trial  did  not  authorize  the  declaration  of  law  made  by  the  court  that  the 
plaintiff  was  not  entitled  to  recover." 


§    1382.  DATE,    TIME,    PLACE,    AND    AMOUNT.  393 

altering  the  bill  so  as  to  discharge  the  drawer  or  indorser, 
the  place  named  becoming  pro  hac  vice  the  place  of  business 
of  the  acceptor.^  "  Such  acceptance  is  not  a  departure  from 
the  tenor  of  the  bill.  It  merely  fixes  a  place  of  payment 
for  the  mutual  convenience  of  the  acceptors  and  the  holder, 
and  can  work  no  possible  injury  to  the  drawer  or  indorsers, 
as  it  will  not  affect  the  time  for  the  presentment  of  the  bill 
to,  or  for  the  service  of  notice  of  non-payment  on,  the  par- 
ties entitled  to  such  notice."^  And  it  has  been  said  that 
even  if  the  bill  were  payable  at  a  particular  store,  counting- 
house,  or  office  in  the  city,  it  would  not  be  a  material  alter- 
ation to  name  in  the  acceptance  another  place  in  the  same 
city.^ 

§  1 38 1.  Drawee  can  not  designate  place  of  payment  in 
another  city  or  town. — But  if  the  drawee  were  to  accept  a 
bill  so  as  to  make  it  payable  at  another  city  or  town,  it 
would  be  a  qualified  acceptance,  and  the  holder  by  taking 
it  would  discharge  the  drawer  and  indorsers."*  It  was  so 
held  in  New  York,  where  a  bill  addressed  to  "  E.  C.  H.,  of 
New  York,"  was  "  accepted  payable  at  American  Exchange 
Bank,  Clayville  Mills,"  which  was  in  another  county;^  and 
so  where  a  bill  addressed  to  A.  Y.  &  Co.,  at  Coburg,  Upper 
Canada,  was  accepted  "  Payable  at  the  Bank  of  Upper 
Canada,  Port  Hope."^ 

§  1382.  Right  to  insert  place  of  payment  over  drawee  s 
signature  of  acceptance.  Query  ? — In  Kentucky,  it  has 
been  held,  that  where  one  indorses  a  bill  for  accommoda- 
tion of  the  drawee,  it  bearing  at  the  time  the  drawee's  name 

'  Troy  City  Bank  v.  Lauman,  19  N.  Y.,  480  (1859) ;  Niagara  District  Bank  v. 
Fairman,  31  Barb.,  405  (i860)  ;  Shuler  v.  Gilette,  19  N.  Y.  S.  C.  (12  Hun),  280 
(1877). 

'^  Niagara  District  Bank  v.  Fairman,  supra,  E.  D.  Smith,  J. 

'  Troy  City  Bank  v.  Lauman,  supra.  Strong,  J. 

♦  Rowe  V.  Young,  2  B.  &;  B.,  165  (6  E.  C.  L.  R.) ;  Redfield  &  Bigelow's  Lead. 
Gas.,  329. 

"  Walker  v.  Bank  of  the  State  of  N.  Y.,  13  Barb.,  637  (1852). 

'  Niagara  District  Bank  v.  Fairman,  31  Barb.,  404  (1S60)  ;  see  Todd  v.  Bank 
of  Ky.,  3  Bush  (Ky.),  645,  infra. 


394  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   1 3 82. 

written  across  its  face,  and  leaves  it  in  the  drawee's  hands 
to  be  used  by  him  to  raise  money,  he  thereby  confers  au- 
thority on  him  to  write  the  acceptance  above  his  signature, 
and  designate  therein  a  place  of  payment.  And  the  court — ■ 
basing  its  decision  also  upon  the  ground  that  the  acceptance 
being  in  blank,  the  parties  to  the  bill  had  afforded  an  oppor- 
tunity for  it  to  be  filled  up  m  a  manner  different  from  their 
agreement,  would  be  bound  to  a  bona  fide  holder  without 
notice — sustained  action  by  the  holder  against  all  the  par- 
ties thereto/  In  a  subsequent  case  this  view  was  confirmed 
by  the  court,  not,  however,  without  indications  of  reluctant 
acquiescence  in  it.^  And  indeed  it  does  not  seem  to  us 
sustainable  upon  reason  or  authority.  The  mere  name  of 
the  drawee  written  across  the  bill  does  not  signify  an  in- 
choate, skeleton  undertaking,  like  that  of  an  indorser  in 
blank  ;  or  if  a  bill  is  blank  in  respect  to  amount,  time,  or 
place  of  payment,  it  constitutes  a  full  and  complete  accept- 
ance in  itself  ;  and  although  it  may  be  readily  varied  by 
additions,  without  imparting  a  suspicious  appearance  to  the 
bill,  that  is  a  consequence  of  the  nature  of  the  engagement, 
and  not  of  the  carelessness  or  confidence  of  the  acceptor. 
Therefore  if  it  be  varied,  an  alteration  is  made,  and  the 
prior  parties  are  discharged. 


'  Rogers  v.  Posters,  I  Mete.  (Ky.),  645  (1858). 

"^  Todd  V.  Bank  of  Ky.,  3  Bush  (Ky.),  626  (1868).  In  this  case  the  drawee  of 
the  bill  wrote  over  his  acceptance,  "  accepted  payable  at  the  Northern  Bank, 
Lexington."  Held^  that  the  indorser  was  not  discharged,  Williams,  J.,  saying  : 
"Although  we  might  be  inclined  to  deny  this  implied  power  in  the  drawee  as 
the  better  opinion,  if  this  question  was  now  for  the  first  time  before  this  court, 
yet,  in  the  face  of  an  express  decision  of  this  tribunal,  which  has  remained  for 
ten  years  unaltered  by  legislative  action  or  judicial  construction,  and  when  hun- 
dreds of  thousands  of  dollars  of  this  class  of  paper  have  been  taken,  and  are 
perhaps  now  held  on  its  faith,  and  regarding  this  rule,  since  the  adoption  of  it 
by  this  court,  as  impliedly  entering  into  all  such  contracts,  we  do  not  deem  it  of 
sufficient  importance  to  overrule  it,  and  thus  unsettle  a  recognized  rule  of  con- 
tracts, and  perhaps  jeopardize  a  large  amount  of  such  paper.  Besides,  there  is 
much  reason,  when  the  paper  is  for  the  accommodation  of  the  drawers  and  ac- 
ceptor, as  in  this  instance,  to  infer,  from  the  transaction  and  nature  of  the  paper, 
an  implied  authority  in  those  for  whose  use  it  is  made  to  appoint  the  place  ot 
payment,  unless  one  has  been  already  expressly  designated  in  the  bill,  as  this 
would  more  generally  make  the  paper  answer  the  purposes  of  the  beneficiaries 
and  objects  of  its  creation." 


^   1383.  DATE,    TIME,    PLACE,    AND    AMOUNT.  395 

§  1383.  Memorandum  of  place  of  pay  )ne7it. — Whether  a 
memorandum  of  the  place  of  payment  is  to  be  considered 
as  a  part  of  the  contract,  or  merely  as  a  direction  where 
payment  will  be  made,  has  been  questioned ;  but  it  seems 
now  settled  that  it  enters  into  the  contract  and  is  a  material 
alteration. 

In  Bank  of  America  v.  Woodworth,  i8  Johns,  315,  it 
appeared  that  an  accommodation  note  had  been  made, 
dated,  and  indorsed  in  blank  at  Albany,  where  the  parties 
resided,  and  that  the  maker,  without  the  indorser's  knowl- 
edge or  consent,  wrote  in  the  margin,  "  payable  at  the  Bank 
of  America,"  i.  e.,  in  New  York  City.  The  Supreme  Court 
held  the  alteration  immaterial,  on  the  ground  that  an  in- 
dorser  in  blank  leaves  the  place  of  payment,  w^hen  none  is 
designated,  to  the  subsequent  discretion  of  the  maker,  ex- 
cept only  when  he  appoints  one  in  bad  faith,  or  at  an  un- 
reasonable distance. 

But  this  decision  was  overruled  on  appeal  (Woodworth 
V.  Bank  of  America,  19  Johns,  391),  the  court  deciding 
that  a  written  instrument  might  be  varied  by  a  memoran- 
dum in  the  margin,  and  that  the  terms  of  such  memorandum 
had  the  same  effect  as  if  contained  in  the  body  of  the  in- 
strument,^ and  that  this  was  a  material  alteration,  because 
"it  subjected  the  indorser  to  new  and  unexpected  liabilities. 
By  the  note,  as  originally  drawn,  he  bound  himself  to  pay 
in  the  event  of  non-payment  on  a  demand  being  made  of 
the  maker  personally,  or  at  his  residence ;  by  the  addition 
of  the  memorandum,  he  is  made  liable  upon  a  demand  of 
payment  at  New  York,  which,  but  for  that  memorandum, 
would  have  been  perfectly  nugatory.  It  rendered  valid  a 
notice  of  non-payment,  which  was  received  one  or  two  days 
later  than  that  which  he  contemplated  at  the  time  of  his 
indorsement — a  circumstance  by  which  he  does  not  indeed 


'  Starr  v.  Metcalf,  4  Camp.,  217  ;  Trecothick  v.  Edwin,  I  Stark.,  469  ;  Piatt  v. 
Smith,  14  Johns,  368  ;  Jones  v.  Fales,  4  Mass.,  244. 


396  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   1 3 84. 

appear  to  have  been  injured,  but  which  certainly  increased 
his  risks,  and  lessened  his  prospects  of  indemnity."^ 

§  1384.  Alteration  in  amou^it  of  principal  and  interest. 
— In  tht  fourth  place,  as  to  the  amount  of. principal  for 
which  the  bill  or  note  is  executed,  any  change  thereof  is  a 
material  alteration,  whether  it  be  increased^  or  lessened  ;^  as 
where,  for  instance,  the  amount  is  changed  from  $500  to 
$400,^*  for  it  is  a  palpable  variance  of  the  instrument's  legal 
effect  in  its  most  vital  part.  Indeed,  an  alteration  to  a 
larger  amount  is  a  forgery  ;  and  so  also  of  a  smaller  amount, 
if  with  fraudulent  intent. 

It  has  been  held  that  where  the  principal  altered  a  note 
so  that  its  amount  was  lessened,  and  then  delivered  it  to 
the  payee,  the  surety  was  not  discharged.^  Certainly  the 
identity  of  the  contract  was  destroyed,  and  it  is  difficult  to 
reconcile  this  case  with  the  principles  and  authorities  al- 
ready stated.  Doubtless,  the  idea  that  it  was  a  release,  and 
therefore  a  benefit  to  the  surety,  pro  tanto,  had  a  weighty 
influence  with  the  court  ;  but  the  law  denominates  any 
change  in  the  legal  effect  of  a  contract  an  alteration,  and 
its  policy  is  to  tolerate  no  tampering  with  written  instru- 
ments. 

§  1385.  Alteration  in  interest. — In  thQ  fifth  place,  as  to 
interest,  any  addition  of  words  making  the  bill  or  note  bear 
interest  when  it  originally  did  not,  or  changing  the  time 
when  interest  should  run,  or  varying  the  percentage  of  in- 
terest, is  of  the  same  character  as  if  it  changed  the  princi- 
pal.^   Where  the  words  "  with  lawful  interest "  were  written 

'  See  also  Dewey  v.  Reed,  40  Barb.,  17  ;  and  see  contra,  American  National 
Bank  v.  Bangs,  42  Mo.,  454 ;  ante,  §  1379,  p.  391,  note  2. 

"^  Bank  of  Commerce  v.  Union  Bank,  3  Coms.,  230 ;  Goodman  v.  Eastman,  4 
N.  H.,  455- 

'  Stevens  v.  Graham,  7  S.  &  R.,  505 ;  Leith  v.  Elphiston  (Scotch  case),  Thom- 
son on  Bills  (Wilson's  ed.),  in  ;  Hewins  v.  Cargill,  67  Me.,  554;  State  Savings 
Bank  v.  Shaffer,  9  Neb.,  7  ;  ^tna  Bank  v.  Winchester,  43  Conn.,  391. 

*  Hewins  v,  Cargill,  67  Me.,  554.  '  Ogle  v.  Graham,  2  Penn.,  132. 

*  Schnewind  v.  Hacket,  54  Ind.,  248  ;  Harsh  v.  Klepper,  28  Ohio  St ,  200  ;  see 
ante,  §  1375  ;  Reeves  v.  Pierson,  23  Hun,  187  (30  N.  Y.  S.  C.  R.)  ;  Craighead  v, 
McLoney,  S.  C.  Penn.  Central  L.  J.,  March  10,  1882,  p.  192. 


$>   1385.  DATE,  TIME,  PLACE,  AND  AMOUNT.  397 

on  the  corner  of  the  note  ;^  where  "with  interest  from 
date"  were  incorporated  in  it  ;^  and  where  "  with  interest" 
were  written  by  the  maker  after  it  had  been  indorsed,  but 
before  delivery  to  the  payee,  it  was  alike  held  to  be  material, 
and  to  avoid  the  note  as  against  non-consenting  parties  ; ' 
where  "  with  interest  payable  semi-annually  "  were  inserted 
before  delivery  to  payee  ;*  and  where  they  were  inserted 
afterward,^  the  surety  was  discharged  ;  and  where  "with  in- 
terest "  was  added,  but  without  fraudulent  intent,^  and  "  in- 
terest to  be  paid  annually." '^  So  adding  "eight  per  cent, 
interest";®  or  "bearing  ten  per  cent,  interest  from  matu- 
rity";^ or  "  with  half  legal  interest  until  maturity  ";^°  and 
so  where  "  after  maturity  "  was  added  to  interest  clause  ;^^ 
and  so  where  the  like  words  in  the  interest  clause  were  erased.^' 
A  change  of  percentage  is  of  like  effect.  Thus,  where 
"  nine  per  cent."  was  added  to  the  words  of  a  note  "  on  de- 
mand and  interest  ";^^  and  where  twelve  per  cent,  was 
chanored  to  ten.''* 

So  interlining  the  word  "  paid  "  before  "  annually  "  in 
the  expression  :  "  the  above  to  be  at  ten  per  cent,  annu- 
ally." ^^  But  where  the  word  "annually"  was  inserted  in 
the  interest  clause  of  a  note,  dated  January  loth,  1869,  and 
payable  on  or  before  October  15th,  1870,  it  was  construed 

*  Warrington  v.  Early,  2  El.  &  B.,  763  ;  see  also  Sutton  v.  Toomer,  7  B.  &  C, 
416. 

"  Brown  v.  Jones,  3  Port.  (Ala.),  420. 

'  Waterman  v.  Vose,  43  Me.,  504  ;  see  also  McGrath  v.  Clark,  56  N.  Y.,  36  ; 
Schwarz  v.  Oppold,  74  N.  Y.,  307,  where  the  note  was  payable  on  demand. 

*  Neff  V.  Horner,  63  Penn.  St.,  327. 

^  Dewey  v.  Reed,  40  Barb.,  16  ;  Glover  v.  Robbins,  49  Ala.,  219. 

°  Fay  V.  Smith,  i  Allen,  477  ;  Draper  v.  Wood,  112  Mass.,  315. 

'  Boalt  V.  Brown,  13  Ohio  N.  S.,  364.  *  Hart  v.  Clouser,  30  Ind.,  210. 

'  Lee  V.  Starbird,  55  Me.,  491  ;  see  also  Kilkelly  v.  Martin,  34  Wis.,  525  ; 
Franklin  Life  Ins.  Co.  v.  Courtney,  60  Ind.,  349. 

"  Lamar  v.  Brown,  56  Ala.,  157.  "  Cobum  v.  Webb,  56  Ind.,  96. 

"  Dietz  V.  Harder,  72  Ind.,  208.  "  Ivory  v.  Michael,  33  Miss.,  398. 

'*  Whitmer  v.  Frye,  10  Mo.,  348  (a  bond).  In  Moore  v.  Hutchinson,  69  Mo., 
429,  the  note  bore  one  per  cent,  per  month.  Payee  erased  "  one."  H^/d  that 
it  was  a  material  alteration  vitiating  note  however  purely  done. 

"  Patterson  v.  McNeely,  16  Ohio  St.,  348. 


398  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   1 386. 

to  relate  to  the  rate  of  interest,  and  not  to  time  of  pay- 
ment, and  therefore  that  it  was  not  a  material  alteration.^ 

§  1386.  Alteration  ijimedium  of  payment. — \x\.Xh^  sixth 
place,  as  to  the  medium  of  payment,  a  change  of  the  kind 
of  currency,  as  by  the  addition  of  the  words  "  in  specie"  to 
a  bond  after  the  sum  ;^  or  the  word  "  gold"  after  the  term 
"dollars"  in  a  note;^  or  of  the  denomination,  as  "from 
pounds  into  dollars  ;  from  sterling  pounds  into  current 
pounds,"*  even  though  it  could  do  no  possible  injury,  would 
avoid  the  instrument,  and  there  might  be  cases  in  which 
positive  or  possible  injury  would  result.  And  so  the  eras- 
ure of  such  words  would  equally  amount  to  alteration.^  In 
a  recent  case  before  the  U.  S.  Supreme  Court,  the  words 
in  an  order  which  made  it  payable  "  in  drafts  to  the  order 
of  H.  G.  A."  were  erased  with  a  pen,  and  "  in  current 
funds  "  inserted  in  their  stead  ;  and  the  paper  was  held 
avoided  thereby.^  So,  if  the  instrument  be  payable  in 
goods,  on  the  same  principle,  if  the  style  or  character  of 
the  goods  were  changed,  it  would  be  vitiated.  It  was  so 
held  where  a  note  was  payable  "  in  merchantable  meat 
stock,"  and  the  word  "  young  "  was  interpolated  after  mer- 
chantable;'^ so  adding  "good  hard"  before  "  wood"; ^  so 
writing  "  good  "  before  "  merchantable  wool."  ^ 


*  Leonard  v.  Phillips,  39  Mich.,  182.  "^  Darwin  v.  Rippey,  63  N.  C,  318. 
=  Bogarth  v.  Breedlove,  39  Tex.,  561.  ''  Stevens  v.  Graham,  7  S.  &  R.,  505. 
'  Church  V.  Howard,  24  N.  Y.  S.  C.  (16  Hun),  5,  where  the  words  "gold  or 

its  equivalent  "  were  stricken  out. 

^  Angle  V.  N.  W.,  etc.,  Ins.  Co.,  92  U.  S.  (2  Otto),  330. 
^  Martendale  v.  Follett,  i  N.  H.,  95. 

*  Schwalm  v.  Mclntyre,  17  Wis.,  232. 

*  State  V.  Cilley,  quoted  in  i  N.  H.,  97. 


§   1387-  ALTERATIONS  IN  RESPECT  TO  PARTIES.  399 


SECTION     III. 

ALTERATIONS   IN   RESPECT    TO     THE    PARTIES    TO   THE   INSTRU- 
MENT. 

§  1387.  In  the  seventh  place,  as  to  the  parties  to  a  bill 
or  note,  any  change  in  the  personality,  number,  or  relations 
of  the  parties  is,  as  a  general  rule,  a  material  alteration. 
Thus,  where  C,  member  of  the  firm  of  C.  &  Co.,  obtained 
an  accommodation  indorsement  to  his  individual  note,  and 
then  added  "&  Co."  to  his  signature,  thus  making  it  his 
firm's  note,  it  was  held  a  material  alteration.^  When  there 
are  several  makers  or  cosureties,  the  addition  of  another 
maker  ^  or  cosurety^  constitutes  a  material  alteration;  for 
the  addition  of  another  maker  destroys  the  integrity  of  the 
original  contract ;  and  the  addition  of  another  cosurety 
changes  the  right  of  the  sureties  in  respect  to  the  proportion 
of  contribution  for  which  each  is  liable  to  the  others. '^  And 
the  erasure  of  the  name  of  one  of  two  drawers  or  makers,^ 
or  payees,^  who  have  indorsed  the  paper,  or  of  one  of  sev- 
eral cosureties,'  is  likewise  a  material  alteration.     So  the 

'  Haskell  v.  Champion,  30  Miss.,  136. 

''Hamilton  v.  Hooper,  46  Iowa,  516;  Dickerman  v.  Miner,  43  Iowa,  508; 
Wallace  v.  Jewell,  21  Ohio  N.  S.,  163;  Hall  v.  McHenr\',  19  Iowa,  521  ;  Lunt 
V.  Silver,  5  Mo.  Ap.,  186;  Gardner  v.  Welsh,  5  El.  &  B.,  82;  overruling  Catton 
V.  Simpson,  8  Ad.  &  EI.,  136  ;  see  Gould  v.  Combs,  i  C.  B.,  543  ;  2  Parsons  N. 
&  B.,  556,  557.  But  the  additional  maker  is  himself  bound.  Hamilton  v. 
Hooper,  46  Iowa,  516  ;  Dickerman  v.  Miner,  43  Iowa,  508. 

=  McVean  v.  Scott,  46  Barb.,  379  ;  overruled  in  Card  v.  Miller,  8  N.  Y.  S.  C. 
(i  Hun),  504. 

'  In  Monson  v.  Drakeley,  40  Conn.,  552  (1873),  where  after  deliver)'  a  party 
signed  a  joint  and  several  note  of  a  maker  and  two  sureties  as  surety,  no  ques- 
tion of  alteration  was  raised.  The  court  held  that  he  would  not,  unless  in  pur 
suance  of  arrangement  at  time  of  execution  or  delivery,  become  a  joint  promisor 
or  maker,  and  that  the  subsequent  undertaking  was  independent  of,  and  collat- 
eral to,  the  original ;  but  the  surety  so  signing  was  bound  for  contribution  to 
the  original  sureties. 

'Mason  v.  Bradley,  11  M.  &  W.,  590  ;  Gillett  v.  Sweat,  i  Gilm.,  475  ;  Callan- 
dar  V.  Kirkpatrick  (Scotch  case),  Thomson  on  Bills  (Wilson's  ed.),  112. 

°  Cumberland  Bank  v.  Hall,  i  Hals.,  215. 

'McCramer  v.  Thompson,  21  Iowa,  244;  Hall  v.  McHenry,  19  Id.,  521. 


400  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I388. 

substitution  of  one  drawer  or  drawee,  or  maker  or  comakei 
for  another,  is  of  like  effect.^  But  it  has  been  held,  that 
where  A.  signed  as  principal  and  B.  as  surety,  the  cutting 
off  the  memorandum  of  suretyship  from  B.'s  name  was  no 
material  alteration,  because  as  such  it  did  not  vary  the 
meaning,  nature,  or  subject-matter  of  the  contract,  B.  being 
liable  any  way.^  This  view  does  not  seem  tenable,  and  the 
contrary  view  has  been  taken  in  Texas.^ 

§  1388.  Adding  a  maker  when  there  is  but  one. — 
Whether  or  not,  when  there  is  only  one  maker,  the  addi- 
tion of  another  is  an  alteration  which  discharges  him,  is  a 
question  upon  which  the  authorities  are  divided.  In  New 
York,  where  a  note  was  offered  in  part  payment  of  a  pur- 
chase, and  the  seller  refused  to  take  it  unless  the  buyer  add- 
ed his  name  under  the  maker's,  such  a  signature  and  trans- 
fer was  held  to  make  the  signer  jointly  and  severally  liable 
with  the  maker  to  the  holder  of  the  note,  and  an  action 
was  allowed  against  both  as  joint  makers.^  So  where  hold- 
ers, in  order  to  get  a  note  discounted  as  makers,  signed 
their  names  as  makers,  and  afterward  paid  the  note,  it  was 
held  they  had  lost  no  rights,  and  could  sell  or  transfer  it.^ 
But  in  a  subsequent  case,  where  the  payee  wrote  his  name 
under  the  maker's,  adding  to  it  the  word  "  security,"  it  was 
held  a  material  alteration.^  There  are  other  cases  in  the 
same  State,  in  which  it  is  held  that  the  addition  of  another 
name  as  maker,  where  there  was  but  one,  is  not  a  material 
alteration,  the  additional  maker  being  regarded  as  a  guaran- 


'  Davis  V.  Coleman,  7  Ired.,  424;  Mahaiwe  Bank  v.  Douglas,  31  Conn.,  170; 
State  V.  Polk,  7  Blackf.,  27  ;  Richmond  Mfg.  Co.  v.  Davis,  Id.,  412  ;  Smith  v 
Weld,  2  Bair,  54  ;  Fleming  v.  Leiper,  Thomson  on  Bills,  112. 

*  Vance  v.  Collins,  6  Cal,  530  ;  but  queer  el 

'Rogers  v,  Tapp,  S.  C.  Texas  Dec.  5,  1881  ;  Central  L.  J.,  Jan.  13,  1882,  p.  38. 
Held  that  where  one  of  the  signers  of  a  promissory  note  adds  to  his  signature 
the  word  surety,  and  the  others  do  not,  the  presumption  is  that  the  note  was 
given  for  value  by  the  other  makers,  and  that  they  are  the  principal  debtors  ; 
and  that  the  erasure  of  the  word  "  surety  "  would  be  a  material  alteration. 

*Patridge  v.  Colby,  19  Barb.,  248  ;  see  also  McVean  v.  Scott,  46  Barb.,  379. 

^Muir  v.  Demaree,  12  W^end.,  468.  °  Chappell  v.  Spencer,  23  Barb.,  584 


^   1 39 1.  ALTERATIONS  IN  RESPECT  TO  PARTIES.  4OI 

tor.*  And  in  the  latest  case  it  was  held  that  such  party  was 
bound  as  a  several  maker.^  In  Scotland,  it  has  been  decided, 
in  opposition  to  the  English  authorities,  that  where  a  new 
acceptor  had  been  added  to  the  address  of  the  bill,  and  had 
accepted  without  the  drawer's  knowledge,  after  delivery  of 
the  bill  to  the  other  acceptor,  for  whose  accommodation  it 
was  drawn,  it  was  not  a  material  alteration.  "  But,"  says 
Parsons,  commenting  on  this  decision,  "  we  think  the 
wiser  rule  is  that  which  looks  first  to  the  integrity  of  the 
instrument,  and  secures  that,  though  there  be  no  actual  in- 
jury nor  purpose  of  fraud." '^  If  a  blank  were  left  for  the 
name  of  the  promisor  so  that  the  paper  could  be  made 
joint  and  several,  and  new  parties  unite  in  and  sign  it,  then, 
except  as  to  those  who  knew  that  the  authority  to  fill  the 
blank  was  exceeded,  the  instrument  would  be  valid.^ 

§  1389.  The  preservation  of  the  integrity  of  the  instru- 
ment is  certainly  a  matter  of  prime  importance,  and  where 
there  are  several  makers,  the  addition  of  another  would 
prima  facie  operate  as  a  material  alteration.  Even  if  it 
were  explained  that  the  third  was  added  as  a  surety,  the 
difficulty  w^ould  not  seem  to  be  entirely  gotten  over.  If  one 
of  the  original  makers  signed  for  accommodation,  his 
apparent  rights  of  contribution  would  be  changed,  and  two 
parties,  instead  of  one,  would  have  to  be  resorted  to.  And 
if  the  original  makers  owed  the  debt,  the  third,  by  adding 
his  name,  confuses  the  evidences  of  it,  and  changes  the 
form  of  their  obligation.  Still  it  may  be  urged  with  great 
force  that  the  chance  of  damage  is  so  remote,  and  the  hard- 
ship of  avoiding  the  instrument  so  great,  that  it  should  be 
regarded  as  an  immaterial  alteration.     Where  there  is  but 


'  Brownell  v.  Winnie,  29  N.  Y.,  400  ;  McCaughey  v.  Smith,  27  N.  Y„  39,  Bal- 
com,  J.,  dissenting. 

'  Card  V.  Miller,  i  Hun,  504  (1874)  ;  8  N.  Y.  S.  C.  R.  overruling  Chappell  v. 
Spencer  and  McVean  v.  Scott. 

'  2  Parsons  N.  &  B.,  559. 

*  Snyder  v.  Van  Doren,  46  Wise,  602.     See  ante,  §§  143,  147. 

Vol.  II.— 26 


402  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       »^    1 39O. 

one  maker  to  a  note,  and  another  is  added,  these  views 
apply  with  enhanced  emphasis.  The  addition  does  not 
vary  the  original  maker's  liabilities  in  any  respect.  There 
could  be  no  motive  of  fraud  upon  him  or  others  to  induce 
the  addition.  And  while  it  would  come  within  the  letter 
of  those  declarations  of  courts  that  maintain  anything 
which  affects  the  integrity  of  the  instrument,  to  be  a 
material  alteration,  it  does  not  seem  to  us  to  come  within 
their  spirit.  And,  on  the  whole,  we  think  it  may  be  re- 
garded as  an  immaterial  alteration.^ 

§  1390.  Change  of  personality. — A  change  of  the 
personality  of  the  party  is  material.  Thus  adding  or  eras- 
ing "junior,"  in  the  signature,^  or  changing  the  christian 
name  from  ''William"  to  "Thomas."^ 

Alterations  in  the  name,  number,  or  relation  of  the  accept- 
ors or  indorsers,  stand  on  same  footing  as  of  other  parties. 
Changing  an  indorser's  christian  name,*  or  adding,^  or 
erasing  ^  that  of  an  acceptor. 

The  interhning  of  the  words  "  jointly  and  severally,"  or 


'  Miller  v.  Finley,  26  Mich.,  249  (1872).  In  this  case  it  appeared  that  a  party 
added  his  signature  as  surety  to  a  sole  note.  It  was  held  an  immaterial  altera- 
tion. Campbell,  J.,  said  :  "  In  the  recent  case  of  Aldous  v.  Cornwell,  L.  R.,  3 
Q.  B.,  573,  Cotton  V.  Simpson  is  cited  as  authority  on  the  point  that  an  altera- 
tion will  not  vitiate,  unless  material ;  and  the  case  of  Gardner  v.  W^alsh  was 
referred  to,  merely  to  say  that  it  only  overruled  the  former  case  on  the  question 
whether  such  an  alteration  as  that  passed  upon  was  material.  Aldous  v.  Corn- 
well  is  somewhat  pointed  in  condemning  the  early  decisions  which  paid  no 
attention  to  the  materiality  of  alterations.  And  the  doctrine  that  immaterial 
alterations  should  not  be  regarded,  is  too  well  based  on  good  sense  to  be  over- 
thrown. The  addition  of  a  surety  was  not,  in  either  of  those  cases,  held  to 
discharge  a  principal.  It  has  always  been  competent  for  a  person  to  become 
surety  by  signing  the  note  of  the  principal,  so  as  to  become  a  joint  and  several 
maker.  There  is  no  rule  which  requires  that  a  contract  of  suretyship  must  be 
contemporaneous  with  the  principal  obligation.  And  unless  the  principal's  lia- 
bility is  in  some  way  affected  by  the  addition,  it  can  not  be  material.  It  is  very 
difficult  to  see  how  such  a  change  can  affect  him  in  any  but  a  mere  technicality, 
which  neither  changes,  increases,  nor  diminishes  his  liability."  See  also  Gano 
V.  Heath,  36  Mich.,  441. 

"^  Broughton  v.  Fuller,  9  Vt.,  373. 

'  Macara  v.  Watson  (Scotch  case),  Thomson  on  Bills,  112.     See  post,  §  1398. 

*  Macara  v.  Watson,  supra. 

'  Howe  v.  Purves  (Scotch  case),  Thomson  on  Bills,  112. 

•  M'Ewenv.  Gordon,  Thomson  on  Bills,  112. 


§   I390-  ALTERATIONS  IN  RESPECT  TO  PARTIES.  403 

"severally,"  or  "or  either  of  us"  in  a  note  joint  and  not 
several,  would  be  a  material  alteration,  as  they  would 
engraft  upon  the  joint  a  several  obligation.^  But  where  a 
joint  note  has  the  effect  to  bind  the  parties  jointly  and 
severally,  the  insertion  of  those  words  would  be  immaterial, 
because  merely  expressing  what  was  already  implied.^ 

And  the  changing  of  a  note  from  "  I  promise"  to  "  We 
promise  "  is  material,  because  it  changes  a  joint  and  several 
note  into  one  joint  only.^  Adding  the  word  "  collector  " 
by  the  payee  to  his  name  was  recently  held  in  New  Jersey 
a  material  alteration/ 

Where  the  name  of  a  surety  was  erased  by  agreement 
between  himself  and  the  payee,  it  was  held  that  the  princi- 
pal was  not  affected,  as  the  payee  had  a  right  to  release  the 
surety  if  he  chose  to  ;  and  therefore  it  was  no  alteration  ;' 
but  if  the  payee  erased  the  word  "  surety  "  from  a  party's 
name  without  his  assent,  such  party  would  be  discharged.* 

The  striking  out  of  the  name  of  an  indorsee  on  a  special 
or  full  indorsement  ; '  or  changing  a  blank  indorsement  so 
as  to  read,  "  pay  to  the  order  of  E.  S.  at  the  rate  of  25  fr. 
75  c.  per  ^i,  'utretro,"  etc.  ;  and  writing  the  same  on  the 
face  of  the  bill,  materially  alters  the  indorser's  contract,  and 
the  latter  also  the  acceptor's.^ 

Writing  a  waiver  of  demand,  protest,  or  notice  over  an 
indorsement  would  convert  a  contingent  into  an  absolute 
liability,  and  therefore  discharge  the  indorser.^ 

'  Perring  v.  Hone,  2  Car.  &  P.,  401  ;  4  Bing.,  28.     See  Draper  v.  Wood,  113 
Mass.,  315. 

"Gordon  v.   Sutherland,   Thomson  on  Bills  (Wilson's  ed.),    113;    Miller  v. 
Reed,  27  Penn.  St.,  244. 

^  Humphreys  v.  Guillow,  13  N.  H.,  385  ;  Hemmenway  v.  Stone,  7  Mass.,  58 
Clark  V.  Blackstock,  Holt  N.  P.,  474. 
*  York  V.  Jones  (S.  C.  N.  J.,  June,  1881),  43  N.  J.  L.  R.,  332. 
^  Broughton  v.  West,  8  Ga.,  248  ;  Huntington  v.  Finch,  3  Ohio  St.,  445. 
°  Laub  V.  Paine,  46  Iowa,  551.  'Grimes  v.  Piersol,  25  Ind.,  246 

•*  Hirschfield  v.  Smith,  Law  Rep.,  i  C.  P.,  340. 
°  Farmer  V.  Rand,  14  Me.,  225. 


404  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   1 39 1 


SECTION    IV. 

ALTERATIONS   IN   THE   OPERATION   OF  THE    INSTRUMENT. 

§  1 39 1.  In  the  eighth  place,  a  change  in  the  character  or 
effect  of  the  instrument,  whether  in  respect  to  its  obliga- 
tion or  to  its  weight  in  evidence,  is  a  material  alteration. 
Thus,  the  addition  of  a  seal  to  the  signature  of  the  maker 
of  a  note  converts  it  into  a  bond,  against  which  no  plea  of 
want  of  consideration  can  be  made,  and  thus  invests  his 
contract  with  attributes  which  he  declined  to  impart  to  it.^ 
Consequently  the  note  is  avoided.  So  a  bond  is  avoided 
by  detaching  the  seal.^ 

So  when  a  seal  is  added  to  the  name  of  one  of  several 
comakers  of  a  note,  all  are  discharged,  because  the  holder 
could  not  have  the  same  recourse  against  the  three  which 
he  held  before  ;  one  would  be  estopped  from  denying  a 
want  of  consideration  which  might  inure  to  the  benefit  of 
all,  and  new  relations  and  obligations  would  be  created.^ 

§  1392.  Addition  of  witnesses  names. — Many  questions 
have  arisen  as  to  the  effect  of  adding  to  a  note  after  its  de- 
livery the  names  of  parties  purporting  to  be  witnesses  to  its 
execution.  In  States  where  a  distinction  is  made  between 
witnessed  and  unwitnessed  notes,  whether  by  the  statute  of 
limitations  or  otherwise,  it  would  seem  to  us  clear  that  the 
subscription  of  his  name  by  the  witness  after  the  delivery 
would  be  a  material  alteration  as  to  all  parties  not  consent- 
ing, because  it  would  change  the  legal  effect  of  the  instru- 
ment* Thus,  where  an  unattested  note  was  barred  by  six 
years,  and  one  attested  stood  on  the  foot  of  a  bond,  not 

*  United  States  v.  Linn,  I  How.,  104;  Marshall  v.  Gougler,  10  Serg.  &  R„ 
164;  Vaughan  v.  Fowler,  14  S.  C,  357. 

*  Piercy  v.  Piercy,  5  West  Va.  (Hagans),  199. 

'  Biery  v.  Haines,  5  Whart.,  563.  *  Eddy  v.  Bond,  19  Me.,  461. 


§    1393-  ALTERATIONS    IN    THE    OPERATION.  405 


being  barred  until  twenty,  and  ten  years  after  its  execution, 
being  four  after  the  bar  had  accrued,  the  attestation  was 
added,  it  was  held  a  material  alteration,  as  "  it  at  once 
infused  life  into  an  instrument  which  had  lost  all  legal 
efficacy."^ 

So,  too,  we  should  say,  that  if  the  payee  should  procure 
a  person  not  present  at  the  time  of  execution  of  the  instru- 
ment to  sign  his  name  as  a  subscribing  witness,  it  would  be 
prima  facie  evidence  of  some  fraudulent  design,  and  would 
in  itself  constitute  a  material  alteration.^ 

§  1393.  If,  however,  a  party  actually  witnessed  the  exe- 
cution of  a  bill  or  note,  and  afterward,  by  request  of  the 
holder,  should,  without  others'  consent,  subscribe  his  name 
as  witness,  it  has  been  held  that  it  does  not  work  a  material 
alteration,  as  it  can  work  no  harm.^  And  the  suggestion 
that  the  appearance  of  such  attestation  might  weigh  with 


'  Brackett  v,  Mountfort,  11  Me.,  115. 

"^  Homer  v.  Wallis,  11  Mass.,  309 ;  see  2  Parsons  N.  &  B.,  555.  In  Adams  v. 
Frye,  3  Met.,  107,  where  the  obligee  of  a  bond  procured  a  person  not  present  nor 
authorized  to  attest  it  to  sign  it  as  a  witness,  it  was  held  material.  Dewey,  J., 
said  :  "  By  adding  to  the  bond  the  name  of  an  attesting  witness,  the  obligee  be- 
came entitled  to  show  the  due  execution  of  the  same  by  proving  the  handwriting 
of  the  supposed  attesting  witness,  if  the  witness  was  out  of  the  jurisdiction  of 
the  court.  It  is  quite  obvious,  therefore,  that  a  fraudulent  party  might,  by 
means  of  such  an  alteration  of  a  contract,  furnish  the  legal  proof  of  the  due 
execution  thereof,  by  honest  witnesses  swearing  truly  as  to  the  genuineness  of 
the  handwriting  of  the  supposed  attesting  witness,  and  yet  the  attestation  might 
be  wholly  unauthorized  and  fraudulent.  It  seems  to  us  that  we  ought  not  to 
sanction  a  principle  which  would  permit  the  holder  of  an  obligation  thus  to  tam- 
per with  it  with  entire  impunity.  But  such  would  be  the  necessary  consequence 
of  an  adjudication  that  the  subsequent  addition  of  the  name  of  an  attesting  wit- 
ness, without  the  privity  or  consent  of  the  obligee,  is  not  a  material  alteration  of  the 
instrument,  and  would,  under  no  circumstances,  affect  its  validity.  But  we  thmk 
that  it  would  be  too  severe  a  rule,  and  one  which  might  operate  with  great  hard- 
ship upon  an  innocent  party,  to  hold  inflexibly  that  such  alteration  would,  in  all 
cases,  discharge  the  o;)ligor  from  the  performance  of  his  contract  or  obligation. 
If  an  alteration,  like  that  which  was  made  in  the  present  case,  can  be  shown  to 
have  been  made  honestly,  if  it  can  be  reasonably  accounted  for,  as  done  under 
some  misapprehension  or  mistake,  or  with  the  supposed  assent  of  the  obligor,  it 
should  not  operate  to  avoid  the  obligation.  But,  on  the  other  hand,  if  fraudu- 
lently done,  and  with  a  view  to  gain  any  improper  advantage,  it  is  right  and 
proper  that  the  fraudulent  party  should  lose  wholly  the  right  to  enforce  his 
original  contract  in  a  court  of  law." 

^  Rollins  v.  Barlett,  20  Me.,  319 ;  2  Parsons  N.  &  B.,  555. 


406  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   1394- 

the  jury  in  a  question  as  to  the  genuineness  of  the  signature, 
has  been  thought  of  httle  force.^ 

But  it  is  treading  on  dangerous,  and  at  least  doubtful, 
ground  to  countenance  this  doctrine.  It  is  true  that  where 
proved  to  have  been  done  honestly  througliout,  little,  if 
any,  harm  could  be  wrought  ;  but,  if  permitted  at  all,  it  is 
by  no  means  clear  that,  by  forging  the  names  of  promisors 
and  of  witnesses,  the  door  might  be  opened  for  extensive 
frauds.  Upon  the  minds  of  a  jury,  the  more  solemn  the 
form  of  an  instrument,  the  greater  its  weight.  Indeed, 
every  mark  of  authenticity  must  insensibly  or  otherwise 
have  its  effect  upon  all  minds.  Certainly  a  court  should 
exact  very  rigid  proof  of  perfect  good  faith  ;  and  we  are 
sustained  by  high  authority  in  the  opinion  which  our  mind 
has  reached,  that  it  would  be  better  not  to  permit  such 
liberties  to  be  taken  with  the  rights  of  others.^  Where  the 
name  had  been  accidentally  neglected,  so  that  its  addition 
was  really  in  addition  of  an  original  understanding,  it  would 
be  different.^  And  very  slight  circumstances  might  prove 
such  understanding. 

It  has  been  held  that  where  the  payee  of  a  note  cut  off 
the  name  of  an  attesting  witness  he  can  not  recover  at  law, 
because  it  might  be  that  it  would  impede  the  proof  of  con- 
sideration should  a  defence  be  made ;  and  that  equity 
would  not  relieve  him,  as  it  presumes  everything  against  a 
spoliator.*  The  converse  doctrine  would  seem  to  us  ap- 
plicable when  the  name  had  been  added. 

§  1394.  Alteration  in  terms  of  consideration. — It  has 
been  held  that  if  a  bill  be  expressed  generally  "  for  value 
received,"  and  words  are  added  describing  such  considera- 
tion as  "  for  the  good-will  and  lease  in  trade  "^  of  a  certain 
person,  or  "for a  certain  tract  of  land,"^  it  is  materially  al- 


» 2  Parsons  N.  &  B..  554.  *  2  Parsons  N.  &  B.,  556. 

'  Smith  V.  Dunham,  8  Pick.,  256.  *Sharpe  v.  Bagwell,  i  Dev.  Eq.,  115. 

'  Knill  V.  Williams,  10  East.,  413.  °  Low  v.  Argrove,  30  Ga.,  129. 


I 


§  1395.      ALTERATIONS  IN  THE  OPERATION.  407 

tered  and  avoided.  The  reasons  assigned  are,  first,  that  it 
makes  the  note  a  confession  in  evidence  of  a  fact  which 
might  otherwise  require  extraneous  proof  ;  and  seco?td,  that 
it  puts  the  holder  upon  inquiry  whether  that  consideration 
passed.^  The  first  reason  seems  to  us  in  itself  sufficient.  But 
the  second  is,  at  least,  according  to  several  cases,  and  as  it 
seems  to  us  upon  principle,  incorrect  in  its  statement  of 
fact.  The  statement  of  the  specific  consideration  is  an  as- 
surance of  some  consideration,  and  does  not  charge  the 
holder  with  inquiring  about  it.^  Inserting  words  making 
the  note  a  charge  upon  her  separate,  would  be  a  material 
alteration  as  to  a  married  woman.^ 

§  1395.  Alteration  iji  words  of  negotiability. — The  addi- 
tion of  the  negotiable  words,  "  or  order,"  or  "  bearer,"  is 
not  an  alteration  when  they  were  intended  to  have  been  in- 
serted, and  were  accidentally  left  out.*  But  where  the  ef- 
fect of  such  addition  is  to  impart  negotiability  to  an  instru- 
ment not  designed  to  be  negotiable,  it  is  a  most  material 
alteration  in  the  nature  of  the  contract,  and  the  bill  or 
note  is  thereby  avoided.^  So  the  interhneation  of  "or 
bearer  "  in  a  negotiable  note,  payable  to  a  certain  person  or 
order,  is  an  alteration  of  it,  because  it  materially  changes 
the  manner  of  its  negotiability.  It  would  not  without  the 
payee's  indorsement  be  evidence  of  the  amount  paid  to  him 
upon  being  returned  after  payment ;  and  it  might  possibly 
deprive  the  defendant  of  a  set-off  otherwise  available.^    The 


'2  Parsons  N.  &:  B.,  562. 

"  Herieh  v.  Merchants'  Nat.  Bank,  34  Ind.,  3S0;  Bank  of  Commerce  v.  Barrett, 
38  Ga.,  126  ;  see  §  797,  vol.  i. 

^  Reeves  V.  Pierson,  23  Hun  (N.  Y.),  185. 

*  Kershaw  v.  Cox,  3  Esp.,  246 ;  10  East.,  437 ;  Byrom  v.  Thompson,  1 1  Ad.  & 
El.,  31.     See  Cariss  v.  Tattersall,  2  Man.  &  G.,  890. 

^  Bruce  v.  Westcott,  3  Barb.,  274;  Johnson  v.  Bank  U.  S.,  2  B.  Mon.,  310  ; 
Pepoon  V.  Stag:g,  i  Nott  &  McC,  102  ;  Edwards  on  Bills,  95  ;  The  State  v. 
Stratton,  27  Iowa,  424  ;  Brown  v.  Straw,  6  Neb.,  536 ;  McAuley  v.  Gordon,  64 
Geo.,  221. 

•  Booth  V.  Powers,  56  N.  H.,  30 ;  Scott  v.  Walker,  Dudley  (Ga.),  243  ;  The 
State  v.  Stratton,  27  Iowa,  424 ;  Union  N.  B.  v.  Roberts,  45  Wise,  373- 


408  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   1 3  96. 

substitution  of  "or  order"  for  "  bearer"  would  be  different 

» 

because  it  would  only  affect  the  transfer  of  title  between 
holder  and  transferee.^ 

So  the  addition  of  the  words,  "  without  defalcation  or 
set-off,"  where  they  have  the  effect  they  import,^  or  making 
note  negotiable  my  making  it  payable  in  bank,^  would  con- 
stitute an  alteration.  And  writing  over  an  indorser's  signa- 
ture the  words,  ''  without  recourse,"  is  a  material  altera- 
tion.^ 

§  1396.  Alteration  of  words  on  back  of  instrument. — In 
some  cases,  words  on  the  back  of  a  bill  or  note  are  not  re- 
garded as  a  part  of  it ;  and  it  has  been  held  that  the  can- 
cellation of  an  indorsement  of  part  payment  need  not  be 
explained  unless  called  in  question.^  But  still  an  indorse- 
ment on  the  back  of  the  bill  or  note  might  be  material  as  a 
part  of  it,  as  its  construction  is  to  be  gathered  from  every 
source  of  information  which  an  inspection  of  it  supplies.^ 
And  it  may  be  shown  by  evidence  that  an  indorsement 
annexing  a  condition  to  the  payment  was  on  the  instrument 
when  delivered,  in  which  case  it  would  be  deemed  a  ma- 
terial part  of  it.'' 

§  1397.  Alteration  by  making  or  obliterating  m-emoranda 
on  bills  and  notes. — An  alteration  of  the  legal  import  and 
operation  of  a  bill  or  note  may  be  effected  as  readily  by 
making  or  obliterating  material  memorandum  upon  it,  as 
by  inserting  or  erasing  provisions  in  the  body  of  it.  Thus, 
where  the  words  "  with  lawful  interest  "  were  written  on 
the  corner  of  a  note  after  its  execution,  it  was  said  in  Eng- 
land, by  the  Court  of  Queen's  Bench  :  "  This  forms  part  of 

'  Flint  V.  Craig,  59  Barb.,  330.  "  Davis  v.  Carlisle,  6  Ala.,  707. 

'  McCoy  V.  Lockwood,  71  Ind.,  319  ;  Toomer  v.  Rutland,  57  Ala.,  379. 

*  Luth  V.  Stewart,  6  Victorian  R.,  383. 

*  Commonwealth  v.  Ward,   2  Mass.,  397  ;  see  Warner  v.  Spencer,   7  J.  J. 
Marsh,  340. 

*  See  Muldrow  v.  Baldwell,  7  Mo.,  587  ;  2  Parsons  N.  &  B.,  545  ;  ante,  §§  149 
et  seq.,  vol.  I. 

'  Blake  v.  Coleman,  22  Wis.,  415. 


§   139^-  IMMATERIAL  AND  AUTHORIZED  CHANGES.  4O9 

the  contract.  It  would  clearly  have  been  so  if  it  had  been 
written  in  the  body  of  the  note,  and  we  think  a  memoran- 
dum of  this  kind  written  in  the  corner  of  this  note  is  equally 
part  of  the  contract,  because  the  contract  must  be  collected 
from  the  four  corners  of  the  document,  and  no  part  of  what 
appears  there  is  to  be  excluded."^  So,  where  the  maker 
of  a  note  payable  generally  wrote  on  the  margin,  "  payable 
at  Bank  of  North  America,"  it  was  held  vitiated  as  to  the 
indorser.^ 

Cutting  off  or  obliterating  a  material  memorandum 
which  had  the  effect  to  make  a  note  written  on  demand 
payable  on  time;^  or  which  annexed  a  condition  to  the 
payment  of  the  note  j**  or  provided  for  a  delay  of  collection 
until  a  certain  person  should  take  it  up,  the  maker  having 
paid  it ;  ^  or  which  made  the  note  payable  out  of  the  profits 
of  a  certain  business.** 


SECTION   V. 

IMMATERIAL  AND  AUTHORIZED  CHANGES   OF   THE   INSTRUMENT. 

§  1398.  Not  every  change  in  a  bill  or  note  amounts  to 
an  alteration.  If  the  legal  effect  be  not  changed,  the  instru- 
ment is  not  altered,  although  some  change  may  have  been 
made  in  its  appearance,  either  by  the  addition  of  words 
which  the  law  would  imply,  or  by  striking  out  words  of  no 
legal  significance.  Thus,  writing  out  the  name  of  the  bank 
after  the  name  of  the  signature  "  cashier,"  which  was  intended 

'  Warrington  v.  Early,  2  El.  &  Bl.,  763  ;  see  also  Benedict  v.  Cowden,  49  N. 
Y.,  396  (1872)  ;  ante,  §§  149  et  seq.,  vol.  i. 

"  Woodvvorth  v.  Bank  of  America,  19  Johns,  381  (overruling  18  Johns,  319, 
391)  ;  see  ante,  §  1367, 

'  Wheelock  v.  Freeman,  13  Pick.,  165. 

*  Wait  V.  Pomeroy,  20  Mich.,  425.  But  query,  if  there  was  no  disfigurement. 
See  post,  §§  1405,  1407  et  seq. 

^  Johnson  v.  Heagan,  23  Me.,  329.  •  Benedict  v.  Cowden,  49  N.  Y.,  396. 


4IO  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §    1 398. 

to  bind  the  bank,  is  merely  expressing  more  clearly  the  legal 
effect  of  the  signature,  and  is  not  an  alteration.^  So  the  in- 
sertion of  a  dollar  mark  before  the  numerals  expressing  the 
amount  in  dollars ;  ^  or  insertion  of  the  word  "  annually " 
after  the  interest  clause  in  a  note  payable  on  or  before  a 
certain  time  ;  ^  or  changing  the  marginal  figures  so  as  to 
conform  them  to  the  written  amount ;  ^  or  the  addition  in 
full  of  the  christian  names  of  the  drawers  whose  surnames 
had  been  affixed  before  the  acceptance  ;  ^  the  interlineation 
of  the  surname  of  the  payee,  after  deUvery ;  ^  the  running 
of  a  pen  through  the  words  "  Providence  Steam-Pipe  Co.," 
which  was  one  name  under  which  a  firm  did  business,  and 
writing  over  it  their  style  in  the  copartners'  names,'  were 
likewise  adjudged  immaterial.  So  also  where  a  bill  was 
addressed  to  a  firm  by  the  style  of  "A.,  B.  &  Co.,"  and  on 
being  accepted  by  them  in  the  name  of  "  A.  &  B.,"  and  the 
address  was  changed  to  conform  to  the  acceptance,  there 
being  no  question  as  to  the  identical  firm  intended,  and  the 
acceptors  being  liable  either  way.^ 

So  erasing  "  R.,"  where  the  payee's  name  was  written 
"  B.  R.  C,"  instead  of  "  B.  C,"  as  intended,^  and  correct- 
ing "  Franklin  E.,"  so  as  to  read  "  Francis."  ^^  So  adding 
"  agent"  to  a  maker's  name  as  mere  descriptio personcsP- 

And  in  no  case  is  a  change  in  the  phraseology  of  the  in- 
strument material  when  it  does  not  essentially  change  its 
legal  effect. ^^ 

>  Bank  of  Genesee  v,  Patchin  Bank,  3  Kern,  309  ;  Folger  v.  Chase,  18  Pick.,  63. 

'  Houghton  V.  Francis,  29  111.,  244. 

^  Leonard  v.  Phillips,  39  Mich.,  182,  Cooley,  J.,  saying  that  in  such  a  note 
"  the  rate  of  interest  to  be  paid  annually  must  be  understood  as  naming  only  the 
rate  to  be  paid  for  the  yearly  period." 

*  Smith  V.  Smith,  i  R.  I.,  398.     See  ante,  chap.  HI,  §  Z6,  vol.  i,  note  6. 
"  Blair  v.  Bank  of  Tennessee,  1 1  Humph.,  84. 

•  Manchet  v.  Cason,  i  Brev.,  307.  '  Arnold  v.  Jones,  2  R.  I.,  345. 
«  Farquhar  v.  Southey,  Moo.  &  M.,  14.  '  Cole  v.  Hills,  44  N.  H.,  227. 
"  Desby  v.  Thrall,  44  Vt.,  414. 

"  Manufacturers',  etc.,  Bank  v.  Follett,  1 1  R.  L,  92. 

''  Holland  V.  Hatch,  15  Ohio  St.,  464-  In  Gushing  v.  Field,  70  Maine,  50,  a 
note  was  indorsed  on  its  face  "  subject  to  a  contract  made,"  which  was  changed 
to  "  subject  of  a  contract  made."     Held  immaterial. 


§1400.  IMMATERIAL  AND  AUTHORIZED  CHANGES.  4II 

§  1399.  T'^nmaterial  niejnoranda  on  the  margin  or  other 
portions  of  the  bill  or  note  stand  on  the  same  footing  as 
immaterial  insertions  incorporated  in  it.  If  they  be  merely 
explanatory  of  some  circumstance  connected  with  the 
transaction,  they  are  immaterial.  Thus,  where  a  drawer, 
who  held  a  bill  indorsed  in  blank  by  the  payees,  wrote 
under  his  signature,  "  Left  with  Mr.  B.  (the  plaintiff)  as 
collateral,"  it  was  held  immaterial.^  So  where  a  party's 
residence  was  noted  on  the  instrument  after  his  name.^  So 
an  indication,  for  the  convenience  of  the  holder,  where  he 
would  find  his  money  when  duc.^  So,  where  several 
makers  of  a  note  had  appended  to  their  signature  the 
words  "  As  trustees  of  the  First  Universalist  Society," 
which  appendix  was  torn  off,  it  was  held  immaterial,  as  the 
note  was  the  personal  undertaking  of  the  signers,  and  so 
remained  unchanged  in  its  effect.'*  The  figures  denoting 
the  number  in  a  particular  series  to  which  the  instrument 
belongs  is  no  part,  and  its  alteration  or  erasure  is  imma- 
terial.^ 

§  1400.  Other  illiLstrations  of  iin77iaterial  alterations. — 
So  there  are  some  changes  of  a  purely  immaterial  character, 
which  do  not  change  the  effect  or  impair  the  identity  of 
the  instrument,  and  therefore  are  not  alterations.  Thus, 
retracing  a  faded  name  in  clear  ink  ;  ^  or  writing  over  in  ink 
a  word  written  in  pencil  ; '''  or  correcting  a  misspelling.^ 
Where  the  number  of  a  negotiable  bond  was  changed,  but 
it  did  not  appear  that  the  numbering  was  required  by 
statute,  nor  in  any  way  affected  the  holder's  rights,  it  was 

'  Bachellor  v.  Priest,  12  Pick.,  399  ;  Thomson  on  Bills,  113. 

"  Struthers  v.  Kendall,  5  Wright,  214. 

'  Walter  v.  Cubley,  2  Cr.  &  M.,  151. 

"  Buriingame  v.  Brewster,  79  111.,  515.  To  same  effect  see  Hayes  v.  Mathews, 
63  Ind.,  412. 

'  City  of  Elizabeth  v.  Force,  29  N.  J.  (Eq.),  591,  overruling  S.  C.  28  N.  J.  (Eq.), 
587  ;  Commonwealth  v.  Industrial  Savings  Bank,  98  Mass.,  12  ;  Berdsell  v.  Rus- 
sell, 29  N.  Y..  220.     See  §  1499a. 

*  Dunn  V.  Clements,  7  Jones  Law,  58.        ^  Reed  v.  Roark,  14  Tex.,  329, 

'  Leonard  v.  Wilson,  2  Cromp.  &  M.,  589. 


412  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.        §   I4OI. 

held  immaterial;^  and  so  in  England  the  alteration  of  the 
number  of  certain  Bank  of  England  notes  was  considered 
immaterial,  Coleridge,  J.,  saying  that  though  in  a  popular 
sense  it  was  a  material  alteration  because  it  interposed  some 
difficulty  in  the  way  of  detecting  fraud,  it  did  not  vary,  or 
attempt  to  vary,  the  contract.^  Where  the  consideration  of 
a  note  was  gold,  and  the  payee  inserted  "  paid  in  gold,  gold 
having  been  the  consideration,"  it  was  held  immaterial  to 
the  maker,  and  also  as  to  the  surety,  if  he  knew  that  the 
consideration  was  gold  when  he  signed.^ 

§  1 40 1.  Changes  by  express  or  ifuplied  consent. — It  is 
quite  obvious  that  where  all  the  parties  to  a  bill  or  note 
expressly  agree  to  a  change  in  any  of  its  terms  that  they 
can  not  complain  of  such  change  as  an  alteration.  They 
have  as  much  right  to  change  as  to  make  a  contract.  And 
where  all  do  not  consent,  those  consenting  are  bound,  while 
the  rest  are  discharged.^ 

Consent  may  be  given  before  the  change  is  made,  or  it 
may  be  given  afterward  by  ratification.^  It  may  be  express, 
or  it  may  be  implied  from  custom,^  or  from  the  acts  of  the 
parties.''^ 

In  all  cases  where  a  change  has  been  made,  it  will  be  a 
question  for  the  court  to  determine  whether  or  not  it  amounts 
to  an  alteration ;  ®  but  the  question  whether  or  not  the  par- 
ties affected  consented  to  it,  is  solely  with  the  jury.'^  • 

'  Commonwealth  v.  Emigrants'  Bank,  98  Mass.,  12  ;    State  ex  rel.  Plock  v. 
Cobb,  64  Ala.,  1 58. 

^  Sufifell  V.  Bank  of  England,  O.  B.  D.  Central  L.  J.,  Dec.  9,  1881,  p.  455. 

*  Hanson  v.  Crawley,  41  Ga.,  303. 

■•  Grimstead  v.  Briggs,  4  Iowa,  559  ;  Wilson  v.  Jamieson,  7  Barr,  126  ;  Bank 
of  Ohio  Valley  V.  Lockwood,  13  W.  Va.,  392. 

*  National  State  Bank  v.  Rising,  11  N.  Y.  S.  C.  (4  Hun),  793  ;  Cariss  v.  Tat- 
tersall,  2  Man.  &  G.,  890  ;  Morrison  v.  Smith,  13  Mo.,  234. 

'  Woodworth  v.  Bank  of  America,  19  Johns,  391. 

'  Clute  V.  Small,  17  Wend.,  238;  Bowers  v.  Jewell,  2  N.  H.,  543. 

*  Stevens  v.  Graham,  7  S.  &  R.,  505  ;  Bowers  v.  Jewell,  2  N.  H.,  543;  Jones 
V.  Ireland,  4  Iowa,  63. 

'  Stout  V.  Cloud,  5  Lit.,  205  ;  Stahl  v.  Berger,  10  Serg.  &  R.,  170;  Overton  v, 
Mathews,  35  Ark.,  147. 


I 


§   1402.         IMMATERIAL  AND  AUTHORIZED  CHANGES.  413 

If  a  note  be  altered  by  one  signer  without  the  consent  of 
the  other,  and  be  sued  upon  as  their  joint  note,  the  plain- 
tiff may  recover  against  the  signer  who  made  the  alteration, 
but  the  other  will  be  entitled  to  his  costs.^  Where  two  of 
three  joint  makers  of  a  note  consented  to  its  alteration,  it 
has  been  held  that  the  holder  can  recover  against  them, 
provided  he  had  no  knowledge  that  the  third  maker  had 
not  consented.' 

Under  the  English  stamp  acts  there  are  a  number  of  de- 
cisions to  the  effect  that  no  change  can  be  made  after  issue, 
even  by  consent  of  all  parties.^  As  soon  as  the  instrument 
is  issued  the  stamp  has  filled  its  function.  Any  change  af- 
terward is  virtually  a  new  contract,  requiring  a  new^  stamp. 

§  1402.  Evidence  of  conse?it  to  alteration. — Consent 
mig-ht  be  inferred  to  the  insertion  of  negotiable  words 
where  the  party  indorsed  the  note  as  if  it  were  negotiable  ; 
so  also  from  a  subsequent  acknowledgment  of  validity  by 
payment  of  interest,  consent  would  be  implied.^  So  a 
promise  to  pay  after  full  knowledge  of  alteration,  and  an 
offer  to  give  security  for  payment,  would  be  competent 
evidence  of  consent  ;^  but  a  renewal  note  signed  by  an  ac- 
commodation indorser,  without  knowledge  of  the  fact  that 
the  original  note  indorsed  by  him  had  been  materially  al- 
tered, would  be  without  consideration  ;  and  would  not  bind 
him,  save  to  a  bona  fide  holder  without  notice.''^ 

So  the  supplying  of  an  omission,  such  as  stating  on 
whose  account  the  bill  was  drawn,  there  being  no  dispute 
as  to  the  fact.^ 

Where  the  last  indorser  of  an  accommodation  bill  made 

'  Broughton  v.  Fuller,  9  Vt.,  373 ;  Wills  v.  Wilson,  3  Oregon,  308. 

*  Myers  v.  Nell,  84  Penn.  St.,  369. 

'  Bowman  v.  Nichol,  5  T.  R.,  547  ;  Bathe  v.  Taylor,  15  East.,  412  ;  Downes  v 
Richardson,  5  B.  &  Aid.,  674, 

*  Kershaw  v.  Cox,  3  Esp.,  246.  '  Cariss  v.  Tattersall,  2  Man.  &  G.,  890. 
'  Humphreys  v.  Guillow,  13  N.  H.,  385, 

'  Fraker  v.  CuUum,  21  Kansas,  555. 

*  Commercial  Bank  v.  Paton,  Thomson  on  Bills,  113. 


414  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I403. 

a  memorandum  at  the  foot  directing  its  proceeds  to  be 
credited  to  the  drawer,  it  was  held  no  part  of  the  bill,  and 
its  obliteration  of  no  consequence.^ 

§  1403.  Changes  to  correct  mistakes,  supply  omissions, 
and  effectuate  parties  intentions. — In  like  manner,  where 
the  change  is  made  by  implied  consent,  as,  for  instance, 
where  it  is  done  in  order  to  correct  a  mistake  in  which  all 
the  parties  concurred,  or  to  supply  an  accidental  omission, 
and  thus  to  effectuate  the  intentions  of  all,  it  does  not  con- 
stitute a  legal  alteration.  For  although  it  may  sometimes 
vary  the  apparent  legal  effect  of  the  instrument,  it  does  not 
change  the  effect  which  they  intended  to  give  it ;  but  really 
effectuates  their  design  by  giving  expression  to  it,  and  pre- 
vents it  from  being  thwarted.^  Thus,  where  1822  was  in- 
serted by  mistake  for  1823,  and  the  agent  of  the  drawer, 
and  acceptor  to  whom  the  bill  had  been  given  for  delivery 
to  the  indorsee,  rectified  the  mistake,  it  was  held  not  an 
alteration.^  And  so  where  1868  was  changed  to  1869,  the 
latter  having  been  intended.^ 

§  1404.  So,  where  the  drawer  intended  to  make  the  bill 
negotiable,  and  indorsed  it  over,  but  omitted  the  words,  "or 
order,"  their  subsequent  insertion  merely  supplied  his  omis- 
sion, and  it  was  held  was  not  an  alteration.®  So,  where  the 
holder  of  a  bill  payable  "  twenty-four  after  date,"  inserted 
"months";®  and  where  in  a  bill  payable  "in  the  of  our 
Lord,"  the  word  "year  "  was  inserted,'''  it  was  held  likewise. 
And  where  a  note  was  intended  to  read  "  eight  hundred 

'  Hubbard  v.  Williamson,  5  Ired.,  397.       °  McRaven  v.  Crisler,  53  Miss.,  542. 

'  Brutt  V.  Piccard,  R.  &  M.,  273. 

*  Duker  v.  Franz,  7  Bush  (Ky.),  273,  But  see  Bowers  v.  Jewell,  2  N.  H.,  543. 
In  this  case  it  appeared  that  a  note  was  actually  executed  in  18 19,  but  dated 
1809^  and  subst^quently  altered  to  1819.  There  was  no  express  evidence  of  the 
consent  of  the  maker,  and  judgment  for  the  plaintiff  was  reversed  by  the  Supe- 
rior Court,  for  evidence  to  be  taken  as  to  whether  or  not  the  alteration,  which 
it  deemed  material,  was  fraudulent  also. 

^  Kershaw  v.  Cox,  3  Esp.,  246  ;  10  East.,  437;  Jacobs  v.  Hart,  2  Stark.,  45  ; 
Clute  V.  Small,  17  Wend.,  242. 

°  Connor  v.  Routh,  7  How.  (Miss.),  176.  '  Hunt  v.  Adams,  6  Mass.,  519. 


^  1405.    BONA  FIDE  HOLDER  OF  ALTERED  BILL  OR  NOTE.       415 

dollars,"  and  "  hundred  dollars"  were  omitted,  they  were 
properly  supplied.^  So,  where  "  hundred  "  was  inserted 
before  "  pounds"  in  a  bond,  having  been  intended.^ 

For  like  considerations,  where  the  name  of  one  of  several 
payees  was  inserted  by  mistake,  the  indorsee  of  the  other 
payees  might  prove  the  fact  in  a  suit  to  recover  against  his 
indorsers,  in  order  to  show  that  such  payee's  indorsement 
was  unnecessary  to  pass  title  to  him.^  And  we  should  say 
that,  as  such  payee's  name  was  not  intended  to  be  there,  its 
erasure  would  be  authorized  to  correct  the  mistake.* 


SECTION  VI. 

BONA  FIDE  HOLDER  OF  ALTERED  BILL  OR  NOTE. — WHERE 
PARTY  AFFORDS  OPPORTUNITY  FOR  ALTERATION  HE  IS 
BOUND. 

§  1405.  There  is  a  general  principle  which  pervades  the 
universal  law  merchant  respecting  alterations  (which,  when 
they  are  material,  will,  as  we  have  seen,  vitiate  the  bill  or 
note  even  in  the  hands  of  a  bona  fide  holder  without  notice)  ; 
a  principle  necessary  to  the  protection  of  the  innocent  and 
prudent  from  the  negligence  and  fraud  of  others.  That  is, 
that  when  the  drawer  of  the  bill  or  the  maker  of  the  note 
has  himself,  by  careless  execution  of  the  instrument,  left 
room  for  any  alteration  to  be  made,  either  by  insertion  or 
erasure,  without  defacing  it,  or  exciting  the  suspicions  of  a 
careful  man,  he  will  be  liable  upon  it  to  any  bona  fide 
holder  without  notice  when  the  opportunity  which  he  has 
afforded  has  been  embraced,  and  the  instrument  filled  up 
with  a  larger  amount  or  different  terms  than  those  which  it 

*  Boyd  V.  Brotherson,  10  Wend.,  93. 

*  Waugh  V.  Russell,  i  C.  Marsh,  214;  5  Taunt.,  707. 

»  Pease  v.  Dwight,  6  How.,  190.  *  Thomson  on  Bills  (Wilson's  ed.),  114 


4l6  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I406 

bore  at  the  time  he  signed  it.*  The  true  principle  appli- 
cable to  such  cases  is  that  the  party  who  puts  his  papei 
in  circulation,  invites  the  public  to  receive  it  of  any  one 
having  it  in  possession  with  apparent  title,  and  he  is  estopped 
to  urge  an  actual  defect  in  that  which,  through  his  act, 
ostensibly  has  none.^  "  It  is  the  duty  of  the  maker  of  the 
note  to  guard  not  only  himself,  but  the  public  against  frauds 
and  alterations  by  refusing  to  sign  negotiable  paper  made  on 
such  a  form  as  to  admit  of  fraudulent  practices  upon  them 
with  ease,  and  without  ready  detection."^  The  inspection 
of  the  paper  itself  furnishes  the  only  criterion  by  which  a 
stranger  to  whom  it  is  offered  can  test  its  character,  and 
when  the  inspection  reveals  nothing  to  arouse  the  suspicions 
of  a  prudent  man,  he  will  not  be  permitted  to  suffer  when 
there  has  been  an  actual  alteration.* 

§  1406.  Illustrations. — Thus,  where  the  maker  of  a  note 
left  a  blank  between  the  amount  "  one  hundred,"  and  the 
word  "dollars"  following,  and  "fifty"  was  inserted  between 
them  in  the  same  handwriting,  it  was  held  that  the  holder 
without  notice  could  recover  the  w^hole  amount.^  So,  where 
the  note  was  expressed,  "  with  interest  monthly  at  the  rate 
of  —  per  cent,  per  annum,  per  month,  until  final  payment," 
and  the  word  "  five  "  was  inserted  so  as  to  put  the  blank 
rate  of  interest  at  five  per  cent.  ;  ^  and  the  like  decision  has 
been   rendered  in  Iowa.'''     But,  in  a  similar  case,  where  a 


'  Young  V.  Grote,  4  Bing.,  253.  (The  authority  of  Young  v.  Grote  seems  to 
be  shaken  in  England.  See  Bank  of  Ireland  v.  Evans,  Trustees  H.  of  L.  Cas., 
389  ;  Baxendale  v.  Bennett,  cited  §  842.)  Isnard  v.  Towes,  10  La.  Ann.,  103  ; 
Garrard  v.  Haddan,  6^  Penn.  St.,  82  ;  Young  v.  Lehman,  63  Ala.,  519  ;  Toomer 
V.  Rutland,  57  Ala.,  379  ;  Thomson  on  Bills  (Wilson's  ed.),  109  ;  also  42,  43  ; 
see  post,  chapter  XLlX,  on  Checks,  section  xiv. 

=  Van  Duzer  v.  Howe,  21  N.  Y.,  538  (i860).  See  chapter  XXVI,  sec.  iii,  vol. 
I,  §§  843  et  seq.,  and  chapter  XLlll,  sec.  vi,  §§  1405  et  seq. 

^  Zimmerman  v.  Rote,  75  Penn.  St.,  188  ;  Brown  v.  Reed,  79  Penn.  St.,  370. 

*  Approved  in  Blakey  v.  Johnson,  13  Bush  (Ky.),  204  (1877). 

^  Garrard  v.  Haddan,  67  Penn.  St.,  82.  To  like  effect  Yocum  v.  Smith,  63 
111.,  321.     Ante,  %  844. 

*  Vischer  v.  Webster,  8  Cal.,  109 ;  see  also  6  Cal.,  577. 
^  Rainbolt  v.  Eddy,  34  Iowa,  440  (1872). 


^  1407.    BONA  FIDE  HOLDER  OF  ALTERED  BILL  OR  NOTE.      417 

blank  was  left  after  the  words,  "value  received  with 
interest  at — ,"  and  "ten  per  cent."  was  inserted,  this 
doctrine  was  denied.^  And  in  a  recent  Iowa  case,  where 
"  one  hundred  "  was  inserted  before  the  words  "  ten  dollars," 
and  there  was  nothing  suspicious  in  the  appearance  of  the 
paper,  a  very  strong  opinion  was  rendered  holding  that  a 
bona  fide  holder  could  not  recover.^  Where  after  the  word 
"  at  "  a  blank  was  left,  and  it  was  filled,  so  that  the  note 
was  made  payable  at  an  unauthorized  place,  it  was  held 
that  the  word  "  at  "  implied  that  the  blank  space  which 
succeeded  it  might  be  filled  before  the  note  should  be  de- 
liv^ered,  with  a  designated  place  of  payment,  and  that  if  the 
holder  filled  in  a  place  of  payment,  it  would  not  discharge 
the  maker,**  nor  an  indorser.*  And  to  the  like  effect  are 
cases  elsewhere  cited.^ 

And  in  like  manner,  where  the  note  was  written  partly 
in  pencil  and  partly  in  ink,  and  the  provision  in  pencil  an- 
nexing the  condition,  "This  note  is  not  to  be  paid  until 
fourteen  mills  are  sold,"  the  rubbing  out  of  the  condition 
would  not  debar  a  bojta  fide  holder  without  notice  from  re- 
covering, the  maker  having  been  guilty  of  gross  negligence 
in  so  making  the  note  as  to  be  easily  altered  without  muti- 
lation.^ So  where  the  words  "  without  interest "  were  in- 
terlined in  pencil,  and  afterward  erased,  the  party  was  held 
guilty  of  negligence,  and  the  bona  fide  holder  without  notice 
protested.''' 

§  1407.  The  addition  or  subtraction  of  a  memorandum 
on  the  bill  or  note  is,  as  we  have  already  seen,  as  much  an 

'  Holmes  v.  Trumper,  22  Mich.,  427.  See  also  Greenfield  Savings  Bank  v. 
Stowellj  123  Mass.,  196;   Washington  Sav.  Bank  v.  Ekey,  51  Mo.,  273. 

"^  Knoxville  National  Bank  v.  Clarke,  51  Iowa,  264.  Seevers,  J.,  delivered  a 
very  instructive  opinion. 

*  Redlich  v.  Doll,  54  N.  Y„  237. 

*  Kitchen  v.  Place,  41  Barb.,  465  ;  see  McGrath  v.  Clark,  56  N.  Y.,  36. 
'Vol.  i,§§  149,  152. 

"  Har\'ey  v.  Smith,  55  111.,  224  ;  see  also  Elliott  v.  Levings,  55  111.,  214. 
'  Seibel  v.  Vaughan,  69  111.,  257. 

Vol.  II. — 27 


41 8  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.        §  I407 

alteration  as  if  the  same  act  had  been  committed  in  respect 
to  its  incorporated  terms,^  But  if  the  memorandum  were 
so  written  upon  the  margin  or  any  other  part  of  the  instru- 
ment that  it  could  be  readily  separated  from  it  without 
giving  it  a  mutilated  appearance,  a  bona  fide  holder  taking 
it  without  notice,  we  should  consider  unaffected  by  its  being 
so  severed  and  destroyed.^  This  view  was  well  illustrated 
in  a  late  Indiana  case.^  If  the  memorandum  were  oriei- 
nally  made  upon  a  separate  paper,  there  can  be  no  doubt 
that,  although  a  contract  binding  between  the  parties,  it 
would  be  of  no  effect  against  a  third  party  without  notice  ;* 
and  if  the  party  who  executes  a  negotiable  instrument 
chooses  to  restrict  its  effect  by  a  separable  memorandum, 
instead  of  writing  the  entire  contract  in  the  body  of  the 
instrument,  he  should  not  be  protected  against  a  fraud  of 
which  he  has  laid  the  foundation.  The  holder  should  be 
protected,  upon  the  principle  that  where  one  of  two  inno- 
cent persons  must  suffer,  the  loss  should  fall  on  the  one 
who  has  furnished  the  opportunity.  The  case  is  analogous 
to  those  in  which  blanks  have  been  filled  with  excessive 
amounts.  The  promisor  should  be  held  bound  when  he 
has  left  his  contract  in  a  form  to  be  mutilated  by  the  cut- 
ting away  of  a  part,  as  well  as  where  he  has  left  room  for 
an  alteration  to  be  engrafted  upon  it.  But  it  has  been  held 
differently  in  Michigan,^  and  also  in  New  York,^  and  some 

^  Ante,  §  1397. 

"^  Ante,  §  1406;  Phelan  v.  Moss,  17  P.  F.  Smith,  59  ;  Garrard  v.  Haddan,  Id., 
82  ;  Cornell  v.  Nebeker,  58  Ind.,  428  ;  Zimmerman  v.  Rote,  75  Penn.  St.,  188  ; 
Noll  V.  Smith,  64  Ind.,  511. 

^  Nail  V.  Smith,  64  Ind.,  511.  In  this  case  a  condition  was  annexed  to  the 
notes,  perfect  in  form,  that  they  were  not  to  be  paid  unless  defendant  (the 
maker)  sold  within  a  certain  time  certain  machines  equal  to  the  amount  of  the 
notes.  The  condition  was  severed,  and  the  notes  negotiated,  and  a  bona  fide 
holder  was  held  entitled  to  recover. 

*  2  Parsons  N.  &  B.,  539. 

'  In  Wait  V.  Pomeroy,  20  Mich.,  425,  it  appeared  that  there  was  written  under 
a  promissory  note  for  %ioo  this  memorandum,  "  If  the  machine  should  not  be 
delivered,  this  note  not  to  be  paid,"  which  was  cut  off  and  destroyed,  and  the 
note,  without  it,  passed  to  a  bona  fide  holder  without  notice  ;  the  court  held 

*  Benedict  v.  Cowden,  49  N.  Y.,  396  (1872). 


5   1407^-    BONA  FIDE  HOLDER  OF  ALTERED  BILL  OR  NOTE.  419 

Other  States;^  but  it  is  observable  that  in  the  New  York 
case  the  court  says,  in  its  opinion,  that  the  question,  whether 
or  not  there  was  negligence  on  the  part  of  the  maker,  and 
the  effect  thereof,  was  not  raised  in  the  court  below,  and 
could  not  then  be  considered.  If  there  were  a  mere  mem- 
orandum to  the  effect,  "  This  note  is  given  on  condition," 
and  there  is  nothinor  to  show  what  the  condition  is,  the 
severance  has  been  held  to  be  immaterial.^ 

§  1407^.  Conflicting  authorities.  Inserting  words  be- 
tween spaces  of  completed  instrtunents. — The  authorities  on 
this  subject,  as  applicable  to  particular  circumstances,  are 
conflicting,  as  the  text  has  already  disclosed.  Where  blanks 
are  left  in  the  paper,  they  concur  that  their  existence  im- 
plies authority  in  the  holder  to  fill  them,  and  that  therefore 
the  bona  fide  holder  may  recover  on  the  paper,  although 
the  blank  be  filled  in  excess  of  any  real  authority  conferred. 
But  when  the  paper  is  perfect  in  itself,  and  the  parties  are 
sought  to  be  charged  because  of  the  fact  that  the  words  or 
figures  have  been  so  written  that  interlineations  are  practi- 
cable, without  presenting  a  strange  or  suspicious  appear- 
ance, and  have  been  made  so  as  to  alter  the  purport  of  the 
instrument,  a  very  nice  and  difficult  question  is  presented. 
A  recent  Massachusetts  case  very  forcibly  presents  the  doc- 


that  he  could  not  recover,  and  Campbell,  C.  J.,  concluded  his  opinion,  saying: 
"  There  seems  at  first  a  plausibility  in  the  argument  that  a  party  by  signing  a 
note  with  a  separate  memorandum  beneath,  puts  it  in  the  power  of  the  holder  to 
gain  easier  credit  for  the  note  than  it  would  be  likely  to  gain  if  altered  in  the 
body.  But  as  it  was  well  suggested  on  the  argument,  no  one  is  bound  to  guard 
against  every  possibility  of  felony.  And  practically  it  is  a  matter  of  every-day 
occurrence  to  feloniously  alter  negotiable  paper  as  successfully  by  changes  on 
the  face  as  in  any  other  way.  The  public  are  not  very  much  more  likely  to  be 
defrauded  in  one  way  than  in  another.  There  can  never  be  absolute  safety 
except  by  looking  to  the  character  and  responsibility  of  the  persons  from  whom 
such  paper  is  received,  and  who  are  always  bound  to  respond  for  the  considera- 
tion if  it  is  forged.  Little  v.  Derby,  7  Mich.,  325.  If  a  party  makes  a  contract 
in  such  a  manner  as  is  authorized  by  law,  he  has  a  right  to  object  to  being 
bound  to  any  other.  A  bona  fide  holder,  before  maturity,  is  allowed  to  receive 
the  genuine  contract,  discharged  from  any  equities  attached  to  the  contract 
itself,  as  between  the  origmal  parties,  but  he  can  not  get  a  contract  where  none 
was  made." 

'  Gerrish  v.  Glines,  56  N.  H.,  9  ;  see  Palmer  v.  Largent,  5  Neb.,  223. 

'  Palmer  v,  Largent,  5  Neb.,  223  ;  see  ante,  §§41,  51,  797^ 


420  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §    I408. 

trine  that  the  bona  fide  holder  of  perfected  negotiable  in- 
struments, which  have  been  altered  by  the  insertion  of 
words  in  the  spaces  left  between  the  words  and  figures,  can 
not  recover ;  and  denies  that  the  parties  to  such  instru- 
ments are  guilty  of  any  such  negligence  as  should  render 
them  hable  when  their  undertakings  have  been  altered  by 
strangers.^ 

§  1408.  If  the  alteration  were  made  without  any  fault 
on  the  part  of  the  maker,  drawer,  or  acceptor,  neither  will 
then  be  bound,  although  the  alteration  were  so  skilfully 
made  as  to  escape  notice  upon  careful  observation.  Thus, 
where  a  banker's  check  had  been  dexterously  altered  by  a 
chemical  process,  the  original  sum  being  expunged,  and  a 
larger  inserted,  the  banker  was  not  allowed  to  recover  of 
the  drawer  more  than  the  sum  for  which  the  draft  actually 
called  when  he  drew  it.^  So  where  the  payee  of  a  note  al- 
tered it  from  $500  so  as  to  read  $1,500,  no  blank  space 
having  been  negligently  left.^  And  clearly  when  the  alter- 
ation is  made  in  so  clumsy  or  ineffectual  a  manner  that  it 
ought  to  excite  suspicion  and  inquiry,  the  holder  will  not 
be  protected,  having  only  himself  to  blame  if  he  takes  it.* 


'  Greenfield  Sav.  Bank  v.  Stowell,  123  Mass.,  203.  In  this  case  the  cases  on 
this  subject  were  reviewed  in  an  elaborate  and  able  opinion,  and  the  doctrine 
stated  in  the  text  was  disapproved.  In  that  case  it  appeared  that  George  W. 
Bardwell  obtained  from  the  plaintiff  a  printed  form  of  a  note,  wrote  the  figures 
"67"  at  the  top  of  it,  leaving  a  space  of  three-tenths  of  an  inch  between  the 
"  %  "  mark  and  these  figures,  and  also  wrote  the  words  "  sixty-seven  "  before  the 
word  "  dollars,"  in  the  body  of  the  note,  leaving  three  inches  of  the  blank  space 
before  the  words  "  sixty-seven  "  unfilled.  Having  signed  the  note  in  this  form, 
he  presented  the  note  to,  and  obtained  the  signatures  of,  two  others,  as  joint  and 
several  makers  with  himself,  they  having  no  knowledge  or  expectation  that  the 
note  was  to  be  altered  or  negotiated  for  a  larger  sum  than  sixty-seven  dollars, 
and  giving  him  no  authority  to  alter  or  increase  the  amount  of  the  note.  Bard- 
well, without  the  knowledge  of  the  comakers  who  signed  for  his  accommoda- 
tion, fraudulently  inserted  the  figure  "  4  "  before  the  figures  "  67,"  and  the  words 
"  four  hundred  and  "  before  the  words  "sixty-seven,"  and  negotiated  the  note  to 
the  plaintiff  as  a  note  for  four  hundred  and  sixty-seven  dollars.  It  was  held  that 
the  plaintiff  could  not  recover  against  the  accommodation  makers. 

=  Hall  V.  Fuller,  5  Barn.  &  C,  75°- 

*  Trigg  V.  Taylor,  27  Mo.,  245. 

♦  Hall  v.  Fuller,  5  Barn.  &  C.,  750 ;  Garrard  v.  Haddan,  67  Penn.  St.,  82 
Worrall  v.  Gheen,  3  Wright,  388 ;  Thomson  on  Bills  (Wilson's  ed.),  43. 


^  1409.     BONA  FIDE  HOLDER  OF  ALTERED  BILL  OR  NOTE.      42 1 

Actual  notice  is  not  in  such  cases  required,  constructive 
notice  suffices,  and  if  the  holder  chooses  to  receive  the 
paper  with  erasures  or  other  marks  of  infirmity  upon  it,  he 
takes  it  at  his  own  risk.^  It  has  been  held  that  the  question 
whether  the  alteration  bears  marks  of  suspicion  is  for  the 
court,  on  inspection  of  the  instrument.^  Any  addition  to 
any  instrument  already  complete  is  an  undoubted  forgery." 

§  1409.  In  Scotland  the  doctrine  of  the  text  obtains,  and 
there  the  acceptor  and  indorser  were  held  bound  upon  a  bill 
in  which  the  sum  had  been  altered  from  "  eight "  to  "  eighty- 
four"  pounds  ;  there  being  so  much  room  for  the  alteration 
that  it  was  made  without  giving  the  bill  a  suspicious  appear- 
ance. I  n  another  case  in  which  two  bills  came  under  consid- 
eration— one  in  which  the  w^ords  "  four  hundred  and  "  had 
been  added  before  "fifty-eight"  without  appearing  sus- 
picious ;  and  the  other  in  which  an  alteration  had  likewise 
been  made  in  the  sum,  but  so  as  to  have  a  crowded  appear- 
ance ;  it  was  held  that  the  acceptors  were  bound  upon  the 
first  bill  to  the  full  amount  to  a  bona  fide  holder  without 
notice  ;  but  upon  the  second,  that  the  parties  were  dis- 
charged altogether.*  A  recent  Pennsylvania  case  well  illus- 
trates the  principles  enunciated.  The  defendant  signed  an 
agreement  constituting  him  an  agent  for  the  sale  of  a  pat- 
ented article,  which  agreement  was  so  framed  that  a  part 
of  it  could  be  cut  off,  leaving  a  perfect  negotiable  note.  It 
was  so  cut  without  defendant's  knowledge,  and  transferred 
for  value  to  the  plaintiff.  It  was  held  that  the  defendant 
was  not  bound,  as  he  had  not  signed  a  negotiable  note,  and 
was  not  guilty  of  negligence  in  the  premises.^ 


»  Angle  V.  M.  W.,  etc.,  Ins.  Co.,  92  U.  S.  (2  Otto),  342 ;  sttante,  §§  7SS,  7S9, 

'  Paramore  v.  Lindsey,  63  Mo.,  63. 

»  Ivory  V.  Michael,  33  Mo.,  398 ;  McGrath  v.  Clark,  56  N.  Y.,  36  ;  see  vol.  i 
§  142.  , 

*  Pagan  v.  Wylie  ;  Graham  v.  Gillespie  ;  see  Thomson  on  Bills  (Wilson  s  ed.), 
42,  and  Ross  on  Bills,  104,  195. 

'  Brown  v.  Reed,  79  Penn.  St.,  370  (1875),  Sharswood,  J.,  distinguishes  and 


422  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   l4.lOa. 


SECTION   VII. 

THE   EFFECT   OF  ALTERATION.    ' 

§  1410.  The  effect  of  material  alteration  of  a  bill  or  note 
will  be  considered,  (i)  in  respect  to  fraudulent  alterations, 
and  (2)  in  respect  to  alterations  innocently  made.  The 
effect  of  immaterial  changes,  not  amounting  to  alterations, 
will  be  separately  considered. 

§  1410^.  Fraudtihiit  alteration  destroys  instrument  and 
extinguishes  debt. — In  XkiQ  first  place,  as  to  fraudulent  alter- 
ation, when  a  party  to  a  bill  or  note  fraudulently  alters  its 
legal  effect,  he  not  only  destroys  the  instrument  by  thus 
destroying  its  legal  identity,  but  he  also  extinguishes  the 
debt  for  which  it  was  given.  And  it  can  not  afterward  be 
made  the  basis  of,  or  evidence  for,  a  recovery  in  any  form 
of  action  whatever  ;  ^  though,  of  course,  it  might  be  admis- 
sible to  defeat  a  claim  on  the  ground  of  fraud,  or  convict  a 
party  of  a  crime.^  It  is  necessary  that  the  law  should  impose 
this  forfeiture  of  the  debt  itself  upon  one  who  fraudulently 
tampers  with  the  instrument  which  evidences  or  secures  it ; 
and  it  is  done  upon  the  principle  that  "  no  man  should  be 

explains  Phelan  v.  Moss,  Garrard  v.  Haddan,  and  Zimmerman  v.  Rote.     The 
paper  which  was  perverted  into  a  note  was  as  follows  : 

North  East,  April  3d,  1872. 
Six  months  after  date  I  promise  to  pay  J.  B.  Smith  or  bearer,  fifty  dollars  when  I  sell  by 

order    Two     Hundred     and     Fifty    Dollars  worth  of  hay  and   harvest  grinders 

for  value  received,  with  legal  interest,  without  appeal        and        also        without 

defalcation  or  stay  of  execution. 

T.  H.  BROWN,  Agent  for  Hay  &  Harvest  Grinders. 

* 

The  paper  was  divided  by  cutting  through  where  the  asterisks  are  placed, 
but  when  the  paper  was  written  the  context  was  close  and  natural,  with  nothing 
to  indicate  that  any  portion  was  to  be  detached.  The  left-hand  half  was  nego- 
tiated as  a  note,  but  was  not  recoverable  upon  as  such  by  even  a  bona  fide 
holder. 

'  Wheelock  v.  Freeman,  13  Pick.,  165  ;  Meyer  v.  Huneke,  55  N.  Y.,  412  ; 
Booth  V.  Powers,  56  N.  Y.,  31  ;  Newell  v.  Mayberry,  3  Leigh,  254;  Smith  v. 
Mace,  44  N.  H.,  553  ;  Clute  v.  Small,  17  Wend.,  238  ;  Merrick  v.  Boury,  4  Ohio 
St.,  70  ;  Wallace  v.  Harmstad,  44  Penn.  St.,  492  (a  deed)  ;  2  Parsons  N.  &  B., 
572. 

"^  Chitty  on  Bills  (13  Am.  ed.)  [*i9l],  219. 


§  141  [.         THE  EFFECT  OF  ALTERATION.  423 

permitted  to  take  the  chance  of  gain  by  the  commission  of 
a  fraud,  without  running  the  risk  of  loss  in  the  case  of  de- 
tection."^ 

Thus  in  Massachusetts,  where  a  memorandum  was  writ- 
ten upon  two  notes,  providing  that  they  should  be  payable 
in  a  certain  contingency  in  two  years,  and  was  cut  off  by 
the  plaintiff,  it  was  held  presumptively  fraudulent,  and  that 
he  could  not  recover.^ 

§  141 1.  Ill  the  next  place,  as  to  alterations  innocently 
made. — It  is  considered  by  a  number  of  authorities  that 
when  the  alteration  is  material,  the  instrument  is  ipso  facto 
avoided,  and  the  original  consideration  forfeited  ;  no  regard 
being  paid  to  the  inquiry  whether  or  not  the  alteration  was 
fraudulent  as  well  as  material ;  it  being  said  in  a  case  of 
this  character  in  Vermont,  by  Pierpoint,  J.  :  "  The  forfeiture 
of  the  debt  is  one  of  the  penalties  which  the  law  imposes 
upon  the  party  who  alters  or  tampers  with  the  written  evi- 
dence which  he  holds  of  his  claim,"  ^  On  the  other  hand, 
in  a  number  of  English  and  American  cases,  it  has  been 
considered  that  a  material  alteration  only  avoided  the  in- 


'  Newell  V.  Mayberry,  8  Leigh,  254;  Vogle  v.  Ripper,  3+  111.,  107  ;  Whitmer 
V.  Frye,  10  Mo.,  350. 

2  Wheelock  v.  Freeman,  13  Pick.,  168,  Shaw,  C.  J. :  "  If  the  plaintiff  claims 
upon  the  notes,  he  is  not  entitled  to  recover,  because  he  has  made  a  material  al- 
teration in  the  notes  since  they  were  signed.  Master  v.  Miller,  4  T.  R.,  320. 
That  it  was  fraudulent  is  a  conclusion  of  law  from  the  fact  that  it  was  done  wil- 
fully, for  his  own  benefit  and  to  the  injury  of  the  defendant,  by  accelerating  the 
payment.  It  has  been  made  a  question  whether  the  alteration  was  material. 
This  is  easily  tested  by  inquiring  whether  the  notes  would  have  the  same  legal  ef- 
fect and  operation  after  the  alteration  as  before.  After  the  alteration  they  were 
payable  on  demand  ;  before  it,  on  time.  The  difference  is  apparent.  And  so 
the  parties  understood  it.  When  written  '  on  demand,'  the  defendant  refused  to 
sign  tiiem,  and  only  consented  to  do  so  after  the  qualifying  memorandum  was 
made.  But  there  is  no  magic  in  the  word  memorandum.  And  it  has  often  been 
decided  that  any  words  written  on  an  instrument  which  qualify  and  restrain  its 
operation,  constitute  a  part  of  the  contract.  Jones  v,  Fales,  4  Mass.  R.,  245, 
where  the  words  '  foreign  bills,'  written  in  the  margin  of  the  note,  were  held  to 
be  part  of  the  contract ;  Springfield  Bank  v.  Merrick,  14  IMass.  R.,  322  ;  Homer  v. 
Wallis,  II  Mass.  R.,  309;  Heywood  v.  Perrin,  10  Pick.,  228." 

'  Bigelow  V.  Stephens,  35  Vt.,  525  ;  Martendale  v,  Follett,  i  N.  H.,  99  ;  Gillette 
V,  Smith,  18  Hun,  10 ;  Savings  Bank  v.  Shaffer,  9  Neb.,  i  ;  see  Toomer  v.  Rut- 
land, 57  Ala.,  379. 


424  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I412. 

strument,  and  if  it  were  given  for  a  debt,*  or  in  renewal  of 
a  bill  or  note,^  the  holder  might  still  sue  upon  the  original 
cause  of  action — no  question  of  fraudulent  intent  being 
raised  in  the  pleadings  or  appearing  in  the  case.  But  the 
holder  could  not  sue  any  party  whose  remedy,  after  making 
payment,  would  be  impaired  by  the  alteration.^  If  the  alter- 
ation is  material,  all  authorities  agree  that  the  instrument  is 
avoided.^  The  alteration  vitiates  it  regardless  of  intention.^ 
In  New  York  the  effect  of  material  alteration  innocently 
made  has  been  stated  by  Folger,  J.,  as  follows  :  "  If  the 
alteration  was  made  without  fraudulent  intention,  the 
payee  may  resort  to  the  original  indebtedness,  if  that  was 
independent  of  the  note,  and  has  not  been  discharged  by 
the  execution  of  it,  and  pursues  the  maker  upon  that.  But 
to  have  such  resort,  he  must  be  able  to  produce  and  surren- 
der the  note."^ 

§  141 2.  Presu7nption  from  material  alteration. — It  is 
maintained  by  a  number  of  authorities,  that  if  a  bill  or  note 
appear  on  its  face,'''  or  be  shown  by  extraneous  evidence  to 
have  been  materially  altered,  there  will  be  no  presumption 
that  such  alteration  was  fraudulent,  and  that,  therefore,  al- 
though the  instrument  be  destroyed  as  the  foundation  of 
an  action,  the  party  who  held  it  may  recover  upon  the 
original  consideration,  or  enforce  any  other  security  for 
the  debt.^     On  the  other  hand,  others  maintain  that  if  the 

*  Atkinson  v.  Hawden,  2  Ad.  &  E.,  169  (29  E.  C.  L.  R.)  Bill  altered  in  date 
from  30th  to  28th  of  December.  Held,  drawer  could  recover  original  considera- 
tion of  acceptor.  Warren  v.  Layton,  3  Harring.,  404;  Clute  v.  Small,  17  Wend., 
242;  Clough  V.  Seay,  49  Iowa,  in  ;  2  Parsons  N.  &  B.,  572  ;  see  §  1413. 

^  Sloman  v.  Cox,  i  C.  M.  &  R.,  471.  Bill  given  in  renewal  altered  in  date 
from  20th  to  24th  of  June,  and  it  was  held  that  there  could  be  suit  on  original 
bill. 

^  Alderson  v.  Langdale,  3  Barn.  &  Ad.,  660. 

^  Angle  V.  N.  W.,  etc.,  Ins.  Co.,  92  U.  S.  (2  Otto),  342 ;  Harsh  v.  Klepper,  20 
Ohio  St.,  200;  Booth  v.  Powers,  56  N.  Y.,  31. 

^  Evans  v.  Foreman,  60  Mo.,  449 ;  Moore  v.  Hutchinson,  69  Mo.,  429. 

"Booth  V.  Powers,  56  N.  Y.,  31  ;  see  also  Clute  v.  Small,  17  Wend.,  238; 
Meyer  v.  Huneke,  55  N.  Y.,  412. 

'  Gist  V.  Evans,  30  Ark.,  286. 

*  Vogle  V.  Ripper,  34  III,  100.  A  note  secured  by  mortgage  was  materially 
altered.  Held,  that  a  mortgage  securing  it  might  be  enforced,  the  mortgagot 
not  alleging  fraud- 


^    14 1 3.  THE    EFFECT    OF   ALTERATION.  425 

alteration  be  material,  it  will  be  presumed  to  have  been 
fraudulent  also,  and  that  until  this  presumption  be  rebutted 
by  explanation  there  ean  be  no  recovery  in  any  form  of  ac- 
tion whatever.^  The  latter  doctrine  seems  correct.  The 
party  in  default  should  bear  the  burden  of  explaining  it, 
and  of  extricating  himself.  He  must  know  the  circum- 
stances which  induced  the  alteration,  and  to  require  the 
party  wronged  to  go  into  his  enemy's  camp  for  testimony 
would  be  to  facilitate  the  inventions  of  fraud.  Still,  the 
question  is  one  that  must  be  resolved  by  the  peculiar  cir- 
cumstances of  each  case,  and  the  presumptions  which  arise 
are  frequently  so  slight  and  so  shifting  that  no  fixed  and 
invariable  rule  can  well  be  established.^ 

§  141 3.  S7cz^  not  maintainable  on  altered  instrument. — 
When  an  instrument  has  been  materially  altered  it  can  not 
be  sued  upon  in  its  altered  form,  nor  read  in  evidence  to 
support  an  action,  even  when  brought  by  a  bona  fide  holder 
without  notice.^  But  when  the  party  making  the  alteration 
discharges  the  burden  of  proof  upon  him  by  showing  that  the 
material  alteration  was  made  by  mistake  and  without  fraud- 
ulent intent,  the  right  of  action  upon  the  consideration  for 
which  it  was  given  remains.*  And  there  is  authority  to  the 
effect  that  although  the  alteration  be  material  and  fraudu- 
lent— that  since  a  bill  or  note  suspends,  and  is  not  absolute 
payment  of,  the  debt  for  which  it  is  given — such  alteration 
only  extinguishes  the  security,  and  the  original  considera- 
tion remains.^     But  this  is  not,  we  think,  sound  doctrine. 


■  Whitmcr  v.  Frj'e,  10  Mo.,  349,  Scott,  J, :  "There  is  no  question  but  that  the 
alteration  was  a  material  one,  and  it  \s  p>-tiiia  facie  fraudulent."  Wheelock  v. 
Freeman,  13  Pick.,  165  ;  Robinson  v.  Reed,  46  Iowa,  221. 

^Kountz  V,  Kennedy,  63  Penn.  St.,  190,  Thompson,  C.  J.  :  "Each  case  must 
stand  much  more  on  its  own  facts  than  upon  the  rules  announced  in  any  given 
case."  Craighead  v.  McLoney,  S.  C.  Penn.,  Central  L.  J.,  March  loth,  1882,  p. 
193- 

'  State  Savings  Bank  v.  Shaffer,  9  Neb.,  i. 

*Hunt  V.  Gray,  35  N.  J.  Law,  227  ;  Matteson  v.  Ellsworth,  33  Wis.,  488; 
State  Savings  Bank  v.  Shaffer,  9  Neb.,  7;  an/e,  §  141 1. 

'  Matteson  v.  Ellsworth,  33  Wise,  48S,  obiter. 


426  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I414. 

In  Massachusetts,  where  P.,  the  maker  of  a  note  for  $500, 
got  R.  to  indorse  it  for  P.'s  accommodation,  and  then  by 
aid  of  chemicals  raised  it  to  $2,000,  and  got  it  discounted 
at  banic  ;  but  before  it  fell  due  the  fraud  w^as  discovered, 
the  writing  restored,  and  the  note  as  for  $500  protested,  it 
was  held  that  R.  was  not  liable,  the  only  note  accepted  by 
the  bank,  the  plaintiff  being  due  for  $2,000,  which  note  R. 
did  not  indorse.-' 

§  1 41 4.  Right  of  restoration  of  mstrwnent  innocently 
altered. — There  may  be  many  cases  of  innocent  material 
alterations  in  which  it  would  work  injury,  loss,  or  inconven- 
ience to  confine  the  holder  to  a  suit  upon  the  original  con- 
sideration. If  the  indorser  were  sued,  and  were  held 
liable,  he  could  not  have  the  maker's  note  restored  to  him 
as  a  foundation  for  his  action  if  it  were  utterly  annihilated 
by  the  alteration.  And  the  indorsee  might  have  rendered 
such  a  consideration  as  could  not  be  recovered  back  :  for 
instance,  professional  services,  labor,  or  another  note.  For 
these  reasons  it  would  seem  just  to  allow  a  more  specific 
remedy ;  and  while  we  have  seen  no  precedent  which  so 
decides,  it  has  been  suggested  that  a  court  of  equity  would, 
under  its  jurisdiction  over  mistakes,  correct  an  alteration 
innocently  and  mistakenly  made,  and  restore  the  instru- 
ment to  its  original  form.^  And  there  is  no  sufficient 
reason  why  the  party  should  not  himself  be  permitted  to 
undo  what  he  has  mistakenly  done,  provided  no  other  per- 
son has  become  so  situated  toward  the  instrument  that  it 
would  operate  prejudicially  upon  him.^  The  burden  of 
proving  innocence  would  be  a  sufficient  safeguard  to  prior 
parties ;  and  when  innocence  is  clearly  proven,  and  the 
prima  facie  presumption    of    guilt   overthrown,  it  would 


^Citizens'  Nat.  Bank  v,  Richmond,  I2i  Mass.,  no.  See  also  Walpole  v.  Elli- 
son, 4  Houston,  322. 

*  See  Chadwick  v.  Eastman,  53  Me.,  16.  This  seems  to  be  hinted.  In  Shep- 
ard  V.  Whetstone,  51  Iowa,  457,  it  is  doubted. 

'2  Parsons  N.  &  B.,  570. 


I 


5   141 5.  THE    EFFECT    OF   ALTERATION.  427 

seem  too  rigorous  to  inflict  upon  the  innocent  a  penalty 
only  deserved  by  the  guilty.^ 

§  141 5.  Ilhistrations  of  restoration  of  altered  notes. — This 
latter  view  was  forcibly  presented  in  Pennsylvania  in  a  case 
where  within  an  hour  or  two  after  the  note  was  signed,  the 
payee  returned  to  the  maker's  office,  where  his  clerk,  at  the 
payee's  request,  but  without  knowledge  or  consent  of  the 
indorser,  inserted  "  with  interest."  The  maker  ratified  the 
clerk's  action.  But  subsequently  the  payee  had  the  insert- 
ed words  expunged,  apparently  with  chemicals,  and  sued 
the  indorser  upon  it  in  its  original  form.  The  latter 
claimed  that  the  note  had  been  avoided  as  to  him  by  the 
alteration ;  but  it  was  held,  that  no  fraud  having  been  in- 
tended, the  plaintiff  had  a  right  to  restore  it  to,  and  sue 
upon  it  in,  its  original  form.^  And  in  Massachusetts, 
where  a  special  indorsement  was  erased  by  mistake,  and  no 
one  could  suffer  from  its  restoration,  the  cancelled  words 
were  allowed  to  be  replaced,  the  court  saying:  "Justice 
requires  and  the  law  allows  it  to  be  done."^  In  a  late  Iowa 
case,  where  the  payee  of  a  note,  being  desirous  of  transfer- 
ring it,  but  ignorant  of  the  appropriate  method,  erased  his 
own  name  and  inserted  that  of  the  transferee,  and  subse- 
quently, before  delivery,  restored  it  to  its  original  form, 
and  then  indorsed  it,  the  alteration  was  deemed  immaterial, 
and  an  action  by  the  indorsee  against  the  maker  sustained.* 

'  See  Shepard  v.  Whetstone,  51  Iowa,  457,  and  §  141 5. 

''Kountz  V.  Kennedy,  63  Penn.  St.,  187  (1870),  Thompson,  C.  J.,  sajing: 
"  Now  it  seems  to  me,  that,  as  the  identity  of  the  note  remained,  and  there  was 
nothing  in  it  to  enlarge  the  obligation  of  the  indorser,  and  as  what  had  beea 
done  was  innocently  but  mistakenly  done,  and  expunged,  for  aught  we  know, 
within  the  hour  after  it  had  been  done,  there  is  no  rule  of  law  unreasonable 
enough  to  hold  it  avoided  by  this.  I  admit  that  if  there  had  been  evidence  of  a 
fraudulent  tamp'ering  with  the  note,  a  different  rule  would  apply.  But  regard- 
ing it  as  mistakenly  done,  in  an  attempt  to  make  the  note  comply  with  the  con- 
tract, and  assented  to  by  the  original  parties,  one  of  them  the  principal  in  it, 
and  without  fraud,  ought  the  consequences  of  such  an  act,  done  under  such  cir- 
cumstances, be  made  to  rank  with  fraud  and  perjur>'  ?  It  ought  to  be  regarded, 
as  it  manifestly  was,  to  the  indorser  immaterial."  Sharswood,  J.,  dissented. 
See  also  Collins  v.  Makepiece,  13  Ind.,  448. 

'Nevins  v.  DeGrand,  15  Mass.,  436. 

■•Horst  V.  Wagner,  43  Iowa,  373  (1876).     See  Ames  v.  Brown,  22  Minn.,  257. 


428  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I416. 

And  in  another  case  where  a  blank  after  the  word  "at" 
was  filled  without  fraudulent  design  with  the  w^ords,  "  with 
ten  per  cent,  interest  from  date,"  and  the  note  was  subse- 
quently restored  to  its  original  form,  and  negotiated  to  an 
innocent  holder  without  notice,  it  was  held  he  could  recov- 
er upon  the  note.^  In  California  the  principles  presented 
in  the  text  were  applied  in  the  case  of  an  innocently  altered 
and  restored  bond.^  Where  the  alteration  is  fraudulent, 
there  can  not  be  any  restoration.^ 

§  141 6.  Effect  of  immatei'ial  change  with  fratiduleni 
intent. — It  is  said  by  some  of  the  authorities,  and  by  Green- 
leaf  in  his  Treatise  on  Evidence,  that  if  the  alteration  be 
fraudulently  made  by  the  party  claiming  under  the  instru- 
ment, it  does  not  seem  important  whether  it  be  in  a  ma- 
terial or  an  immaterial  part  ;  for  in  either  case,  he  has 
brought  himself  under  the  operation  of  the  rule  established 
for  the  prevention  of  fraud  ;  and  having  fraudulently  de- 
stroyed the  identity  of  the  instrument,  he  must  take  the 
peril  of  all  the  consequences.''  There  are  other  cases  in 
wdiich  this  doctrine  is  laid  down  ;^  but  in  none  of  those 
quoted  by  the  learned  author,  or  which  we  have  seen,  did 
it  appear  that  the  alteration  was  immaterial,  and  was  held 
to  have  vitiated  the  instrument  by  reason  of  the  fraudulent 
intent.  If  the  change  destroys  the  identity  of  the  instru- 
ment, it  is  material ;  but  it  has  been  well  said,  "  an  imma- 
terial alteration  may  be  treated  as  no  alteration";^  and  ac- 
cordingly held  that  if  the  act  itself  is  immaterial  and  can 
work  no  injury,  it  is  irrelevant  to  inquire  into  the  niotives 
with  which  it  was  committed.  Intent  not  manifested  in  a 
material  respect  is  nugatory,  and  this  we  conceive  to  be  the 
true  doctrine. 

»Shepard  v.  Whetstone,  51  Iowa,  457. 

» Rogers  v.  Shaw,  S.  C.  Cal.,  Nov.,  1881 ;  Central  L.  J.,  Jan'y  13,  1882,  p.  36. 

'Citizens'  National  Bank  v.  Richmond,  121  Mass.,  no. 

*Greenleaf  on  Evidence,  vol.  i,  568. 

*Lubbering  v.  Kohlbrecher,  22  Mo.,  598  ;  Turner  v.  Billagram,  2  Cal.,  523. 

•Mogev.  Herndon,  30  Miss.,  120. 


k 


5  14.17.      BURDEN  OF  TROOF  OF  ALTERATION.         429 

SECTION  VIII. 
BURDEN  OF  PROOF  OF  ALTERATION. 

§  141 7.  Whether  or  not  a  negotiable  instrument  has  been 
altered,  may  appear  upon  its  face,  or  may  be  shown  by 
the  defendant  to  have  been  made  so  skilfully,  or  in  such  a 
manner,  as  not  to  be  apparent  to  the  observer.  When  an 
alteration  is  apparent  on  the  face  of  the  instrument,  the 
question  arises  whether  the  burden  of  proof  is  upon  the 
holder  to  show  that  it  was  made  before,  or  contemporane- 
ously with,  its  issue  ;  or  is  upon  the  defendant  to  show  that 
it  was  made  after  it  was  issued.  It  may  seem  harsh  to  the 
holder,  and  may  frequently  devolve  loss  upon  an  innocent 
party,  to  require  him  to  explain  an  alteration  which  may 
have  been  made  before  he  came  into  possession  of  the  in- 
strument and  with  which  he  had  no  privity.  But  it  would 
frequently  be  equally  harsh  to  hold  the  defendant  to  the 
responsibility  of  showing  not  only  that  his  contract  has 
been  altered,  but  in  addition  that  the  alteration  was  made 
after  it  left  his  hands. 

The  principle  which  prevails  according  to  the  current  of 
English  and  American  authorities  has  been  w^ell  stated  by 
Chief-Justice  Gibson,  in  a  case  where  the  words  "  payable 
at  the  Bank  of  Pittsburgh,"  written  at  the  end  of  a  note, 
were  in  a  handwriting  different  from  that  of  the  defendant. 
He  said  :  "  Without  a  presumption  to  sustain  him,  the  maker 
would  in  every  case  be  defenceless.  It  may  be  said  that 
the  holder,  with  such  a  presumption  against  him,  would 
also  be  defenceless.  But  it  was  his  fault  to  take  such  a 
note.  As  notes  and  bills  are  intended  for  negotiation,  and 
as  payees  do  not  receive  them  when  clogged  with  impedi- 
ments to  their  circulation,  there  is  a  presumption  that  such 
an  instrument  starts  fair  and  untarnished,  which  stands  till 
it  is  repelled  ;  and  a  holder  ought,  therefore,  to  explain  why 


430  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I418. 

he  took  it  branded  with  marks  of  suspicion,  which  would 
probably  render  it  unfit  for  his  purposes.  The  very  fact 
that  he  received  it  is  presumptive  evidence  that  it  was  un- 
altered at  the  time ;  and,  to  say  the  least,  his  folly  or  his 
knavery  raised  a  suspicion  which  he  ought  to  remove.  The 
maker  of  a  note  can  not  be  expected  to  account  for  what 
may  have  happened  after  it  left  his  hands ;  but  a  payee  or 
indorsee  who  takes  it,  condemned  and  discredited  on  the 
face  of  it,  ought  to  be  prepared  to  show  what  it  was  when 
he  received  it.^ 

§  141 8.  The  same  rule  has  been  applied  where  it  appeared 
that  "May  4th,  1837,"  had  been  altered  to  "April  4th";' 
where  "  ;^40  17^-.  6</."  appeared  to  have  been  changed  to 
";^49  I  js.  6d.'']  ^  where  the  words  "  second  of  exchange"  were 
changed  to  "  only  of  exchange  'V  where  the  words  "  at  his 
office  in  New  York  "  were  erased  ;°  where  "  March  25th  " 
was  changed  apparently  to  "  March  30th,"  ^  and  "  August 
i2th"  to  "August  13th";'''  w^here  the  name  of  one  of 
several  promisors  had  been  erased;^  where  the  words 
"  forty-five  dollars  and  twenty-nine  cents  "  had  been  erased, 
and  "forty-seven  dollars  and  seventy-nine  cents"  inter- 
lined;® where  "one  hundred  "was  substituted  for  "three 
hundred";^*'  where  the  words  "  if  the  same  be  a  lien  on  the 
land  bought "  were  interlined  in  an  acceptance  conditioned 
upon  the  satisfaction  of  a  judgment,  and  w^ere  in  ink  of  a 
different  color  from  the  rest  of  the  bill,  the  same  view  was 
taken  ; "  where  the  words  "  after  due  "  in  the  printed  form  of 


'  Simpson  v.  Stackhouse,  9  Barr.,  186  (1848). 

''Hill  V.  Barnes,  11  N;  H.,  395  (1840). 

'Henman  v.  Dickinson,  5  Bing.,  183  (15.  E.  C.  L.  R.),  Best,  C.  J. 

*  White  V.  Haas,  32  Ala.,  430.  "  Fontaine  v.  Gunter,  31  Ala.,  258. 

*  Heffner  v.  Wenrich,  32  Penn.  St.,  423. 

'  Kennedy  v.  Lancaster  Co.  Bank,  18  Penn.  St.,  347. 

*  Daniel  v.  Daniel,  Dudley  (Ga.),  239. 

*  Wheat  V.  Arnold,  36  Ga.,  480.  '»  Chism  v.  Toomer,  27  Ark.,  109. 
"  McMicken  v.  Beauchamp,  2  La.  O.  S.,  290  (1830;. 


§1419-  BURDEN  OF  PROOF  OF  ALTERATION.  43I 

a  note,  following  the  rate  of  interest,  were  erased;^  so 
where  the  words  "&  Co."  were  inserted  in  a  guaranty  of 
payment  by  "George  Winchester,"  in  a  different  hand- 
writing and  a  different-colored  ink  from  the  body  of  the 
instrument.^ 

And  the  principle  has  been  recognized  or  enforced  in 
numerous  other  cases,'^  though  not  without  a  number  to 
the  contrary.*  A  different  principle  applies  to  deeds  ^ 
and  other  written  contracts  ;  and  the  exception  is  made 
in  respect  to  negotiable  paper  because,  being  intended  for 
circulation,  the  greater  strictness  and  watchfulness  is 
necessary. 

§  1419.   In  California  it  has  been  held  that  it  is  not  neces- 


'  Willett  V.  Shepard,  34  Mich.,  106. 

"  Wilde  V.  Armsby,  6  Cush.,  314.  In  Massachusetts,  it  was  held,  in  Simpson 
V.  Davis,  119  Mass.,  269,  that  in  an  action  on  a  note  in  which  the  declaration 
alleges  that  the  defendant  made  the  note,  and  the  answer  denied  this  and 
alleged  alteration,  proof  of  defendant's  signature  \v7\s  prima  facie  evidence  tiiat 
the  whole  body  of  the  note  was  the  act  of  the  defendant,  but  the  burden  ot  proof 
was  on  the  plaintiff  to  show  that  the  note  declared  on  was  the  note  of  the  de- 
fendant. 

^  Runnion  v.  Crane,  4  Blackf.,  466  ;  Warren  v.  Layton,  3  Harr.,  404 ;  Walters 
V  Short,  5  Gilm.,  252  ;  Wheat  v.  Arnold,  36  Ga.,  482  ;  Piercy  v.  Piercy,  5  West 
Va.  (Hagans),  199;  Elbert  v.  McClelland,  8  Bush  (Ky.),  577.  In  Greenleaf  on 
Evidence,  vol.  i,  §  564,  it  is  said :  "  Generally  speaking,  if  nothing  appears  to  the 
contrary,  the  alteration  will  be  presumed  to  be  contemporaneous  with  the  execu- 
tion of  the  instrument."  But  in  note  i,  page  605  to  the  same  section,  it  is  said  : 
"  An  exception  to  this  rule  seems  to  be  admitted  in  the  case  of  negotiable 
paper."     2  Parsons  N.  &  B.,  575-577. 

♦  Stoner  v.  Ellis,  6  Ind.,  161  (semble)  ;  Gooch  v.  Bryant,  13  Me.,  386,  in  which 
case  a  figure  of  the  date  had  been  altered.  Held,  no  explanation  devolved  on 
plaintiff.  Farnsworth  v.  Sharp,  4  Sneed,  55.  In  Sayre  v.  Reynolds,  2  South, 
737,  it  appeared  the  word  "  first,"  in  the  date  "  first  September,"  had  been 
erased,  and  "  second  "  written  over  it.  The  court  said  that,  as  alteration  could 
produce  no  effect  but  make  the  note  bear  interest  one  day  later,  to  presume  a 
forgery  "  would  be  a  violation  of  all  probabilities."  In  Sedgwick  v.  Sedgwick,  5 
Cal.,  213,  "  1871  "  the  date  appeared  to  have  been  changed  to  "  1870."  //c-/a 
not  to  have  been  presumably  done  after  execution  of  note.  Cumberland  Bank 
v.  Hall,  I  Halst.,  215  ;  Bailey  v.  Tavlor,  11  Conn.,  531  ;  Davis  v.  Jenney.  i  Mete. 
(Mass.),  221  ;  Smith  v.  Terry,  69  Mo.,  142  ;  Patterson  v.  Fagan,  38  Mo.,  70  ; 
Cochran  v.  Nebeker,  48  Ind.,  459 ;  Dodge  v.  Haskell,  69  Me.,  429- 

"  Doe  v.  Catamore,  16  Q.  B.,  745  ;  5  E.  L.  &  Eq.,  349.  Lord  Campbell,  C.  J. : 
"  A  deed  cannot  be  altered  after  it  is  executed  without  fraud  or  wrong  ;  and  the 
presumption  is  against  fraud  or  wrong."  Hoey  v.  Jarman,  39  N.  J.  L.  R.  (10 
Vroom),  524.  As  to  interlineation,  see  Herrick  v.  Malin,  22  Wend.,  394.  That 
alteration  of  deed  must  be  explained.  See  Piercy  v.  Piercy,  5  West  Va.^ 
(Hagans),  199. 


L 


432  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §   I42O. 

sary  for  the  plaintiff  to  explain  the  alteration  where  it  has 
been  made  in  printed  words,  it  being  then  presumed  that 
the  parties  had  changed  the  printed  form  to  suit  their  in- 
tentions. And  accordingly,  where  the  plaintiff  sued  on  a 
note  on  which  the  printed  words  "  payable  at  the  banking 
house  of  Dale  and  Simpson  "  had  been  erased  by  a  line 
drawn  through  them,  he  was  allowed  to  recover  without 
showing  how  or  when  the  erasure  was  made.^  And,  in 
Iowa,  it  is  considered  that  the  fact  that  a  portion  of  an 
indorsement  signed  by  the  defendant  is  written  in  a  differ- 
ent ink  and  handwriting  from  the  balance,  does  not  afford 
prima  facie  evidence  of  a  fraudulent  alteration  so  as  to 
require  the  plaintiff  to  explain  the  same,^  and  that  an 
erasure  does  not  necessarily  vitiate  the  paper  or  put  the 
holder  on  inquiry.^ 

§  1420.  By  some  authorities  it  is  considered  that  where 
the  alteration  is  against  the  interest  of  the  party  claiming 
under  it,  then,  at  all  events,  the  law  will  not  throw  upon 
him  the  burden  of  accounting  for  it,  since  it  would  be  un- 
reasonable to  presume  that  a  party  acted  against  his  inter- 
est.* But  it  is  answered  that  the  plaintiff  may  have  in- 
tended and  expected  the  alteration  to  be  beneficial  to  him  ; 
and  while  the  presumption  may  be  very  slight  against  him, 
and  easily  removed,  that  it  is  better  to  adhere  to  the  general 


'  Corcoran  v.  Dale,  32  Cal.,  89. 

"  Wilson  V.  Harris,  35  Iowa,  507.  In  Paramore  v,  Lindsey,  63  Mo.,  ()T,  it  is 
said  :  "  If  nothing  appears  to  the  contrary,  the  alteration  will  be  presumed  to  be 
contemporaneous  with  the  execution  of  the  instrument.  But  if  any  ground  of 
suspicion  is  apparent  on  the  face  of  the  instrument,  the  law  presumes  nothing, 
but  leaves  the  question  of  the  time  when  it  was  done,  as  well  as  the  person  by 
whom,  and  the  interest  with  which,  the  alteration  was  made,  as  matters  of  fact 
to  be  ultimately  found  by  the  jury  upon  proof  to  be  adduced  by  the  party  offer- 
ing the  instrument  in  evidence." 

^  Shepard  v.  Whetstone,  51  Iowa,  457. 

*i  Greenleaf  on  Evidence,  §  564;  Bailey  v.  Taylor,  11  Conn.,  531  ;  Hunt- 
ington V.  Finch,  3  Ohio  St.,  449  (1854) ;  Pullen  v.  Shaw,  3  Dever.,  238.  See  also 
Tillon  v.  Clinton,  etc.,  Ins.  Co.,  7  Barb.,  568 ;  Heffelfinger  v.  Shutz,  16  Serg.  & 
R.,  46. 


$  14.21a.  BURDEN  OF  PROOF  OF  ALTERATION.        433 

principle,  which  seems  best  calculated  to  prevent  frauds.^ 
The  exception,  however,  seems  to  be  a  reasonable  one,  as 
self-interest  is  a  prevailing  motive  to  human  action  ;  and  it 
is  against  all  probability  that  one  Should  do  an  act  calculated 
to  injure  himself. 

§  1 42 1.  Where  an  alleged  alteration  is  not  apparent  on 
the  face  of  the  instrument,  the  burden  of  proving  it  is  upon 
the  party  alleging  it.*^  And  it  has  been  held  in  some  cases 
that  an  indorsement  on  the  back  of  the  instrument  will  be 
deemed  to  have  been  contemporaneous  with  its  execution  ;* 
in  others  the  contrary.^ 

§  1421a.  Observations  on  conflicting  authorities. — The 
question  as  to  the  burden  of  proof  in  respect  to  alterations 
is  generally  affected  by  all  the  surrounding  circumstances  ; 
and  one  fact  or  another  shifts  it  to  and  fro,  the  jury  being 
left  to  weigh  the  testimony  and  determine  the  issue  with 
all  the  lights  that  can  be  thrown  upon  it.^  Very  slight  cir- 
cumstances may  operate  to  shift  the  burden  of  proof,  and  it 
has  been  well  said  by  Horton,  C.  J.,  in  Kansas,  that  "it  is 
impossible  to  fix  a  cast-iron  rule  to  control  in  all  cases."* 


'2  Parsons  N.  &  B.,  579;  Chism  v.  Toomer,  27  Ark.,  108.  Note  altered  from 
$310  to  $110;  held,  that  plaintiff  must  show  it  was  made  before  delivery,  or  by- 
maker's  consent. 

'  Meckel  v.  State  Sav.  Inst.,  36  Ind.,  357. 

'  Brooke  v.  Smith,  Moor,  679.  ^  Emerson  v.  Murray,  4  N.  H.,  171. 

*See,  on  this  subject,  Adm'rs  of  Beaman  v.  Russell,  20  Vt.,  210;  and  the  in- 
structive opinion  of  Hall,  J.,  Bailey  v.  Taylor,  n  Conn.,  531 ;  Davis  v.  Jenney,  i 
Mete.  (Mass.),  221  ;  Kountz  v.  Kennedy,  6'3  Penn.  St.,  190,  Ante,  §  141 2.  Neil 
V.  Case,  25  Kansas,  510,  and  37  Am.  Rep.,  260,  and  notes. 

"Neil  V.  Case,  25  Kansas,  510 ;  S.  C,  37  Am.  Rep.,  259.  This  was  an  action 
on  a  note.  It. appeared  from  its  face  that  the  rate  of  interest  had  been  changed 
either  from  7  to  10  per  cent.,  or  vice  versa.  Horton,  C.  ].,  said  on  the  question 
of  burden  of  proof:  "This  is  a  vexed  question  and  the  books  are  full  of  diverse 
decisions.  Four  different  rules  are  generally  stated.  First:  That  an  alteration 
on  the  face  of  the  writing  raises  no  presumption  either  way,  but  the  question  is 
for  the  jury.  Second :  That  it  raises  a  presumption  against  the  writing  and  re- 
quires therefore  some  explanation  to  render  it  admissible.  T/iird :  That  it 
raises  such  a  presumption  when  it  is  suspicious,  otherwise  not.  Fourth  :  That  it 
is  presumed  in  the  absence  of  explanation  to  have  been  made  before  delivery, 

and  therefore  requires  no  explanation  in  the  first  instance Generally  the 

instrument  should  be  given  in  evidence,  and  in  a  jury  case  should  go  to  the  jury 
upon  ordinary  proof  of  its  execution,  leaving  the  parties  to  such  explanatory  evi- 

Vol.  II.— 28 


434  ALTERATION  OF  NEGOTIABLE  INSTRUMENTS.       §1421^. 

When  all  the  facts  are  undisputed  some  presumption  must 
arise  ;  and  that  presumption  must  be  conformable  to  the 
experience  of  mankind,  and  according  to  what  that  experi- 
ence shows  to  be  most  probably  the  truth  of  the  matter.  The 
authorities  are  every  way  ;  and  generally  each  case  must 
rest  largely  on  its  own  peculiar  surroundings. 

dence  of  the  alteration  as  they  may  choose  to  offer.  If  there  is  neither  intrinsic 
nor  extrinsic  evidence  as  to  when  the  alteration  was  made,  it  is  to  be  presumed, 
if  any  presumption  is  said  to  exist,  that  the  alteration  was  made  before,  or  at  the 
time  of,  the  execution  of  the  instrument.  Perhaps  there  might  be  cases  when  the 
alteration  is  attended  with  manifest  circumstances  of  suspicion  that  the  court 
might  refuse  to  allow  the  instrument  to  go  before  the  jury  until  some  explana- 
tion ;  but  this  case  is  not  of  that  character." 


CHAPTER  XLIV. 

THE    LAW    OF    SET-OFF    IN    ITS    APPLICATION    TO    NEGOTIABLE 

INSTRUMENTS. 


SECTION     I. 
THE   GENERAL  DOCTRINES   OF   SET-OFF. 

§  1422.  A  brief  statement  of  the  general  principles  of 
set-off — of  those  especially  which  have  application  to  nego- 
tiable instruments — is  all  that  would  be  appropriate  to  this 
treatise.  By  set-off  is  meant  the  discharge  of  one  claim  by 
another,  which  is  "set  off"  against  it.  It  was  formerly 
sometimes  called  "  stoppage,"  because  the  amount  sought 
to  be  set  off  was  "  stopped  "  or  deducted  from  the  cross-de- 
mand.^ 

Set-off  was  unknown  to  the  common  law,  it  being  con- 
sidered inconvenient  to  try  two  opposing  claims  in  one 
suit.  But  still  greater  inconvenience  arose  from  disallowing 
it  ;  and  courts  of  equity  first  introduced  it,  the  want  of  it 
at  law  being  productive  of  great  mischief.  "  The  natural 
sense  of  mankind  was  first  shocked  at  this  doctrine  in  the 
case  of  bankrupts  ;  they  thought  it  hard  that  a  person  should 
be  bound  to  pay  the  whole  that  he  owed  to  a  bankrupt  and 
receive  only  a  dividend  of  what  the  bankrupt  owed  him."' 
in  Virginia,  the  setting  off  of  cross-demands  was  allowed 
by  statute  as  early  as  1644.^     In  England,  various  statutes 

'  Byles  on  Bills  (Sharswood's  ed.)  [*35o],  523. 
'Byles  (Sharswood's  ed.)  [*35o],  524. 

'  See  5  Robinson's  Practice,  958  ;  and  see  the   existing  Virginia  statute  ex- 
pounded in  Allen  v.  Hart,  18  Grat.,  727,  and  Wartman  v.  Yost,  22  Grat.,  603. 

(435) 


436  THE    LAW    OF    SET-OFF.  §§  I423-I425. 

have  perfected  the  law  concerning  it ;  and  in  all  of  the 
United  States  it  is  regulated  likewise  by  statuory  enact- 
ments. 

§  1423.  In  what  actions  set-off  is  available. — In  Eng- 
land, and  generally  in  the  United  States,  actions  ex  con- 
tractu are  the  only  suits  to  which  matters  of  set-off  may  be 
pleaded,  and  they  must  be  actions  for  definite  ascertainable 
amounts.  Actions  sounding  in  damages,  such  as  trespass, 
trover,  etc.,  are  not  subject  to  the  defence  of  set-off,  be- 
cause the  sums  recoverable  are  unliquidated  ;  ^  and  actions 
ex  contractu  for  unliquidated  damages  follow  the  same 
rule.^ 

A  set-off  is  not  available  as  a  defence  against  a  lien,  as, 
for  instance,  that  of  a  workman  on  a  chattel  for  his  wages.' 
In  Virginia,  it  is  available  in  an  action  upon  a  forthcoming 
bond  taken  on  a  warrant  of  distress.* 

§  1424.  Nature  of  demand  available  as  a  set-off. — In  an 
action  at  law,  none  but  a  legal  debt  can  be  set  off  in  Eng- 
land and  in  some  of  the  States.^  But  in  other  States  a 
plea  of  equitable  set-off  is  admitted.^  Equity  will  not  re- 
lieve a  party  who  has  neglected  to  plead  a  set-off  at  law.'' 
But  there  are  cases  in  which  set-off  is  not  available  at  law, 
and  which  present  peculiar  circumstances  for  equitable  re- 
lief. 

§  1425.  I'he  counter  demand,  in  order  to  be  available  as 
a  set-off,  must  be  an  actual  subsisting  debt  which  has  ma- 
tured,® and  has  not  been  extinguished,  nor  barred  by  the 


1  Byles  on  Bills  (Sharswood's  ed.)  [*35i],  525  ;  2  Parsons  N.  &  B.,  616.  In 
trover,  however,  it  has  been  held  that  mutual  demands  arising  out  of  the  same 
subject-matter  might  be  adjusted.     Stow  v.  Yarwood,  14  111.,  424. 

'  Gordon  v.  Brown,  2  Johns,  150  ;  Byles  [*525],  351, 

=  2  Parsons  N.  &  B.,  617,  *  Allen  v.  Hart,  22  Grat.,  722. 

'  Wake  v.  Tinkler,  16  East.,  36  ;  McDade  v.  Mead,  18  Ala.,  214 ;  Milbum  v. 
Guyther,  8  Gill,  92. 

°  Watkins  v.  Hopkins'  Ex'rs,  13  Grat.,  743. 

'  Ex  parte  Ross,  Buck,  127.  *  Evans  v.  Prosser,  3  T.  R.,  186. 


§  142  7-      THE  GENERAL  DOCTRINES  OF  SET-OFF.        437 

Statute  of  limitations.^  In  other  words,  it  must  be  such  a 
debt  as  would  support  an  independent  suit.^  As  a  general 
rule,  also,  it  must  be  capable  of  certain  and  exact  ascertain- 
ment, and  not  a  mere  claim  for  unliquidated  damages.' 
Thus,  where  it  appeared  that  a  debtor  had  drawn  and  de- 
livered to  his  creditor  an  order  on  a  third  person,  payable 
at  sight,  and  directed  the  amount,  when  received,  to  be 
placed  to  the  credit  of  his  account,  and  the  creditor,  with- 
out the  knowledge  of  the  drawer,  took  the  drawee's  ac- 
ceptance at  sixty  days,  and  before  the  expiration  of  that 
time  the  acceptor  died  insolvent  ;  the  creditor  then  sued 
the  drawer  upon  the  original  debt,  and  the  latter  pleaded  as 
set-off  the  amount  or  the  draft  he  had  given  ;  but  it  was 
held  that  the  drawer's  claim  on  account  of  the  draft  was 
for  unliquidated  and  uncertain  damages  for  the  creditor's 
failure  to  collect  it,  and  therefore  could  not  be  allowed  as 
a  set-off.* 

§  1426.  A  judgment  can  not  be  set  off  against  an  action 
brought  by  a  judgment  debtor  in  some  States  ;°  in  others 
it  may  be.*^  And  in  Virginia  the  assignee  of  a  judgment 
may  plead  it  as  offset  to  an  action  against  him.'' 

§  1427.  Set-off  being  entirely  a  subject  of  statutory  juris- 
prudence, save  in  those  cases  which  present  circumstances 
for  equitable  interference,  any  question  arising  would  be 
referable  for  its  solution  to  the  particular  statute  of  the 
State  whose  laws  controlled  it.  There  are,  however,  some 
doctrines  which  will  be  found  to  have  extensive  and,  in- 
deed, general  application  ;  but,  as  the  adjudicated  cases  for 
the  most  part  have  been  decided  in  the  interpretation  of 


'  Williams  v.  Gilchrist,  3  Bibb.,  49  ;  Turnbull  v.  Strohecher,  4  McCord,  210 
Jacks  V.  Moore,  i  Yeates,  391  ;  2  Parsons  N.  &  B.,  617. 

'  Pate  V.  Gray,  i  Hempst.,  155.  *  Harrison  v.  Wortham,  8  Leigh,  304. 

*  Harrison  v.  Wortham,  8  Leigh,  304. 

'  Sketoe  v.  Ellis,  14  111.,  75  ;  Rae  v.  Halbert,  Id.,  572. 

'  Wartman  v.  Yost,  22  Grat.,  595  ;  Allen  v.  Hart,  18  Grat.,  728. 

'  Wartman  v.  Yost,  22  Grat.,  603. 


438  THE    LAW    OF    SET-OFF.  §   I428. 

Statutes,  their  pertinence  to  any  given  question  can  only  be 
ascertained  by  comparison  of  the  enactment  under  discus- 
sion with  that  which  has  been  interpreted. 

There  must,  as  a  rule,  be  mutuality  between  the  parties ; 
and  the  party  owing  the  debt  on  one  side  must  be  the  iden- 
tical party  to  whom  it  is  due  on  the  other,  whether  the  set- 
off be  claimed  at  equity  or  in  law.^ 

§  1428.  (i)  As  to  partnership  debts. — A  debt  due  by  an 
individual  partner  in  his  own  right  can  not  be  set  off  against 
a  debt  sued  upon  by  the  firm  of  which  he  is  a  member;^ 
nor  can  a  debt  due  by  a  firm  be  set  off  against  a  debt 
claimed  by  an  individual  member.^  And  an  individual  de- 
fendant can  not  set  off  against  an  individual  plaintiff  a  debt 
by  plaintiff  to  a  firm  in  which  he  and  defendant  are  part- 
ners.* 

So  if  a  firm  be  sued,  they  can  not  set  off  a  debt  due  to 
one  or  more  of  the  partners,  but  not  to  all.^  But  one 
partner  may  settle  a  debt  due  to  the  firm  by  setting  off 
agamst  it  a  debt  due  from  himself.^  And  where  a  surviving 
partner,  to  whom  has  passed  the  effects  and  credit  of  the 
firm  by  the  death  of  his  copartner,  sues  or  is  sued,  his  in- 
dividual debts  may  be  set  off,  because  he  sues  personally, 
though  bound  to  account  with  the  deceased  partner's  per- 
sonal representative.'''  But  a  debt  of  one  firm  to  another 
firm  can  not  be  set  off  in  a  suit  brought  by  the  representa- 
tive of  a  member  of  one  firm,  who  has  died  since  contract- 
ing the  debt,  against  one  member  of  the  other  firm.® 

'  Ford  V.  Thornton,  3  Leigh,  495  ;  Byles  on  Bills  P352],  528. 

"^  Ritchie  v.  Moore,  5  Munf.,  388 ;  Scott  v.  Trents,  i  Wash.  (Va.),  79 ; 
Armistead  v.  Butler,  i  H.&  AL,  176. 

'  Duramus  v.  Harrison,  26  Ala.,  326 ;  Mitchell  v^  Sellman,  5  Md.,  376 ;  Pinck- 
ney  v.  Keyler,  4  E.  D.  Smith,  469  ;  2  Parsons  N.  &  B.,  608. 

*Land  v.  Cowan,  19  Ala.,  297.  *  Byles  on  Bills  [*352],  528. 

"Wallace  v.  Kelsall,  7  M.  &  W.,  264. 

'  Slipper  V.  Stidstone,  5  T.  R.,  493  ;  French  v.  Andratte,  6  T.  R.,  582  ;  Header 
V.  Scott,  4  Vt.,  26  ;  Covvden  v.  Elliott,  2  Mo.,  60  ;  Holbrook  v.  Lackey,  13  Mete, 
132  ;  Byles  on  Bills  [*353],  528  ;  2  Parsons  N.  &  B.,  608. 

*  Reed  v.  Whitney,  7  Gray,  533  ;  Walker  v.  Eyth,  25  Penn.  St.,  216. 


§   I430-  THE  GENERAL  DOCTRINES  OF  SET-OFF.  439 

§  1429.  (2)  As  to  joint  and  several  debts. — In  a  suit 
brought  by  an  individual  there  can  not  be  set  off  against 
him  a  debt  due  by  him  jointly  with  another  ;^  and  in  a  suit 
by  several  plaintiffs  there  can  not  be  set  off  a  debt  due  by 
one  of  them.^  But  in  some  of  the  States  of  the  United 
States  a  note  made  by  joint  and  several  makers  may  be  set 
off  against  either  in  an  action  brought  by  either  of  them  on 
a  debt  due  to  him  individually.^  And  where  plaintiff 
sues  several  defendants  jointly  and  severally  liable,  either 
may  file  as  set-off  against  the  claim  as  to  himself  a  debt  due 
him  by  the  plaintiff.*  The  rule  is  otherwise  in  England, 
where  the  debts  between  the  defendant  and  plaintiff  must 
be  strictly  "  mutual,"  in  order  to  admit  the  one  as  offset 
against  the  other.^  In  Virginia  it  is  expressly  provided  by 
statute  that,  "  although  the  claim  of  the  plaintiff  be  jointly 
against  several  persons,  and  the  set-off  is  of  a  debt  not  to 
all,  but  only  to  a  part  of  them,  this  section  shall  extend  to 
such  set-off,  if  it  appear  that  the  persons  against  whom  such 
claim  is,  stand  in  the  relation  of  principal  and  surety,  and 
the  person  entitled  to  the  set-off  is  the  principal."  And  this 
relation  may  be  shown  by  parol  proof. ^ 

§  1430.  (3)  As  to  debts  of  husband  and  wife. — It  has 
been  held  in  England  that  if  the  husband  sues  alone  on  a 
note  given  his  wife,  a  set-off  of  a  debt  due  from  her  diim 

'Middleton  v.  Pollock,  L.  R.,  20  Equity  Cases,  204;  Davis  v.  Notioare,  13 
Nev.,  421  ;  Porter  v.  Nekervis,  4  Rand,  359  ;  Glazebrooke's  Adm'r  v.  Rag-land,  8 
Grat.,  332 ;  Christian  v.  Miller,  3  Leigh,  78  ;  Ritchie  v.  Moore,  5  Munf.,  388  ; 
Robertson  v.  Parks,  3  Md.  Ch.,  65  ;  Blankenship  v.  Rogers,  10  Ind.,  333  ;  Wil- 
son V.  Keedey,  8  Gill,  195;  Perkins  v.  Hawkins,  9  Grat.,  650.  //t-A/,  that  a 
bond  of  the  plaintiff's  intestate  was  not  a  legal  set-off  against  a  bond  given  to 
the  plaintiff,  but  might  become  a  set-off  by  agreement  between  the  parties.  In 
Virginia  it  has  been  held  that  a  debt  due  by  A.  &  B.  jointly  to  C,  and  a  debt 
due  by  C.  to  B.  alone  could  not  be  set  off  either  in  equity  or  at  law.  Gilliatt  v. 
L)Tich,  2  Leigh,  493. 

"  Johnson  v.  Kent,  9  Ind.,  252. 

'  Powell  V.  Hogue,  8  B.  Mon.,  443 ;  Pate  v.  Gray,  i  Hemp.  C.  C,  155  ;  2  Par- 
sons N.  &  B.,  609. 

*  Briggs  V.  Briggs,  20  Barb.,  447  ;  Wartman  v.  Yost,  22  Grat.,  595. 

'Isbery  v.  Bowden,  8  Wels.  H.  &  G.,  852 ;  Wartman  v.  Yost,  22  Grat.,  604. 

'  Wartman  v.  Yost,  22  Grat.,  603  ;  and  see  Code  of  Virginia,  1S73. 


440 


THE    LAW    OF    SET-OFF.  §§  1 43 1,  1 43 2 


sola,  can  not  be  pleaded  against  him,  though  a  debt  due  by 
himself  might  be ;  though  he  may  join  her  in  the  suit,  in 
which  case  a  debt  due  by  her  dum  sola  would  be  a  good 
set-off.^  Professor  Parsons  criticises  this  decision,  and  con- 
siders that  as  the  husband  is  generally  liable  for  the  wife's 
debts,  the  set-off  should  be  available  against  him,  whether 
he  joins  his  wife  in  the  action  or  not.^ 

§  1 43 1.  (4)  As  to  agents  and  trustees. — A  debt  of  an 
agent  can  not  be  set  off  in  a  suit  against  his  principal  ;^  nor 
can  a  debt  due  the  defendant  as  trustee  or  guardian  be  set 
off  against  the  plaintiff,  who  sues  him  individually  ;  ^  though 
it  seems  that  if  a  trustee  sues  for  another's  benefit,  a  debt 
against  that  other  may  be  set  off.^ 

But  when  an  action  is  brought  for  another's  use,  the  de- 
fendant may  set  off  a  debt  due  by  the  beneficiary/  And  it 
may  be  shown  that  the  plaintiff  is  really  suing  as  agent  and 
for  the  benefit  of  an  undisclosed  principal,  against  whom 
the  set-off  would  be  available."^ 

In  an  action  against  principal  and  surety,  a  debt  due  by 
the  principal  alone  to  the  plaintiff  may  be  set  off  ;  ^  and  so 
might  a  debt  due  by  the  plaintiff  to  the  surety  be  set  off  by 
the  surety  against  him,  leaving  him  to  settle  with  the  prin- 
cipal.' 

§  1432,  (5)  As  to  personal  representatives. — A  debtor 
to  the  estate  of  a  decedent  may  plead  as  set-off  against  his 

'  Burrough  v.  Moss,  10  B.  &  C,  558  (21  E.  C.  L.  R.) 

2  2  Parsons  N.  &  B.,  615. 

'Carman  v.  Garrison,  13  Penn.  St.,  158  ;  Wilson  v.  Codman,  3  Cranch,  193; 
Foster  v.  Hoyt,  2  Johns'  Cas.,  327. 

*  Glazebrooke's  Adm'r  v.  Ragland,  8  Grat.,  342,  Baldwin,  J. 

'  White  V.  Ford,  22  Ala.,  442. 

«  Sheldon  v.  Kendall.  7  Cush.,  217  ;  Pates  v.  St.  Clair,  11  Grat.,  24;  Win- 
chester V.  Hackley,  2  Cranch,  342  ;  Sykes  v.  Lewis,  17  Ala.,  261  ;  Forkner  v. 
Dinwiddle,  3  Ired.,  34;  Bottomley  v.  Brooke,  cited  i  T.  R.,  621. 

'  Pettee  v.  Prout,  3  Gray,  502  ;  Pates  v.  St.  Clair,  1 1  Grat.,  24. 

«  Concord  v.  Pillsbury,  33  N.  H.,  310;  Mahurin  v.  Pearson,  8  N.  H.,  539; 
Kent  V.  Rogers,  24  Miss.,  306  ;  Slayback  v.  Jones,  9  Ind.,  47°  ;  Newell  v.  Sal- 
mons,  22  Barb.,  647. 

"  Lynch  v.  Bragg,  13  Ala.,  773. 


§   1434-  THE  GENERAL  DOCTRINES  OF  SET-OFF.  44 1 

personal  representative,  any  debt  due  him  which  was  con- 
tracted in  the  decedent's  Hfetime,*  provided  the  debt  due 
the  representative  did  not  accrue  after  the  decedent's  death. ^ 
In  an  action  by  the  representative  on  debts  due  the  decedent 
in  his  lifetime,  the  decedent  cannot  set  off  an  amount  paid 
by  him  as  the  decedent's  surety  after  his  death,^  nor  can 
he  set  off  against  the  representative  debts  of  the  decedent 
purchased  after  his  death.* 

§  1433.  Where  an  action  is  brotight  by  executors  upon 
a  contract  made  with  them,  the  defendant  can  not  set  off  a 
debt  due  from  the  testator,  though  a  judgment  may  have 
been  obtained  for  the  same  against  the  executors ;  for  if 
a  set-off  of  this  nature  were  allowed,  the  defendant  might 
gain  an  improper  advantage  over  other  creditors.  He 
might  obtain  payment  of  his  debt  out  of  the  assets,  when, 
according  to  law,  the  whole  assets  ought  to  be  applied  to 
creditors  of  higher  dignity.®  Nor  in  a  suit  by  a  personal 
representative,  on  a  bond  to  him  as  such,  can  the  defendant 
set  off  money  subsequently  received  by  him  as  such.^  But 
it  might  be  different  if  they  have  sufficient  assets.'^ 

§  1434.  There  is  generally  made  a  distinction  between  a 
solvent  and  an  insolvent  estate.  In  the  former  case  the 
debt  may  be  set  off,  although  not  mature  and  due  at  the 
death  of  the  deceased.  But  if  the  estate  of  the  deceased  be 
insolvent,  the  debt  seems  to  fix  the  rights  of  the  parties, 
and  a  debt  can  not  be  set  off  which  was  not  due  at  the 
time  of  the  decease,  although  it  matured  before  action  was 
brought.® 

'  Richardson  v.  Parker,  2  Swan,  529 ;  Boardman  v.  Smith,  4  Pick.,  212  ;  Light 
V.  Lieninger,  8  Barr,  403. 

'  Fry  V.  Evans,  8  Wend.,  530 ;  Wolfersberger  v.  Bucher,  10  Serg.  &  R.,  10  ; 
Bizzell  V.  Stone,  7  Eng.  (Ark.),  378  ;  Armstrong  v.  Pratt,  2  Wise,  299  ;  Lambarde 
V.  Older,  17  Beav.,  542 ;  23  E.  L,  &  Eq.,  45. 

'  Minor  v.  Minor,  8  Grat.,  i.  *  Root  v.  Taylor,  20  Johns,  137. 

*  White  V.  Bannister's  Ex'rs,  i  Wash.  (Va.),  166  ;  Brown's  Adm'x  v.  Garland 
1  Wash.  (Va.),  221  ;  Steel  v.  Steel,  12  Penn.  St.,  64. 

*  James  v.  Johnson,  22  Grat.,  461. 

■"  White  V.  Bannister's  Ex'rs,  i  Wash.  (Va.),  166. 
'  2  Parsons  N.  &  B.,  611. 


442  THE    LAW    OF    SET-OFF.  §§  1 43 5- 1 436. 


SECTION  II. 

HOW  FAR  THE   LAW  OF   SET-OFF  IS   APPLICABLE   TO  NEGOTIABLE 

INSTRUMENTS. 

§  1435.  The  doctrine  of  set-off  has  but  a  limited  appli- 
cation to  negotiable  paper,  it  being  a  distinguishing  character- 
istic of  negotiable  securities  that  when  they  have  passed  into 
the  hands  of  third  parties  for  value,  no  set-off  admissible  in 
pleadings  between  original  parties  is  available.  Between 
the  original  parties,  however,  or  parties  between  whom  there 
is  a  privity — that  is,  between  maker  and  payee,  drawer  and 
acceptor,  indorser  and  immediate  indorsee — a  set-off  may 
be  pleaded  to  negotiable  securities  as  well  as  to  any  other 
kind. 

§  1435-3;.  Set-off  is  not  an  equity.  Purchaser  of  overdue 
negotiable  instrumejtt  not  subject  to  set-off  that  would  apply 
to  his  transferrer. — The  rule  that  a  party  taking  an  overdue 
bill  or  note  takes  it  subject  to  the  equities  to  which  the 
transferrer  is  subject,  does  not  extend  so  far  as  to  admit 
set-offs  which  might  be  available  against  the  transferrer.  A 
set-off  is  not  an  equity ;  and  the  general  rule  stated  is  qual- 
ified and  restricted  to  those  equities  arising  out  of  the  bill 
or  note  transaction  itself,  and  the  transferee  is  not  subject 
to  a  set-off  which  would  be  good  against  the  transferrer, 
arisinor  out  of  collateral  matters.^ 

o 

§  1436.  English  doctrine. — This  is  the  English  rule  on 
the  subject.  In  a  leading  case,  where  the  set-off  existed  at 
the  time  of  the  transfer,  Bayley,  J.,  said  :  "  This  was  an 
action  on  a  promissory  note  made  by  the  defendant,  pay- 
able to  one  Fearn,  and  by  him  indorsed  to  the  plaintiff 


>  Chitty  on  Bills  (13  Am.  ed.),  [*22o],  251  ;  Story  on  Bills,  §  220;  Story  on 
Notes,  §  178  ;  Byles  on  Bills  (Sharswood's  ed.),  [*353],  529  ;  see  also  Edwards 
on  Bills,  260;  2  Parsons  N.  &  B.,  603,  604;  see  chapter  XXI,  on  Transfer  by 
Indorsement,  §§  725  et  seq.,  vol.  i. 


§   1437-  HOW    FAR    SET-OFF    IS    APPLICABLE.  443 

after  it  became  due  ;  for  the  defendant  it  was  insisted  that 
he  had  a  right  to  set  off  against  the  plaintiff's  claim  a  debt 
due  to  him  from  Fearn,  who  held  the  note  at  the  time 
when  it  became  due.  On  the  other  hand,  it  was  contended 
that  this  right  of  set-off,  which  rested  on  the  statute  of  set- 
off, did  not  apply.  The  impression  on  my  mind  was,  that 
the  defendant  was  entitled  to  the  set-off ;  but  on  discussion 
of  the  matter  with  my  Lord  Tenterden  and  my  learned 
brothers,  I  agree  with  them  in  thinking  that  the  indorsee 
of  an  overdue  bill  or  note  is  liable  to  such  equities  only  as 
attach  on  the  bill  or  note  itself,  and  not  to  claims  arising 
out  of  collateral  matters."^  In  a  subsequent  case,  where  it 
was  averred  that  the  indorsee  received  the  bill  with  notice 
of  the  set-off,  it  was  held  that  it  could  not  be  pleaded 
against  him.^  And  in  a  more  recent  case  it  was  held  that 
the  right  of  an  indorsee  of  an  overdue  bill  to  sue  the  acceptor 
was  not  defeated  by  the  existence  of  a  debt  due  from  the 
drawer  to  the  acceptor,  and  notice  by  the  latter  to  the 
drawer  before  indorsement,  of  his  election  to  set  off  the 
amount  against  the  bill  ;  and  that  the  indorsee  was  not 
affected  by  the  right  of  set-off  between  the  acceptor  and 
the  drawer,  although  the  bill  was  indorsed  without  value, 
and  for  the  purpose  of  defeating  the  set-off.^ 

§  1437.  American  doctrine. — In  the  United  States  there 
is  a  conflict  of  decisions.  In  some  of  the  States  the  English 
rule,  excluding  set-offs  which  existed  at  the  time  of  the 
transfer  of  the  overdue  paper,  is  follow^ed.^  In  others  such 
set-offs  are  admitted.^     But   it  seems  to  be   the  uniform 

'  Burroiigh  v.  Moss,  10  B.  &  C,  558  ;  5  M.  &  R.,  296 ;  Chitty,  Jr.,  1481. 
"  Whitehead  v.  Walker,  10  Mees.  &  W.,  696. 
'  Oulds  V.  Harrison,  28  Eng.  L.  &  Eq.,  524. 

*  Davis  V.  Miller,  14  Grat.,  8  (the  court  seems  to  favor  the  English  rule)  ; 
Annon  v.  Houck,  4  Gill,  332  ;  Hughes  v.  Large,  2  Barr,  103  ;  Epler  v.  Funk,  8 
Id.,  468  ;  Clay  v.  Cottrell,  6  Han,  413  ;  2  Rob.  Prac.  (new  ed.),  252,  253. 

*  Peabody  v.  Peters,  5  Pick.,  i  ;  Braynard  v.  Fisher,  6  Id.,  355  ;  Grew  v.  Bur- 
ditt,  9  Id.,  265  ;  Pettee  v.  Prout,  3  Gray,  502  ;  Shirley  v.  Todd,  9  Greenl.,  82  ; 
McDuffie  V.  Dame,  1 1  N.  H.,  244  ;  Martin  v.  Trowbridge,  i  Vt.,  477  ;  McKenzie 
V.  Hunt,  32  Ala.,  494 ;  Bond  v.  Fitzpatrick,  4  Gray,  89 ;  Nixon  v.  English,  3 
McC.,  549  ;  Perry  v.  Mays,  2  Bailey,  254. 


444  THE    LAW    OF    SET-OFF.  §   1437- 

ruling  everywhere,  that,  although  the  paper  be  transferred 
after  maturity,  no  set-offs  between  antecedent  parties,  which 
arose  after  the  transfer,  will  be  available  against  the  in- 
dorsee.^ In  some  of  the  States  this  questions  is  settled  by 
express  statute  on  the  subject.  In  New  York,  for  instance, 
the  statute  admits  set-offs  existing  at  the  time  of  transfer 
of  the  overdue  note  or  bill.^ 


'  Davis  V.  Miller,  14  Grat.,  8.  Moncure,  J.,  said  on  this  subject :  "  Whatever 
conflict  of  authority  there  maybe  upon  the  question  whether  the  equities  subject 
to  which  an  indorsee  takes  an  overdue  note,  embrace  set-offs  in  favor  of  the 
maker  against  the  payee,  existing  at  the  time  of  the  indorsement,  I  have  been 
able  to  find  no  case  in  which  it  was  held,  or  even  said,  that  set-offs  between 
those  parties,  arising  or  acquired  after  the  indorsement,  even  though  without 
notice  thereof,  are  good  against  the  indorsee.  On  the  contrary  it  was  expressly 
decided  in  Baxter  v.  Little,  6  Mete,  7,  that  they  are  not."  Shaw,  C.  J.,  in  his 
able  opinion,  said  :  "  A  note  does  not  cease  to  be  negotiable  because  it  is  over- 
due. The  promisee  by  his  indorsement  may  still  give  a  good  title  to  the  indorsee. 
Notes  or  other  matters  of  set-off  acquired  by  the  defendant  against  the  promisee 
after  such  transfer  can  not  be  given  in  evidence  in  defence  to  such  note,  ahhough 
the  maker  had  no  notice  of  such  transfer  at  the  time  of  acquiring  his  demand 
against  the  promisee.  The  indorsee  of  a  note  overdue  takes  a  legal  title  ;  but 
he  takes  it  with  notice  on  its  face  that  it  is  discredited,  and  therefore  subject  to 
all  payments,  and  offsets  in  the  nature  of  payment.  The  ground  is,  that  by  this 
fact  he  is  put  upon  inquiry,  and  therefore  he  shall  be  bound  by  all  existing  facts 
of  which  inquiry  and  true  information  coald  apprise  him  ;  but  these  could  only 
apprise  him  of  demands  then  acquired  by  the  maker  against  the  payee." 

«  Edwards  on  Bills,  260.  The  point  was  considered  doubtful  (outside  of  the 
statute)  in  Miner  v.  Hoyt,  4  Hill,  193,  197. 


CHAPTER  XLV. 

EXCHANGE    AND    RE-EXCHANGE  ;     AND    DAMAGES,    UPON     DIS- 
HONORED   NEGOTIABLE    PAPER. 


SECTION    I. 
NATURE   OF  DAMAGES,   AND   OF   EXCHANGE. 

§  1438.  Statutory  enactme-nts. — In  the  United  States  the 
whole  subject  of  re-exchange  and  damages  has  been  very 
much  simplified  by  the  enactment  of  statutes  establishing 
fixed  amounts  of  damages  in  lieu  of  re-exchange  ;  and  even 
previous  to  statutory  provisions  on  the  subject,  mercantile 
custom  had,  in  some  of  the  States,  prescribed  fixed  rates  of 
damages  equally  as  effectually.  Immemorial  usage,  at  an 
early  day,  allowed  10  per  cent,  as  damages  in  lieu  of  re- 
exchange  on  bills  drawn  in  Massachusetts  on  England,  and 
returned  protested,^  and  twenty  per  cent,  on  the  like  bills 
drawn  in  New  York.^  In  England  it  seems  that  a  similar 
rule  was  adopted  in  the  commerce  between  England  and 
the  East  Indies,  to  allow  a  certain  per  cent,  in  particular 
cases  in  lieu  of  re-exchange,  but  it  was  merely  conventional 
as  between  parties  agreeing  to  it.*^  Such  custom,  however, 
would  not  apply  in  the  absence  of  an  agreement,  express  or 
implied,  to  allow  re-exchange.* 

In  1 700  a  statute  was  passed  in  the  Colony  of  Pennsyl- 
vania allowing  twenty  per  cent,  on  bills  drawn  upon  Eng- 

'  Grimshavv  v.  Bender,  6  Mass.,  157. 
'  Hendricks  v?  Franklin,  4  Johns,  119. 
'  Auriol  V.  Thomas,  2  Term  R.,  52. 

*Willans  v.  Ayres,  3  Appeal  Cases,  82  (1877)  ;  stt  post,  §  1446. 

(445) 


446  EXCHANGE    AND    RE-EXCHANGE.  §   1 439- 

land  or  any  part  of  Europe ;  ^  and,  in  1 743,  Rhode  Island 
adopted  one  of  similar  purport.^ 

Now  every  State  has  recognized  the  convenience  and 
utility  of  regulating  the  matter  by  statute,  and  their  codes 
contain  ample  provisions  on  the  subject.  But  they  lack 
uniformity,  and  consequently,  in  transactions  between  the 
States,  there  is  great  diversity  in  the  rights  and  liabilities 
of  parties.  It  has  been  thought  that  Congress  has  a  right 
to  prescribe  fixed  rates  of  damage,  under  the  clause  of  the 
constitution  authorizing  it  to  regulate  commerce  between 
the  States.^     But  no  action  has  been  taken  by  that  body. 

§  1439.  These  statutory  damages  are  not  given  as  a  pen- 
alty for  drawing  without  authority,  but  as  commutation  for 
interest,  damages,  and  re-exchange.*  "It  is,  in  truth,"  says 
Gibson,  C.  J.,  "a  liquidation  of  the  damages,  not  by  the 
parties,  but  by  the  law  fixing  the  compensation  for  the  loss 
beforehand,  to  save  time  and  litigation  ;  and  if  damages 
need  not  be  specially  laid  where  there  is  no  statute  on  the 
subject,  as  they  certainly  need  not  be  in  England,  no  rule 
of  pleading  requires  them  to  be  laid  in  their  liquidated 
form."  ^  The  damages  given  by  statute  constitute  as  much 
a  part  of  the  contract  as  the  interest*  But  now  while 
they  are  now  universally  fixed  in  amount  by  statute,  the  whole 
theory  from  which  they  are  derived  springs  from  the  right 
of  the  holder  to  indemnity  for  dishonor  of  the  bill,  which 
was  formerly  worked  out  through  the  doctrine  of  re- 
exchange.  And  it  is  still  necessary  to  a  thorough  under- 
standing of  the  subject  of  damages  that  the  rules  of  the 
law  merchant  respecting  exchange  and  re-exchange  should 
be  held  in  view. 

*  Francis  v.  Rucker,  Ambler,  672. 

"  Brown  v.  Van  Braum,  3  Dallas,  344. 

^  Mr.  Verplanck's  report  to  House  of  Representatives,  March   22,  1826;  Ed- 
wards on  Bills,  750;  Sedgwick  on  Damages,  274;  i   Parsons  ]>>.  &  B.,  654. 

*  Bangor  Bank  v.  Hook,  5  Greenl.,  174;  Allen  v.  Union  Bank,  5  Whart.,  420 
Lenning  v.  Ralston,  23  Penn.  St.,  137. 

'  Lloyd  V.  McGarr,  3  Barr,  474.  '  Bank  U.  S.  v.  U.  S.,  2  How,,  711. 


§   I440-  NATURE  OF  DAMAGES,  AND  OF  EXCHANGE.  447 

§  1440.  Function  of  bills  of  exchajige,  and  the  nature 
of  exchange. — The  very  name  of  the  instrument,  "  Bill  of 
Exchange,"  indicates  the  office  which  it  so  frequently  per- 
forms, that  of  exchanging  a  debt  in  one  place  or  country 
for  a  debt  in  another  place  or  country.  When  a  person  in 
one  place  or  country  owes  monc}^  to  a  party  in  another 
place  or  country,  he  does  not  in  general  discharge  the  debt 
by  transmitting  the  money,  which  would  involve  risk  and 
expense,  but  purchases  from  some  banker,  or  other  person 
who  has  money  due  him  at  the  place  where  he  has  the 
amount  to  pay,  a  bill  drawn  for  that  amount  upon  the 
banker  or  such  other  person's  debtor.  This  bill  is  drawn 
payable  to  the  purchaser's  creditor,  or  to  himself,  and  in- 
dorsed by  him  to  his  creditor,  as  he  sees  fit,  and  when  pre- 
sented to  and  paid  by  the  drawee  it  extinguishes  the 
original  debt.  The  facility  with  which  such  a  bill  may  be 
procured  depends  upon  the  commercial  relations  between 
the  two  places  or  countries  betwixt  which  it  is  required. 

Thus :  If  there  are  more  debts  due  from  New  York  to 
London  than  from  London  to  New  York,  the  demand  in 
New  York  for  bills  on  London  will  be  greater  than  the 
demand  in  London  for  bills  on  New  York  ;  and,  conse- 
quently, in  London,  where  there  are  many  creditors  of 
debtors  in  New  York,  it  will  be  easier  and  cheaper  to  pro- 
cure a  bill  of  exchange  on  New  York  than  it  will  be  in 
New  York,  where  there  are  a  less  number  of  creditors  of 
London  debtors,  to  procure  a  bill  on  London. 

It  would  follow  from  this  state  of  affairs  that  in  London 
bills  on  New  York  would  be  at  a  discount,  creditors  pre- 
ferring to  take  lesser  amounts  of  cash  in  hand  than  to 
undergo  the  trouble  and  delay  of  collecting  their  debts  in 
New  York.  This  discount,  which  is  in  fact  a  sum  paid  by 
the  London  drawer  of  an  order  of  payment  on  his  New 
York  debtor,  is  called  exchange,  and  the  course  of  ex- 
chano-e  is  said  to  be  ao^ainst  New  York.  It  is  also  in  favor 
of  London,  for  in  New  York  a  draft  on  London,  being  in 


448  EXCHANGE    AND    RE-EXCHANGE.  §   1 441' 

greater  demand,  would  bear  a  premium ;  that  is,  a  pur- 
chaser would  pay  for  it  more  than  the  amount  of  its  face. 
This  premium  is  also  called  exchange.^ 

§  1440^.  The  rate  of  exchange. — It  follows  that  the  rate 
of  exchange  between  two  countries  is  that  amount  of 
premium  which  it  will  cost  to  replace  a  sum  of  money  in 
the  one  country  in  the  other ;  or  which  a  right  to  a  sum  of 
money  in  one  country  will  produce  in  another  country.  In 
other  words,  it  is  the  difference  in  the  value  of  the  same 
amount  of  money  in  different  countries. 

§  1 44 1.  Natural  and  artificial  exchange. — The  rate  of 
exchange  between  two  countries  is  sometimes  natural  and 
sometimes  artificial.  "Thus,"  observes  Parsons,  "an  ex- 
change is  never  nominally  at  par,  because  our  statute  makes 
the  pound  sterling  equal  to  only  four  dollars  and  forty-four 
cents,  which  is  nearly  ten  per  cent,  less  than  it  is  really 
when  paid  in  gold.  Accordingly,  while  ;^ioo  is  legally 
worth  only  $444,  to  pay  that  sum  in  London  one  must  pay 
in  New  York,  if  the  exchange  is  actually  at  par,  about 
$484.  A  recent  United  States  statute  has  provided  that, 
for  the  purpose  of  estimating  duties  on  imported  goods, 
the  pound  sterling  shall  be  calculated  at  $4.84,  which  is 
about  its  true  value.  (Statute  July  27,  1842,  ch.  66,  5  U. 
S.  Statutes  at  Large,  496.)  But  the  matter  of  exchange 
is  left  to  itself.  Merchants  regulate  that  by  adding  from 
nine  to  ten  per  cent,  to  the  actual  rate  of  the  day  (or  that 
which  would  be  the  rate  if  it  were  determined  by  business 
alone),  and  thus  the  buying  and  selling  rate  is  made.  This 
is  seldom  less  than  eight  per  cent.,  for  if  it  falls  so  low,  or 
nearly  so  low,  gold  comes  over  from  England,  and  seldom 
more  than  eleven,  for  if  it  rises  so  high,  or  near  this  rate, 
gold  instead  of  bills  is  sent  to  England."^ 

'  See  Thomson  on  Bills,  439. 

"  I  Parsons  N.  &  B.,  663.  By  more  recent  enactment  of  Congress,  the  value 
of  the  sovereign  or  pound  sterling  is  placed  at  four  dollars  eighty-six  cents  and 
six  and  one-half  mills.  See  Revised  Statutes  U.  S.,  707  ;  act  March,  1873,  ch. 
268,  vol.  17,  p.  603. 


^   1442.  NATURE  OF  DAMAGES,  AND  OF  EXCHANGE.  449 

§  1442.  Par  of  exchange. — By  the  par  of  exchange  is 
meant  the  precise  equahty  of  any  given  sum  of  money  in 
the  coin  or  currency  of  one  country,  and  the  Hke  sum  in 
the  coin  or  currency  of  another  country  into  which  it  is  to 
be  exchanged,  regard  being  had  to  the  fineness  and  weight 
of  the  coins  so  fixed  by  the  mint  standard  of  the  respective 
countries.^  Marius  says  :  ''Pair,''  as  the  French  call  it,  "  is 
to  equalize,  match,  or  make  even,  the  money  of  exchange 
from  one  place  with  that  of  another  place  ;  when  I  take  up 
so  much  money  for  exchange  in  one  place  to  pay  the  just 
value  thereof  in  other  kind  of  money  in  another  place, 
\vithout  having  respect  to  the  current  of  exchange  for  the 
same,  but  only  to  what  the  moneys  are  worth. "^  It  is  nec- 
essary to  this  purpose  to  ascertain  the  intrinsic  values  of  the 
different  coins  ;  and  then  it  is  a  mere  matter  of  arithmetical 
computation  to  arrive  at  the  amount  of  the  one  which  will 
be  the  exact  equivalent  of  a  certain  amount  of  the  other, 
into  which  it  is  to  be  exchanged.  When  this  has  been  ac- 
complished, and  the  exact  equivalent  of  a  certain  amount 
in  one  currency  has  been  ascertained  in  another,  should  it 
be  desired  to  transmit  such  amount  from  one  country  to 
another,  the  rate  of  exchange  between  the  countries  will 
be  added  to  or  subtracted  from  such  amount,  accordingly 
as  the  course  of  exchange  is  in  favor  of  the  one  country  or 
the  other.  So  the  par  of  exchange  is  the  equivalency  of 
amounts  in  different  currencies,  while  the  rate  of  exchange 
is  the  difference  between  these  amounts  at  different  places. 

§  1443.  Gilbert  remarks  on  this  subject,  in  his  Treatise 
on  Banking  :  "  The  real  par  of  exchange  between  two 
countries  is  that  by  which  an  ounce  of  gold  in  one  country 
can  be  replaced  by  an  ounce  of  gold  of  equal  fineness  in 
the  other  country.  In  England  gold  is  the  legal  tender, 
and  its  price  is  fixed  at  ^3  lys.  lokd.  per  ounce.  In  France 
silver  is  the  currency,  and  gold,  like  other  commodities, 

'  Cunningham  on  Bills,  417  ;  Story  on  Bills,  §  30.  *  Marius  on  Bills,  4. 

Vol.  II. — 29 


450  EXCHANGE    AND    RE-EXCHANGE.  §   1443' 

fluctuates  in  price  according  to  supply  and  demand.  Us'u 
ally,  it  bears  a  premium  or  agio.  In  the  abov^e  quotation, 
this  premium  is  stated  to  be  7  per  7nille  ;  that  is,  it  would 
require  1,007  francs  in  silver  to  purchase  1,000  francs  in 
gold.  At  this  price  the  natural  exchange,  or  that  at  which 
an  ounce  of  gold  in  England  would  purchase  an  ounce  of 
gold  in  France,  is  25. 32^.  But  the  commercial  exchange 
— that  is,  the  price  at  which  bills  on  London  would  sell  on 
the  Paris  Exchange — is  25  francs,  25  cents,  showing  that 
gold  is  0.30  per  cent,  dearer  in  Paris  than  in  London. 
Tables  have  been  constructed  to  show  the  results  of  each 
fluctuation  in  the  premium  of  gold  in  Paris  and  Amster- 
dam."^ And  in  Cunningham  on  Bills  it  is  said:  "  By  the 
par  of  exchange  is  meant  the  precise  equality  between  any 
sum  or  quantity  of  English  money,  and  the  money  of  a 
foreign  country  into  which  it  is  to  be  exchanged,  regard 
being  had  to  the  fineness  as  well  as  to  the  weight  of  each. 
When  Sir  Isaac  Newton  had  the  inspection  of  the  English 
mint,  he  made,  by  order  of  council,  assays  of  a  great  num. 
ber  of  foreign  coins  to  know  their  intrinsic  values,  and  to 
calculate  thereby  the  par  of  exchange  between  England 
and  other  countries  ;  of  which  a  table  is  given  by  Dr.  Ar- 
buthnot.  And  he  says  you  may  thereby  judge  the  balance 
of  trade,  as  well  as  the  distemper  of  a  patient  by  the  pulse. 
And  this,  it  seems,  induced  Mons.  Dutot,  in  a  late  book, 
entitled  '  Reflexions  Politique  sur  les  Finances,'  to  follow 
the  same  path  in  calculating  the  par  of  exchange,  and  to 
say  that  the  balance  of  trade  may  be  thereby  as  well  judged 
of  as  the  weather  by  a  barometer."^ 

'  Gilbert  on  Banking,  424,  425.  *  Gilbert  on  Banking,  p.  417. 


1^   1444-  NATURE    OF    RE-EXCHANGE.  45 1 

SECTION  II. 

NATURE   OF   RE-EXCHANGE  AND   DRAWER'S   LIABILITY. 

§  1444.  From  the  use  which  bills  of  exchange  subserve 
in  transmitting  money,  arises  the  liability  upon  the  part  of 
the  drawer  for  the  payment  of  what  is  termed  "  re-exchange," 
in  the  event  of  the  dishonor  of  the  bill  in  the  place  or 
country  upon  which  it  is  drawn.  Thus,  suppose  A.  in  San 
Francisco,  California,  desires  a  thousand  dollars  in  New 
York  City,  New  York.  He  purchases  a  bill  of  exchange 
from  a  San  Francisco  banker,  drawn  by  himi  on  a  house  in 
New  York,  and  pays  therefor  a  premium  of  (say)  three  or 
five  per  cent.  In  other  words,  he  purchases  New  York 
exchange  in  San  Francisco,  and  is  entitled  to  demand  in 
New  York  of  the  drawee  the  thousand  dollars  for  which 
he  has  paid  the  premium.  Now,  should  it  happen  that  the 
bill  were  dishonored  in  New  York,  it  is  obvious  that  if  the 
holder  could  only  recover  of  the  drawer  in  California  the 
thousand  dollars  which  he  should  have  received  in  New 
York,  he  would  lose  the  premium  which  he  paid  for  the 
exchange,  and  suffer  without  remedy  the  loss  and  incon- 
venience of  returning  the  bill  to  California  for  recourse 
against  the  drawer. 

And  even  if  no  premium  had  been  paid,  the  holder  enti- 
tled under  the  drawer's  contract  to  receive  the  thousand 
dollars  in  New  York,  would  not  be  indemnified  if  he  could 
only  sue  for  and  obtain  that  amount  in  California.  From 
these  circumstances  grew  the  customary  right  of  the  holder 
of  the  bill,  by  the  law  merchant,  to  draw  a  bill  upon  the 
drawer — literally  a  bill  of  re-exchange — for  the  principal 
amount  which  he  should  have  received,  increased  by  the 
costs  of  protest,  and  the  sum  which  it  will  cost  to  replace 
that  principal  amount  at  the  place  where  it  should  have 
been  paid.     Thus,  if  the  exchange  between  New  York  and 


452  EXCHANGE    AND    RE-EXCHANGE.  §   1 445. 

California  were  ten  per  cent,  the  holder  of  a  bill  for  a 
thousand  dollars  drawn  in  California  on  New  York,  would, 
upon  its  protest  in  New  York,  be  entitled  to  redraw  upon 
the  California  drawer  for  eleven  hundred  dollars,  with  his 
necessary  expenses  and  interest  added.^ 

§  1445.  Re-exchange,  then,  may  be  defined  to  be  the 
amount  for  which  a  bill  may  be  purchased  in  the  country 
where  the  original  bill  is  payable,  drawn  upon  the  drawer 
in  the  country  where  he  resides,  which  will  give  the  holder 
a  sum  exactly  equal  to  the  amount  of  the  original  bill  at 
the  time  when  it  ought  to  be  paid,  or  when  he  is  able  to 
draw  the  re-exchange  bill,  together  with  expenses  and 
interest ;  for  that  is  precisely  the  sum  which  the  holder  is 
entitled  to  receive,  and  which  will  indemnify  him  for  its 
non-payment. 

The  cross-bill  is  called  in  French  the  retraite.  The 
amount  for  which  it  is  drawn  is  called  in  law  Latin,  ricam- 
biunl,  in  Italian,  recambio,  and  in  English,  re-exchange.  In 
point  of  fact,  the  re-exchange  bill  is  seldom,  if  ever,  drawn 
in  England  or  in  the  United  States,  but  the  right  of  the 
holder  to  draw  it  is  recognized  by  the  law  merchant  of  all 
nations,  and  it  is  by  reference  to  this  supposed  redraft  upon 
the  drawer  that  the  re-exchange  is  computed.^ 

§  1446.  The  United  States  Supreme  Court  remarks  on 
this  subject :  "  The  doctrine  of  re-exchange  is  founded 
upon  equitable  principles.  A  bill  is  drawn  in  this  country, 
payable  at  Paris,  France.  The  payee  gives  a  premium  for 
it,  under  the  expectation  of  receiving  the  amount  at  the 
time  and  place  where  the  bill  is  made  payable.  It  is  pro- 
tested for  non-payment.  Now  the  payee  and  holder  is  en- 
titled to  the  amount  of  the  bill  in  Paris.  The  same  sum 
paid  in  this  country,  including  costs  of  protest  and  other 
charges,  is  not  an  indemnity.     The  holder  can  only  be  re- 

'  See  D'Tastet  v.  Barring,  11  East.,  265. 
«Byles  on  Bills  (Sharswood's  ed.)  [*402],  588. 


§   1447-  NATURE    OF    RE-EXCHANGE.  453 

munerated  by  paying  to  him,  at  Paris,  the  principal,  with 
costs  and  charges ;  or  by  paying  to  him  in  this  country 
those  sums,  together  with  the  difference  in  value  between 
the  whole  sum  at  Paris  and  the  same  amount  in  this  coun- 
try. And  this  difference  in  value  is  ascertained  by  the  pre- 
mium on  a  bill  drawn  in  Paris,  and  payable  in  this  country, 
wiiich  should  sell  at  Paris  for  the  sum  claimed."*  By  Sir 
J.  Colville,  in  the  Privy  Council,  it  was  recently  said  :  "  If 
an  ordinary  bill  of  exchange  is  drawn  in  one  country  upon 
persons  in  another  and  distant  country,  the  holder  who  has 
contracted  for  the  transfer  of  funds  from  the  one  country 
to  the  other  almost  necessarily  sustains  damages  by  the  dis- 
honor of  the  bill.  He  must  take  other  means  to  put  him- 
self in  funds  in  the  country  where  the  bill  was  payable. 
Hence  the  right  to  're-exchange'  which  is  the  measure  of 
those  damages."  And  accordingly  it  was  held  that  where 
the  holder  of  a  bill  drawn  in  London  on  a  party  in  Aus- 
tralia, had  no  occasion  to  transfer  funds  to  Australia,  but 
sent  the  bill  there  to  have  it  negotiated  and  the  proceeds 
remitted  to  London,  he  could  not,  upon  dishonor  of  the 
bill,  recover  re-exchange.^ 

§  1447.  Drawer  may  limit  re-exchange. — The  drawer 
may,  if  he  pleases,  limit  the  amount  of  re-exchange  and 
expenses,  in  the  event  of  the  bill  being  dishonored,  by  sub- 
scribing :      "  In  case  of   non-acceptance  or  non-payment^ 

re-exchange  and  expenses  not  to  exceed  $ ,"  or  some 

sucli  words.  And  then  the  holder  can  not  recover  a  larger 
amount.^  It  might  be  better  to  say,  "  re-exchange  and  ex- 
penses shall  be  so  much,"  for  then  the  amount  is  definitely 
determined.'* 


» Bank  of  the  United  States  v.  United  States,  2  How.,  737. 

'Wellans  v.  Ayres,  3  Appeal  Cases,  133  (1877)  ;  24  Moak's  E.  R.,  82. 

•  Chitty  on  Bills  (13  Am.  ed.)  [*i66],  190.  *  i  Parsons  N.  &  B.,  653. 


454  EXCHANGE    AND    RE-EXCHANGE.  ^   1 448. 


SECTION   III. 

indorsee's  AND  ACCEPTOR'S  LIABILITY  FOR  ^RE-EXCHANGE 
AND  DAMAGES. — ACCUMULATIONS  OF  RE-EXCHANGE  AGAINST 
DRAWER  AND   INDORSER, 

§  1448.  Every  indorser  of  a  bill  is  a  new  drawer,  and  the 
holder  may  therefore  redraw  upon  any  indorser  (as  well  as 
upon  the  drawer)  for  the  re-exchange  between  the  country 
upon  which  the  bill  is  drawn  and  that  where  the  indorse- 
ment was  made.  And  as  soon  as  the  indorser  pays  the  re- 
exchange,  he  may  thereupon  redraw  upon  any  antecedent 
indorser,  or  upon  the  drawer,  for  the  whole  amount,  in- 
cluding the  re-exchange  between  the  place  of  dishonor  and 
of  indorsement,  which  he  has  been  required  to  pay ;  and, 
in  addition,  the  re-exchange  between  the  place  of  such 
payment  and  the  place  upon  which  the  redraft  is  drawn.* 
This  principle  rests  upon  the  obvious  equity  and  justice  of 
indemnifying  each  several  and  successive  party  for  the  Icjs 
which  he  suffers  by  the  breach  of  contract  of  his  antece- 
dents ;  and  although  when  the  bill  has  passed  through  nu- 
merous hands,  the  drawer  may  be  burdened  with  successive 
re-exchanges  between  different  places,  it  is  only  the  conse- 
quence of  his  own  engagement,  and  what  is  necessary  to 
reimburse  and  save  harmless  those  who  trusted  to  its  per- 
formance.^ 

'  Chitty  on  Bills  (13  Am.  ed.)  [*686],  767  ;  Edwards  on  Bills,  732  ;  i  Parsons 
N.  &  B.,  652  ;  Wharton's  Conflict  of  Laws,  §  458  ;  Westlake  on  Int.  Law,  §  234. 

"  D'Tastet  v.  Baring,  11  East.,  265  ;  Crawford  v.  Branch  Bank,  6  Ala.  N.  S., 
15  ;  Mellish  v.  Simeon,  2  H.  Bl.,  379  (1794).  In  this  case  the  bill  was  drawn  in 
England  by  Simeon  on  Boyd  &  Co.,  in  Paris.  It  was  negotiated  through  Am- 
sterdam, in  Holland,  and  refused  payment,  and  was  sent  back  to  the  indorser  at 
Amsterdam,  and  by  him  to  the  English  drawer,  with  the  accumulation  of  ;^300 
damages.  Lord  Chief-Justice  Eyre  said  :  "  I  see  no  distinction  between  this 
case  and  the  common  one  of  a  bill  being  refused  payment.  The  drawer  must 
pay  for  all  the  consequences  of  the  non-payment,  and  the  loss  on  the  re-exchange 
seems  to  me  to  be  part  of  the  damages  arising  from  the  contract  not  being  per- 
formed. I  thought,  indeed,  at  the  trial,  that  it  might  be  a  question  whether  the 
drawer  was  liable  for  the  re-exchange  occasioned  by  the  circuitous  mode  of  re- 
turning the  bill  through  Amsterdam,  but  the  jury  decided."  BuUer  and  Heath, 
JJ.,  concurred. 


§  1448.       indorser's  and  acceptor's  liability.  455 

Story  says,  upon  the  authority  of  Joussc,  that  if  there  be 
a  direct  comniercial  intercourse  between  the  country  where 
the  acceptance  and  payment  are  to  be  made,  and  the  country 
where  the  drawer  lives,  the  rate  of  that  re-exchange  is  the 
proper  amount  to  be  allowed  to  the  holder,  and  intimates 
that  it  is  only  when  such  intercourse  is  disturbed  that  the 
drawer  is  bound  for  the  re-exchange  accumulating  by  the  cir- 
cuitous mode  of  transmitting  and  negotiating  the  bill  in  the 
various  countries  through  which  it  must  pass.^  But  none 
of  the  Enirlish  cases  cited  rccoonize  this  distinction,  nor  does 
it  appear  to  be  a  principle  of  the  law  merchant  resting  either 
upon  reason  or  authority.  As  the  indorsers  are  drawers, 
there  is  no  reason  why  the  holder  should  not  draw  upon  the 
one  as  well  as  another,  and  that  the  party  who  has  put  his 
bill  in  circulation,  should  not  indemnify  those  who  received 
it.  Even  the  fact  that  the  drawee  is  prohibited  by  the  laws 
of  his  country  from  accepting  or  paying  the  bill  does  not 
release  the  drawer's  liability,  for  he  "  who  undertakes  for 
the  act  of  another,  undertakes  that  it  shall  be  done  at  all 
events."  ^  But  no  indorsee  can  avail  himself  of  but  one 
satisfaction  of  re-exchange,  nor  will  any  drawer  or  indorser 
be  liable  for  re-exchange  except  when  it  is  allowed  by  the 
laws  of  the  country  where  the  bill  is  drawn,  or  the  indorse- 
ment made.^ 


*  Story  on  Bills,  §  402,  quoting  Jousse  Comm,  sur  L'Ord,  1673,  tit.  6,  art.  4, 
pp.  139,  140.  In  Scotland,  Story's  view  has  been  taken  by  Forbes  and  Glen  (see 
Forbes,  151  ;  Glen,  274).  But  Thomson  exposes  its  fallacy  with  his  usual  clear- 
ness and  discrimination.  See  Thomson  on  Bills,  p.  445,  where  it  is  said  :  "It 
has  been  said  that  the  drawer  ought  not  to  be  liable  for  any  but  the  direct  re- 
exchange  between  the  place  of  drawing  and  the  place  of  payment,  unless  he  has 
given  permission  to  negotiate  the  bill  in  other  places.  But  such  a  j^ermission  is 
implied  by  the  drawer  issuing  a  negotiable  document,  since  the  holder  for  the 
time  is  ent'itled  to  indorse  it  to  any  person  he  pleases  ;  and,  on  the  other  hand,  the 
last  holder,  being  entitled,  in  case  of  its  dishonor,  to  redraw  on  any  previous  in- 
dorser, in  order  to  make  good  his  recourse  against  such  indorser,  who  again  has 
a  right  to  do  the  same  with  any  prior  indorser,  the  drawer,  as  he  is  liable  lor  all 
the  consequences  of  dishonor,  must  be  liable  for  the  accumulated  re-exchange 
arising  on  the  successive  redrafts,  because  tJiat  results  from  the  negotiability  ol 
the  document  which  he  has  issued." 

*  Hellish  V.  Simeon,  2  H.  BL,  376,  Heath,  J.  »  Stor)-  on  Bills,  §  403. 


456  EXCHANGE    AND    RE-EXCHANGE.  §   1449' 

§  1449.  Whether  or  not  acceptor  liable  for  re-exchange. — 
Many  of  the  commentators  on  bills  of  exchange  state  em- 
phatically that  the  liability  for  re-exchange  is  peculiar  to 
the  drawer  and  indorser  of  a  bill,  and  does  Qot  extend  to 
the  acceptor.^  Others  consider  the  acceptor  equally  liable.^ 
And  others  still  take  an  intermediate  view,  that  he  is  liable 
only  when  he  has  agreed  with  the  drawer  or  indorser,  for  a 
valuable  consideration,  to  pay  the  bill,  and  has  failed  to  do 
so  ;  and  the  drawer  or  indorser  has  consequently  been  com- 
pelled to  pay  re-exchange.  Then  they  say  he  is  bound  to 
reimburse  them.^  In  England,  where  an  English  mercantile 
firm  had  directed  an  American  merchant  of  Pennsylvania 
to  purchase  corn  for  them,  and  draw  on  them  for  reimburse- 
ment— and  the  bills  drawn  in  pursuance  of  this  direction 
were  not  paid,  some  of  them  not  even  accepted — the  Penn- 
sylvania merchant  w^as  permitted  to  prove  against  the 
English  firm  not  only  the  principal  amount,  but  also  for 
twenty  per  cent,  allowed  by  the  laws  of  Pennsylvania  against 
*'  the  drawer  and  all  others  concerned,"  when  bills  upon 
England  were  returned  protested.* 

This  case  would  seem  clearly  to  maintain  the  acceptor's 
liability  for  re-exchange  to  the  drawer.  But  it  was  after- 
ward held  in  England,  that  the  holder  could  not  recover 
re-exchange  from  the  acceptor,  who,  it  was  said,  by  his  ac- 
ceptance only  charges  himself  with  the  liability  to  pay  ac- 

=  Chitty  on  Bills  (13  Am.  ed.)  [*686],  ^(i^  ;  Chitty,  Jr.,  on  Bills,  \i  ;  Byles  on 
Bills  (Sharswood's  ed.)  P402],  588  ;    3  Kent  Com.,  lect.  44 ;    Edwards  on  Bills, 

733- 

"^  Thomson  on  Bills  (Wilson's  ed.),  446  ;  i  Parsons  N.  &  B.,  650.  Bayley  saj^s 
p.  306,  chap.  X,  note  41  :  "  It  seems  reasonable  that  he  shoulcl  be  liable  to  all 
parties  when  he  has  effects,  and  to  all  excepting  the  drawer  when  he  has  not." 
In  Kyd  on  Bills,  141,  it  is  said  :  "  The  acceptor  must  pay  re-e.\change  and  all 
charges."     Pothier,  117 ;  i  Bell  Com.  B.  3,  chap.  2,  §  4,  p.  407  (5th  ed.) 

=  Story  on  Bills,  §  398  ;  Sedgwick  on  Damages  [242],  271. 

^  Francis  V.  Rucker,  Ambler,  672  (1768),  Lord  Campbell  saying:  "The  20 
per  cent,  is  a  liquidated  thing,  and  therefore  differs  from  the  case  of  re-exchange. 
The  reason  of  not  admitting  proofs  of  the  difference  upon  re-exchange  is  because 
it  is  uncertain  damage  which  can  not  be  proved The  nature  of  the  en- 
gagement is  to  pay  the  bills  or  the  20  per  cent.,  the  consequential  damages  ac- 
cording to  the  law  of  Pennsylvania,  the  same  as  if  it  had  been  by  express  stipu- 
lation." 


§  I450-       indorsee's  and  acceptor's  liability.  457 

cording-  to  the  law  of  this  country  ;  and  if  he  do  not  pay,  the 
holder  has  his  remedy  over  against  the  drawer.^  And  Lord 
Ellenborough  said,  in  one  of  the  cases  where  it  was  sought 
to  charge  the  acceptor  for  re-exchange  because  the  holder 
had  suffered  to  that  extent  by  the  dishonor  :  "  You  may  as 
well  state  that,  by  reason  of  the  bill  not  being  paid,  the  plain- 
tiff was  obliged  to  raise  money  by  mortgage."''  But  in  a  recent 
case  before  the  Chancery  Division  of  the  High  Court  of 
Justice,  it  was  held  that  the  drawer  of  a  bill  of  exchange  in 
a  foreign  country,  upon  its  dishonor  and  protest,  is  entitled 
to  recover  from  the  acceptor  not  only  the  amount  of  the 
bill  with  interest,  but  also  all  such  reasonable  expenses  as 
may  have  been  caused  by  the  dishonor,  including  the  ex- 
penses of  re-exchange.  And  Yice-Chancellor  Malins,  re- 
ferring to  Lord  Ellenborough's  decision,  said  :  "  But  as  to 
that  nisi  priiis  case,  if  it  had  been  expressly  in  point,  it 
could  not  outweigh  the  solemn  decision  of  Francis  v.  Rucker. 
Now,  I  can  not  accede  to  the  argument  that  a  drawer  is 
under  greater  liability  than  an  acceptor.  I  am  of  opinion 
that  the  primary  liability  is  on  the  acceptor.  The  liability 
of  the  drawer  is  secondary,  and  if  the  drawer  is  liable,  so 
must  the  acceptor  be."^ 

§  1450.  In  the  United  States  Supreme  Court,  the  drawee, 
who  had  instructed  the  drawer  to  purchase  salt  for  him,  and 
to  draw  for  reimbursement,  was  held  liable  for  re-exchange 
upon  ground  broad  enough  to  include  every  case  in  which 
there  is  an  authority  to  draw,  or  an  acceptance.''     But  in 

'  Napier  v.  Schneider,  12  East.,  420  (1810). 

'^  Woolsey  v.  Crawford,  2  Camp.,  445  (1810)  ;  Dawson  v.  Mort,^an,  9  Barn.  & 
Cres.,  61S  (  1829),  Lord  Tenterden,  C.  ].,  saying  :  "  The  custom  does  not  give  a 
right  to  an  indorser  (  against  the  acceptor)  to  recover  re-exchange." 

Mn  re.  General  South  American  Co.,  7  Ch.  Div.  Law  R.,  645  (187S).  See  also 
Walker  v.  Hamilton,  I  D.  F.  &  J.,  502.  Prehn  v.  Royal  Bank  of  Liverpool,  Law 
R.,  6  Exch.,  92. 

*  Riggs  v.  Lindsav,  7  Cranch,  500,  Livingston,  J.,  saying :  "  As  Lindsay  was 
expressly  authorized' to  draw,  he  certainly  had  a  right  to  do  so  ;  and  whether  the 
defendants  accepted  his  bill  or  not,  so' as  to  render  themselves  liable  to  the 
holders  of  them,  there  can  be  no  doubt,  that,  as  between  Lindsay  and  them,  it 
was  their  dutv,  and  that  they  were  bound  in  law  to  pay  them.    Not  having  done 


458  EXCHANGE    AND    RE-EXCHANGE.  §   I45O. 

this  country  the  decisions  generally  deny  the  acceptor's  lia- 
bility.^ Our  view  is  this  :  If  the  di-awee  authorizes  the  bill 
to  be  drawn  (which  is  a  virtual  acceptance  as  to  the  drawer 
who  draws  the  bill,  or  the  holder  who  takes  4t,  on  the  faith 
of  the  authority),  or  if  there  is  an  acceptance  when  the  bill 
is  presented  for  acceptance,  the  acceptor  is  bound  for  all 
damages,  including  re-exchange,  which  may  result  to  the 
drawer  immediately  from  the  dishonor  of  the  bill.  If  the 
holder  sues  the  drawer  and  recovers  re-exchange,  the  ac- 
ceptor should  reimburse  him,  as  his  own  default  occasioned 
the  liability.  If  the  holder  sues  drawer  and  acceptor  to- 
gether, the  acceptor  would  likewise  be  liable,  because  the 
drawer,  on  paying  the  amount,  would  immediately  have  a 
claim  over  against  him.  And  even  if  the  acceptor  was 
sued  alone,  he  should  be  held  bound  for  the  re-exchange. 
We  can  see  no  philosophy  in  the  cases  which  hold  him 
liable  only  when  he  has  specially  instructed  the  drawer  to 
draw  for  a  separate  valuable  consideration.  His  liability 
arises  out  of  his  contract  to  pay  the  bill.  A  precedent  debt 
is  a  valuable  consideration  ;  and  if  he  accepts  to  pay  the 

so,  and  Lindsay,  in  consequence  of  their  neglect,  having  taken  them  up,  he 
must  be  considered  as  paying  their  debt,  and  as  this  was  not  a  voluntary  act  on 
his  part,  but  resulted  from  his  being  their  surety  (as  he  may  well  be  considered 
from  the  moment  he  drew  the  bills),  it  may  well  be  said  that  in  paying  the 
amount  of  these  bills,  which  ought  to  have  been  paid,  and  was  agreed  to  be 
paid  by  the  drawees,  he  paid  so  much  money  for  their  use.  Nor  can  any  good 
reason  be  assigned  for  distinguishing  the  damages  from  the  principal  sum,  for  if 
it  were  the  duty  of  the  defendants  to  pay  such  principal  sum,  it  is  as  much  so  to 
reimburse  Lindsay  for  the  damages,  which,  by  the  law  of  South  Carolina,  he  was 
compelled  to  pay,  and  which  may,  therefore,  also  be  considered  a  part  of  the 
debt  due  by  the  defendants  in  consequence  of  the  violation  of  their  promise." 

*  Newman  v.  Gozo,  2  La.  Ann.,  642.  In  Alabama  damages  in  lieu  of  re-ex- 
change and  other  charges  are  recoverable  only  of  the  drawer  or  indorsers. 
Tramwell  v.  Hudmon,  56  Ala.,  237  ;  Hanrick  v.  Farmers'  Bank,  8  Porter,  539. 
In  Watt  v.  Riddle,  8  Watts,  545,  the  statute  of  Pennsylvania  was  held  not  to 
include  the  acceptor  as  liable  for  re-exchange.  Bowen  v.  Stoddard,  10  Mete, 
377  (1845),  Hubbard,  J.,  saying  :  "  In  cases  where  the  drawers  have  been  obliged 
to  take  up  bills,  and  pay  damages,  because  the  acceptors  suffered  them  to  be 
protested  when  they  had  funds  of  the  owners  in  their  hands,  and  were  as  be- 
tween themselves  and  the  drawers  bound  to  accept,  they  may  recover  such 
damages  of  the  acceptors,  because  the  loss  is  occasioned  by  their  default  and 
neglect.  This  rests,  however,  on  the  relations  existing  between  them,  and  not 
on  the  ground  that  the  acceptor  as  such  is  liable  to  pay  damages  by  reason  ol 
his  acceptance." 


§1451-  INDORSER's  AND  acceptor's  LIABILITY.  459 

debt  in  a  particular  way,  he  should  bear  the  consequential 
damao-es  which  his  default   occasions,  and  as  Thomson  has 

o 

well  said  :  "If  the  drawer  or  indorser  is  liable  for  such 
damage  to  the  holder,  there  seems  to  be  no  reason  why  the 
acceptor,  who  is  more  immediately  bound  to  him,  should 
not  also  be  liable  for  this  direct  consequence  of  his  breach 
of  contract."^ 

§  145 1.  What  laws  determine  liability  of  drawer  and 
drawee. — The  drawer  of  a  bill  undertakes  that  the  drawee 
shall  accept,  and  afterward  pay  the  bill  according  to  its 
tenor,  at  the  place  and  domicile  of  the  drawee,  if  it  be 
drawn  and  accepted  generally  ;  at  the  place  appointed  for 
payment,  if  it  be  drawn  and  accepted  payable  at  a  different 
place  from  the  place  of  domicile  of  the  drawee.  If  this 
contract  of  the  drawer  be  broken  by  the  drawee,  either  by 
non-acceptance  or  non-payment,  the  drawer  is  liable  for  pay- 
ment of  the  bill,  not  where  the  bill  was  to  be  paid  by  the 
drawee,  but  where  he,  the  drawer,  made  his  contract,  with 
his  interest,  damages,  and  costs,  as  the  law  of  the  country 
where  he  contracted  may  allow.^  And  so  the  indorser,  who 
is  a  new  drawer,  is  liable  for  damages  according  to  the  law 
of  the  country  where  he  indorses.^ 

§  1452.  Indorser  s  liability  for  damages. — It  results  from 
the  doctrine  that  the  indorser  is  bound  only  according  to 
the  law  of  the  place  of  indorsement,  that  several  and  suc- 
cessive indorsers  may  be  bound  to  the  holder  in  different 
amounts  of  damages.  For  the  holder  can  only  recover 
damages  against  the  indorser  according  to  the  measure  al- 
lowed by  the  law  of  the  place  of  indorsement.  And  as  the 
indorser  can  only  recover  damages  against  prior  parties 
when  allowed,  and  to  the  extent  allowed  by  the  law  of  the 


*  Thomson  on  Bills,  447. 

*  Allen  V.  Kemble,  6  Moore,  P.  C,  314;  Gibbs  v.  Fremont,  9  Exch. 
Eng.  L.  &  Eq.,  555  ;  see  §§  998-9,  vol.  i. 

*  Story  on  Bills,  §  153. 


460  EXCHANGE    AND    RE-EXCHANGE.  §   1 45  2. 

place  of  their  contracts,  it  follows  that  an  indorser  may  be 
required  to  pay  more  to  his  indorsee  than  he  can  recover 
against  such  prior  parties.^  Thus,  in  Maryland,  the 
damages  on  bills  on  Europe  are  fixed  at  15  percent.;  in 
Pennsylvania,  at  20  per  cent.  ;  and  in  New  York,  at  10 
per  cent.  And,  for  the  sake  of  illustration,  let  us  suppose 
that  at  Rio  de  Janeiro,  Brazil,  no  damages  whatever  are  al- 
lowed against  the  indorser  of  a  bill  or  note.  Now,  suppose 
a  bill  be  drawn  by  A.  in  Maryland,  in  favor  of  B.  in  New 
York,  on  C.  in  Liverpool,  England,  and  then  indorsed  by 
B.  to  D.  in  Rio,  and  by  D.  to  E.  in  Pennsylvania,  and  by 
E.  in  Pennsylvania  to  F.  of  Liverpool,  England.  In  such 
case,  in  the  event  of  dishonor,  F.,  the  holder,  could  recover 
against  A.,  the  Maryland  drawer,  the  15  per  cent,  damages; 
against   B.,  in  New  York,  10  per  cent,  damages;  against 

D.  in   Rio   he   could  recover    no   damages  ;    and   against 

E.  in  Pennsylvania  he  could  recover  20  per  cent,  damages. 
But  suppose,  now,  the  amount,  with  20  per  cent,  damages, 
be  paid  by  E.  in  Pennsylvania,  he  can  recover  no  damages 
against  the  indorser  in  Rio.  But  he  may  recover  against 
the  Maryland  drawer  and  the  New  York  indorser  the 
amount  in  full  paid  by  him,  with  the  20  per  cent,  damages 
added  ;  and,  superadded,  the  exchange  between  Pennsyl- 
vania and  Maryland  or  New  York,  as  the  case  may  be. 
And  the  Rio  indorser,  while  not  bound  to  the  holder  for  any 
damages,  may  recover  against  the  drawer  and  indorser  the 
principal  amount  paid,  with  the  damages  allowed  between 
Brazil  and  Maryland  or  New  York,  as  the  case  may  be. 
But,  by  the  law  merchant,  in  the  absence  of  any  statutory 
enactment,  each  indorser  is  bound  to  indemnify  his  succes- 
sors fully  for  all  damages  they  have  been  compelled  to  pay, 
as  we  have  already  seen. 

'2  Parsons  N.  &  B.,  342,  346;   Story  on    Bills,  §  153;  2  Kent.  Com.  [*46o], 
596.     See  also  Wharton  Confl.  of  Laws,  §  458, 


§  1454'  DAMAGES  UPON  PROMISSORY  NOTES.  461 


SECTION  IV. 

RE-EXCIIANGE  AND  DAMAGES  UPON  PROMISSORY  NOTES.— OTHER 

CHARGES. 

§  1453.  Promissory  notes  are  not,  by  the  law  merchant, 
within  the  rule  entitling  the  holder  to  re-exchange,  or  dam- 
ages in  lieu  thereof ;  but  they  may  be  drawn  with  the  ex- 
press provision  that  they  are  to  be  paid,  with  exchange  on  a 
certain  place.^  And  it  has  been  held  that,  when  indorsed, 
they  come  within  the  reason  and  spirit  of  the  rule  ;  for  the 
indorser  of  a  promissory  note  is,  in  effect  and  in  legal  con- 
templation, the  drawer  of  a  bill  upon  a  maker,  who  is  re- 
garded as  its  acceptor,  and  there  is  great  force  in  this  view.^ 
But  it  does  not  seem  to  be  in  accordance  with  the  doc- 
trines of  the  law  merchant,  whose  peculiar  rules  in  respect 
to  the  subject  are  confined  strictly  to  bills  of  exchange. 

§  1454.  While,  ordinarily,  promissory  notes  do  not  carry 
re-exchange,  it  is  the  doctrine  of  the  English  courts,  and  of 
some  of  the  United  States  authorities,  that  when  an 
amount  is  contracted  to  be  paid  in  a  certain  State  or  coun- 
try (say,  for  instance,  the  case  of  a  note  made  in  A^irginia 
for  one  hundred  pounds  sterling,  payable  in  London),  the 
creditor  ought  to  recover,  wherever  his  suit  may  be  brought, 
a  sum  equal  to  the  debt  due,  with  interest ;  and  also  as 
much  as  might  be  necessary  to  replace  the  money  in  the 
country  where  it  ought  to  have  been  paid.^  This  doctrine 
has  been   forcibly   expressed  by  Mr.  Justice   Story,  in  a 


*  Pollard  V.  Herries^  3  Bos.  &  P.,  335 ;  Grutacap  v.  Woulluise,  2  ]\IcLean, 
584. 

''Howard  v.  Central  Bank,  3  Kelly,  375  (1847).  The  note  was  made  in 
Georgia,  payable  in  New  York.     Thomson  on  Bills,  442-3. 

^  Grant  v.  Healey,  3  Sumn.,  523  ;  Smith  v.  Shaw,  2  Wash.  C.  C,  167 ;  Lee  v. 
Wilcocks,  5  Serg-.  &  R.,  48  ;  Bank  of  Missouri  v.  Wright,  10  Mo.,  719  ;  Scott  v. 
Bevan,  2  Barn.  &  Ad.,  78  ;  Cash  v.  Kennion,  11  Ves.,  314;  Edwards  on  Bills, 
726-9;  I  Parsons  N.  &  B.,  664. 


462  EXCHANGE    AND    RE-EXCHANGE.  §   I455. 

case  presenting  the  question/  and  seems  to  be,  as  he  has 
well  observed,  "  founded  on  the  true  principles  of  recip- 
rocal justice,"  but  it  has  been  denied  by  authorities  of  great 
weight.* 

In  a  case  where  the  payment  was  to  be  in  Turkish 
piastres,  but  it  did  not  appear  where  the  contract  was  made 
or  payable,  it  was  held  to  be  the  settled  rule,  "  where  money 
is  the  object  of  the  suit,  to  fix  the  value  according  to  the 
rate  of  exchange  at  the  time  of  the  trial."  ^  But  Story 
says  it  is  impossible  to  say  that  a  rule  laid  down  in  such 
general  terms  ought  to  be  deemed  of  universal  application ; 
and  cases  may  easily  be  imagined  which  may  justly  form 
exceptions,* 

The  measure  of  damages  for  conversion  of  a  bill  or  note 
\?,  prima  facie  the  amount  of  the  note.^ 

§  1455.  It  has  been  held  in  England  that  where  the  jac- 
ceptor  pays  a  part  of  the  bill,  and  it  is  protested  as  to  the 
residue,  or  damages  in  lieu  thereof  is  to  be  reduced  propor- 
tionately, and  allowed  only  on  the  amount  unpaid.^  And 
this  view  has  been  taken  in  several  cases  in  the  United 
States,  it  being  considered  that  damages  are  not  given  as  a 
liquidated  arbitrary  mulct,  but  as  compensation  for  remis- 
sion of  an  amount  of  money  which  should  bear  relation  to 
that  amount.'^  But  it  would  seem  that  the  drawer  contracts 
that  the  bill  shall  be  honored,  and  if  not,  that  he  will  pay 
the  re-exchange,  or  damages  in  lieu  thereof,  provided  by 
statute,  they  being  as  fixed  and  determinate  an  obligation 

•  Grant  v.  Healey,  3  Sumn.,  523,  Story,  J.,  saying  :  "  But  the  rate  of  exchange 
is  not  recoverable  on  a  note  when  the  venue  is  laid  in  the  State  where  suit  is 
brought,  and  there  is  no  count  or  allegation  to  cover  the  difference  of  exchange." 
Grutacap  v.Woulluise,  2  McLean,  581. 

=  Martin  v.  Franklin,  4  Johns,  124;  Day  v.  Scofield,  20  Johns,  102  ;  Adams  v. 
Cordis,  8  Pick.,  260 ;  Lodge  v.  Spooner,  8  Gray,  166. 

=  Lee  V.  Wilcocks,  5  Serg.  &  R.,  48.  *  Story  on  Bills,  §  150. 

'■  McPeters  v.  Phillips,  46  Ala.,  496. 

^  Laing  v.  Barclay,  3  Stark.,  38  ;  Story  on  Bills,  §  399;  Chitty  on  Bills  (13 
Amer.  ed.)  P687],  768. 

'  Bangor  Bank  v.  Hook,  5  Greenl.,  174 ;  Warren  v.  Combs,  20  Me.,  139. 


§   145^-  DAMAGES  UPON  PROMISSORY  NOTES.  463 

as  the  debt  itself.*     The  question  may  turn  in  some  cases  on 
the  construction  of  the  particular  statute. 

§  1456.  It  is  not  necessary  for  the  plaintiff  to  show  that 
he  has  paid  the  re-exchange  ;  it  suffices  if  he  be  liable  to 
pay  it ;  but  if  the  jury  find  that  there  was  not  at  the  time 
any  course  of  re-exchange  between  the  two  foreign  places, 
then  no  re-exchange  is  recoverable.^ 

§  1457.  Provision. — Besides  the  re-exchange,  the  drawer 
and  indorser  of  a  foreign  bill  which  is  dishonored,  are  liable 
also  to  the  holder,  in  like  manner,  for  the  charges  of  protest, 
postage,  and  provision.^  "  With  respect  to  provision,"  ob- 
serves Mr.  Chitty,  "  it  is  said  by  Pothier  that  it  is  usual  for 
the  holder  of  a  bill  to  allow  his  agent,  to  whom  he  indorses  it 
for  the  purpose  of  receiving  payment  for  him,  a  certain  sum 
of  money,  called  *  provision,'  at  the  rate  of  so  much  per  cent., 
to  recompense  him  not  only  for  his  trouble,  but  also,  if  such 
agent  be  a  banker,  for  the  risk  he  runs  of  losing  the  money 
which  he  is  obliged  to  deposit  with  his  correspondents  in 
different  places  for  the  purpose  of  repaying  his  principal 
the  amount  of  the  money  received  on  the  bills.  And  it  is 
said  that  one-half  per  cent,  is  not  an  unreasonable  allowance.^ 
When  it  is  necessary  for  the  holder  to  send  notice  by  a 
special  messenger,  his  reasonable  expenses  are  also  charge- 
able upon  the  parties  liable  for  payment."^ 

§  1458.  Interest  is  recoverable  against  all  the  parties  to 
a  bill  according  to  the  law  of  the  place  where  their  several 
contracts  were  entered  into  or  to  be  performed.  And 
neither  interest,  or  re-exchange,  or  damages  in  lieu  thereof, 
need  be  specially  claimed  in  the  declaration,  as  they  flow 

•  Hargous  v.  Lahens,  3  San.,  21,  Sanford,  J.  :  "The  liability  for  damages  be- 
comes perfect  on  the  return  of  the  protested  bill,  A  subsequent  part  payment 
by  the  acceptor  can  have  no  greater  influence  than  a  similar  part  payment  by  the 
drawer  or  any  other  party.  It  is  as  fixed  and  determinate  an  obligation  as  the 
debt  represented  by  the  sum  expressed  in  the  bill  itself." 

'  Chitty  on  Bills  P684].  '  Chitty  on  Bills  [*684],  765. 

*  lb.  [*688],  770. 

"  Pearson  v,  Crallan,  2  Smith's  Rep.,  404;  Chitty,  Jr.,  715. 


464  EXCHANGE    AND    RE-EXCHANGE.  §   1458^. 

out  of  the  contract.^  But  charges  of  protest,  postage,  and 
other  necessary  expenses,  can  only  be  recovered  upon  a 
special  count  which  covers  them.^  And  protest  must  be 
alleged  in  order  to  the  recovery  of  damage^,  as  they  accrue 
only  on  the  protest.^  Interest  on  a  note  payable  on  de- 
mand runs  only  from  the  time  of  demand,  or  suit  brought ;  * 
and  it  makes  no  difference  that  the  note  was  given  foi 
money  received  at  the  time  it  was  made.^ 

§  1458^.  Statutory  and  cont^'act  rates  of  interest. — Where 
a  certain  rate  of  interest  is  fixed  by  law,  but  a  higher  rate 
is  permissive  by  contract,  the  question  often  arises  as  to 
what  rate  should  be  adjudged  against  the  parties  bound  for 
payment  after  maturity  of  the  debt.  The  better  opinion  is 
that  the  conventional  or  contract  rate  should  prevail,^  al- 
though there  are  a  number  of  cases  which  take  the  opposite 
view.''^  It  is  clearly  the  case  that  the  contract  rate  should 
run  after  maturity  when  the  contract  to  pay  the  higher  rate 
after  maturity  is  express.^     Where  the  rate  of  interest  con- 

*  Bank  U.  S.  v.  U.  S.,  2  How.,  711. 

*  Kendrick  v.  Lomax,  2  Cromp.  &  J.,  405. 
»  Jordan  v.  Bell,  8  Port.  (Ala.),  53. 

*  Hunter  v.  Wood,  54  Ala.,  71  ;  Maxey  v.  Knight,  18  Ala.,  300;  Dodge  v. 
Perkins,  9  Pick.,  369;  Brefogle  v.  Beckley,  16  Sergt.  &  R.,  264  ;  Dillon  v.  Dud- 
ley, I  Marsh  (Ky.),  66. 

^  Hunter  v.  Wood,  54  Ala.,  71  ;  Schmidt  v.  Limehouse,  2  Bailey,  276;  Pullen 
V.  Chase,  4  Pike,  210. 

^  Cecil  V.  Hicks,  29  Grat.,  i  (1877).  In  this  case  the  promise  ran:  "Six 
months  after  date  to  pay  to  H.  or  order  the  sum  of  $700.  with  interest  at  the 
rate  of  twelve  per  centum  per  annum  after  date."  Held,  the  contract  was  legal 
at  the  time  it  was  made,  and  was  not  affected  by  subsequent  abolition  of  consti- 
tutional provision  authorizing  contracts  for  twelve  per  cent.,  and  that  -that  rate 
of  interest  continued  after  maturity.  See,  to  like  effect,  Seymour  v.  Continental 
Life  Ins.  Co.,  44  Conn.,  300 ;  Overton  v.  Balton,  9  Heisk.,  762  ;  Pridgen  v.  An- 
drews, 7  Texas,  461  ;  Thompson  v.  Pickel,  20  Iowa,  490  ;  Hand  v.  Armstrong, 

18  Iowa,  324 ;  Phinney  v.  Baldwin,  16  III,  108  ;  Briscoe  v.  Kenealy,  8  Mo.  Ap., 
^7  ;  Hopkins  v.  Crittenden,  10  Texas,  189  ;  Kohler  v.  Smith,  2  Cal,  597  ;  Cox 
v.  Smith,  I  Nev.,  171  ;  Foulay  v.  Hall,  12  Ohio,  615;  Pruyne  v.  Milwaukee,  18 
Wise,  568  ;  Morgan  v.  Jones,  20  E.  L.  &  Eq.,  454  ;  see  Cromwell  v.  County  ot 
Sac,  6  Otto  (96  U.  S.),  61  ;  Payne  v.  Caswell,  68  Me.,  80 ;  Andrews  v.  Keeler, 

19  Hun,  87. 

'  Duran  v.  Ayer,  6-]  Me.,  145  ;  Eaton  v.  Boissonault,  (>^  Me.,  540 ;  Perr>'  v. 
Taylor,  i  Utah,  63  ;  McComber  v.  Dunham,  8  Wend.,  550  ;  Ludwick  v.  Hut- 
singer,  5  Watts  &  Serg.,  51  ;  Henry  v.  Thompson,  Minor,  209 ;  Newton  v.  Ken- 
nerly,  31  Ark.,  626. 

*  Eaton  V.  Boissonault,  (>^  Me.,  540  ;  Cecil  v.  Hicks,  29  Grat.,  i. 


§    1460.  DAMAGES  UPON  PROMISSORY  NOTES.  465 

tracted  to  be  paid  is  legal,  the  promisor  may  bind  himself 
for  a  higher  rate  than  that  which  runs  by  operation  of  law, 
to  take  effect  at  and  continue  after  maturity  as  liquidated 
damages,  and  the  increased  rate  is  not  a  penalty  against 
which  equity  will  grant  relief.^  The  rule  applied  by  the 
U.  S.  Supreme  Court  is  to  give  the  contract  rate  up  to 
maturity  of  the  contract,  and  thereafter  the  rate  fixed  by 
law  for  cases  in  which  parties  have  fixed  none.^  But  it  re- 
gards the  question  as  one  of  local  law,  and  follows  State 
decisions  in  particular  cases.^ 

§  1459.  Costs. — The  owner  or  indorser  who  is  compelled 
to  pay  the  bill  can  not  charge  the  costs  of  suit  to  prior  par- 
ties, for  they  arise  as  well  from  his  breach  of  contract  to 
pay  the  bill  as  from  that  of  the  principal  party,  and  not 
from  his  indorsement.^  But  it  has  been  said,  that  if  he  is 
an  accommodation  party,  he  may  charge  to  the  person  ac- 
commodated, not  only  the  face  of  the  paper,  but  the  costs 
of  an  action  against  him.^ 

§  1460.  It  has  been  held  in  California  that  damages  on 
bills  do  not  accrue  from  any  stipulation  in  the  contract,  but 
are  recoverable  by  mere  operation  of  law  ;  and  that  they 
are  therefore  a  mere  incident  to  the  principal  sued  for,  and 
where  the  latter  can  not  be  recovered  there  can  be  no  claim 
for  the  former.  If  the  drawee  should  pay  only  the  princi- 
pal sum  after  dishonor  of  the  bill,  the  right  to  demand 
damages  against  the  drawer  having  already  accrued,  the 
liability  of  the  drawer  to  pay  them  would  remain.  But  if 
the  holder  surrender  up  the  bill  to  the  drawer,  on  payment 
of  the  principal  by  him,  it  would  operate  as  a  waiver  of  all 
claim  for  damages,  the  evidence  of  the  debt  being  surren- 

>  Bane  v.  Gridley,  67  111.,  388. 

'  Holden  v.  Trust  Co.,  100  U.  S.  (10  Otto),  72. 

'  Ohio  V.  Frank,  103  U.  S.  (13  Otto),  698  ;  Cromwell  v.  County  of  Sac,  96  U. 
S.  (6  Otto),  61,  explaining  and  distinguishing  Brewster  v.  Wakefield,  22  Howard, 
118. 

*  Dawson  v.  Morgan,  9  B.  &  C,  618 ;  Simpson  v.  Griffin,  9  Johns,  131. 

•  I  Parsons  N.  &  B..  663. 

Vol.  II. — 30 


466  EXCHANGE    AND    RE-EXCHANGE.  §   I460. 

dered  up  and  cancelled.  And  where  there  are  two  or  more 
of  a  set  of  bills,  the  acceptance  of  payment  of  the  principal 
of  one  would  waive  damages  as  to  another  of  the  set  which 
had  been  presented,  and  refused  payment,  as  all  of  the  set 
constitutes  in  fact  but  one  bill.-^  The  result  arrived  at  in 
the  case  cited  seems  correct ;  but  the  view  taken  that  dam- 
ag^es  do  not  inhere  in  the  contract  is  not  in  consonance 
with  other  authorities,  nor,  as  we  think,  correct.^ 

*  Page  V.  Warner,  4  Cal.,  395.  ^  See  anie,  §  1423. 


CHAPTER  XLVI. 

LOST    AND    DESTROYED    BILLS    AND    NOTES. 


SECTION    I. 

DUTIES   AND   RIGHTS    OF  THE   LOSER,  FINDER,  AND   HOLDER   OF 
A   LOST   NEGOTIABLE   INSTRUMENT. 

§  1461.  As  soon  as  it  is  ascertained  by  the  owner  that 
he  has  lost  a  bill,  note,  or  check,  he  ought  instantly  to  give 
notice  of  the  loss  to  all  the  parties  thereto,  and  to  warn 
them  not  to  pay  the  amount  to  any  one  but  to  the  loser  or 
his  order ;  and  if  an  unaccepted  draft  be  lost,  he  should 
advise  the  drawee  not  to  accept  the  same.^  For  if  the  party 
liable  to  pay  the  amount  should  pay  it  at  maturity  of  the 
instrument,  bojia  fide  and  without  notice  of  the  loss  to  the 
holder,  he  discharges  the  debt,  and  the  loss  falls  upon  the 
loser,  provided  the  instrument  be  payable  to  bearer  or  in- 
dorsed in  blank.^  But  the  party  liable  will  not  be  discharged 
if  he  pay  the  amount  to  the  holder  of  the  lost  instrument 
before  maturity,  such  a  payment  not  being  in  the  usual 
course  of  business.^  Nor  will  he  be  discharged  if  he  had 
notice  of  the  loss,^  unless  the  holder  were  a  bona  fide  holder 
for  value  who  could  enforce  payment.^  In  other  words,  the 
loser  of  a  negotiable  instrument  has  no  claim  on  a  payor 
who  pays  it  when  he  is  bound  to  do  so,  but  generally  has 


*  Edwards  on  Bills,  308  ;  Chitty  on  Bills  (13  Am.  ed.)  [*26o],  296. 
°  Lawson  v.  Weston,  4  Esp.,  56. 

'  Da  Silva  v.  Fuller,  Chitty  on   Bills    (13  Am.  ed.),  296  ;    Wheeler  v.  Guild, 
20  Pick.,  541;;  ante,  §  1233  ;  Hinckley  v.  Union  Pacific  R.R.,  129  Mass,  52. 

*  Lovell  V.  Martin,  4  Taunt.,  799.  *  2  Parsons  N.  &  B.,  256. 

(467) 


468  LOST  AND  DESTROYED  BILLS  AND  NOTES.         §   I463. 

such  claim  when  the  payor  pays  it  when  he  is  under  no 
compulsion  of  liability  to  do  so,  although  without  notice  of 
the  loss.* 

§  1462.  The  loser  shoidd  also  iminedicUely  notify  the 
public  of  the  loss  or  theft  of  a  negotiable  instrument,  and 
warn  all  persons  from  trading  for  or  negotiating  it,  by  ad- 
vertisement in  the  newspapers,  by  circulation  of  handbills, 
and  by  giving  notoriety  of  the  fact  through  whatever 
medium  he  may  command.  And  such  notice  should  de- 
scribe the  lost  or  stolen  instrument  in  unmistakable  terms. 
In  this  way  the  loser  may  be  able  to  render  the  circum- 
stance of  loss  so  well  known  that  no  banker  or  other  person 
will  trade  for  the  same,  and  no  one  become  a  bona  fide 
holder  without  notice,  who  could  demand  payment.  But 
the  notice  to  the  public  will  be  unavailing  unless  it  actually 
reach  the  holder  before  he  receives  the  instrument  ;' 
although  advertisement  in  a  paper  and  general  publicity  of 
the  fact  of  loss  or  theft  would  be  evidence  from  which 
knowledge  on  his  part  might  be  presumed  by  a  jury,  when 
coupled  with  the  circumstance  of  his  taking  or  reading  the 
paper  or  the  like.^ 

§  1463.  Advertisement  of  loss  not  necessary  to  holder  s 
recovery. — The  law  formerly  viewed  the  advertisement  of 

'  2  Parsons  N.  &  B.,  2^6.  In  Hinckley  v.  Union  Pacific  R.R.,  129  Mass.,  52 
(1880),  it  appeared  that  Hinckley  was  the  owner  of  certain  coupons  of  Union 
Pacific  Railroad  bonds,  payable  to  bearer  and  falling  due  at  the  company's 
office  in  Boston,  on  the  ist  March,  1876.  They  were  stolen  on  the  26th 
January,  1876,  and  on  February  26th,  1876,  Hinckley  notified  the  company  of 
the  theft,  specified  the  numbers  of  the  coupons,  and  requested  protection.  On 
April  1 8th,  1879,  he  demanded  payment  of  the  stolen  coupons  from  the  company, 
offering  to  give  a  bond  of  indemnity.  On  21st  April  the  company's  agent  paid 
the  coupons  to  certain  bankers,  who  presented  them  without  making  any 
inquiry  as  to  their  title.  The  court  held  that  the  payment  was  bad,  and  that 
Hinckley  could  recover  of  the  company  on  tendering  a  bond  of  indemnity.  Lord, 
T.,  delivered  a  ver}'  instructive  and  interesting  opinion  which  discusses  the  ques- 
tions under  consideration.  See  also  Hinckley  v.  Merchants'  Bank,  131  Mass. 
and  §  1470. 

"^  Beltzhoover  v.  Blackstock,  3  Watts,  20  ;  Mathews  v.  Poythress,  4  Ga.,  287  ; 
Lawson  v.  Weston,  4  Esp.,  56 ;  Byles  on  Bills  (Sharswood's  ed.)  [*362],  539. 

^  Beckwith  v.  Corrall,  1 1  J.  B.  Moore,  335,  where  it  is  said  :  "  If  in  this  case 
the  plaintiff  had  used  due  diligence,  and  had  given  proper  notice  of  the  loss  of 
the  bill  in  question,  the  defendants  might  have  been  presumed  to  have  been  ap 
prized  of  that  fact."     But  see  Beltzhoover  v.  Blackstock,  3  Watts,  20. 


§    1464.      DUTIES  OF  THE  LOSER,   FINDER,   AXD  HOLDER.        469 

loss  by  the  loser  as  a  condition  precedent  to  his  right  to  re- 
cover of  those  who  had  taken  the  instrument,  because  it 
considered  that  if  the  holder  received  it  negligently  he  ac- 
quired no  title  against  the  rightful  owner  ;  but,  on  the  other 
hand,  if  the  owner  neglected  to  advertise  the  loss,  his  negli- 
gence counterbalanced  that  of  the  holder,  and  the  maxim  was 
applied,  potior  est  cotiditio  possedentis}  But  the  law  on 
this  subject  is  now  entirely  changed.  Even  gross  negligence, 
unless  accompanied  with  fraud  or  actual  notice,  does  not 
vitiate  the  holder's  title.^  And  advertisement  of  the  loss  by 
the  owner  is  not  necessary  in  any  case  to  his  recovery  and 
prior  claim  against  any  party  who  has  taken  or  paid  the  in- 
strument (except  to  a  bona  fide  holder  without  notice)  with 
actual  notice  of  the  loss.^  In  short,  the  question  of  the 
actual  holder's  paramount  right  against  the  world  is  narrowed 
now  to  the  single  inquiry  as  to  his  bona  fides} 

§  1464.  Loss  of  instrument  no  excuse  for  want  of  de- 
mand, protest,  or  notice. — The  loss  of  a  bill  or  note  is  no 
excuse  for  want  of  a  demand,  protest,  or  notice,  because  it 
does  not  change  the  contract  of  the  parties,  and  the  drawer 
and  indorsers  will  be  at  once  discharged  if  there  be  failure 
in  respect  of  either  the  demand,  protest,  or  notice.^  This 
rule  applies  whether  the  bill  has  been  accepted  or  not  ;  for 
the  loss  of  the  instrument  does  not  relax  the  duty  of  the 
holder  to  make  the  demand  for  acceptance  within  due  season.® 
And  it  is  well  settled  that  demand,  protest,  and  notice  upon 

'  Snow  V.  Peacock,  3  Bing.,  411  (11  E.  C.  L.  R.)  ;  see  Strange  v.  Wigney,  6 
Bing.,  677  (19  E.  C.  L.  R.)  ;  Beckwith  v.  Corrall,  11  J.  B.  Moore,  335  ;  Byles  on 
Bills  (Sharswood's  ed.)  [*36i],  538  ;  Chitty  on  Bills  (13  Am.  ed.)  [*253],  289. 

"^  See  chapter  xxiv,  §§  774  et  seq.,  vol.  i. 

'  Mathews  v.  Poythress,  4  Ga.,  287  ;  Snow  v.  Peacock,  supra.  In  Louisiana 
the  code  requires  advertisement  of  loss  as  a  prerequisite  to  recovery  upon  a  lost 
draft  or  note. 

*  See  chapter  XXI v,  §§  774  et  seq.,  vol.  i. 

'^w/r,  §1173;  Thackray  V.  Blackett,  3  Camp.,  164;  Blackie  v.  Pidding,  6 
M.  G.  &  S.,  196  ;  Chitty  on  Bills  (13  Am.  ed.)  [*262,  263],  299  ;  Story  on  Bills, 
§  348 ;  Edwards  on  Bills,  304,  305  ;  but  see  Abom  v.  Bosworth,  i  R.  I.,  401,  as 
to  delay. 

*  See  ante,  §§  1 173,  1174. 


470  LOST  AND  DESTROYED  BILLS  AND  NOTES.  §   1 465. 

a  copy  where  the  original  is  lost  is  as  effectual  as  if  made 
upon  the  original  itself.^  But  it  does  not  seem  absolutely 
requisite  that  any  copy  should  be  used.^ 

§  1465.  It  is  proper,  as  suggested  by  Marius,  to  accom- 
pany the  protest  of  a  lost  bill  with  an  offer  of  security 
against  its  appearance  ;  and  he  expresses  the  opinion  that  if 
the  acceptor  refuses  payment  on  such  an  offer,  he  will  be 
liable  for  all  damages,  including  re-exchange  and  charges.^ 
But  the  better  opinion  is,  that  the  drawee,  or  acceptor,  has 
a  right  to  insist  on  the  production  of  the  bill,  or  legal  proof 
of  its  loss  in  an  action  with  indemnity  furnished  under 
supervision  of  a  court  before  he  is  obliged  to  pay  if 

Neglect  to  offer  indemnity  to  the  maker  or  acceptor  on 
demand  of  payment  does  not  deprive  the  payee  of  his  right 
of  action,  but  it  will  prevent  him  from  recovering  costs, 
and  will  compel  him  to  bear  any  special  damages  resulting 
from  the  neglect  on  his  subsequent  suit.^ 

§  1466.  In  France  it  has  long  been  established  that  the 
arawer  and  indorsers  of  a  bill  shall  be  compellable  to  give 
the  holder  of  it  another  of  the  same  tenor,  in  case  the 
original  bill,  or  the  accepted  part,  has  been  lost.^  In  Eng- 
land, Mr.  Chitty  says  "  no  such  general  rule  prevails  in  the 
case  of  inland  bills."  There  is,  however,  a  proviso  in  the 
statute  of  9  and  lo  Will.  III.,  c.  17,  sec.  3,  by  which  it  is 
enacted  "that  in  case  any  such  inland  bill  shall  happen  to 
be  lost  or  miscarried  within  the  time  limited  for  the  pay- 
ment of  the  same,  then  the  drawer  of  the  said  bill  is,  and 
shall  be,  obliged  to  give  another  bill  of  the  same  tenor  with 
that   first  given  ;  the  person  to  whom  they  are  delivered 


1  Hinsdale  v.  Miles.  5  Conn.,  331  ;    Dehers  v.  Harriott,  i  Show,  163  ;  Thomson 
on  Bills  (Wilson's  ed.),  204. 

2  2  Parsons  N.  &  B.,  261.  ^  Marius^  go, 
"Thomson  on  Bills  (Wilson's  ed.),  204;    Chitty  (13  Am.  ed.)   [*263],  299; 

2  Parsons  N.  &  B.,  262,  note  /. 

^Farmers'  Bank  v.  Reynolds,  4  Rand,  186;  Commercial  Bank  v.  Benedict, 
18  B.  Mon.,  307 ;  Allen  v.  State  Bank,  i  Dev.  &  B.  Eq.,  3. 

*  Chitty  on  Bills  (13  Am.  ed.)  [*263],  299. 


§  1468.       DUTIES  OF  THE  LOSER,  FINDER,  AND  HOLDER.         47 1 

giving  security,  if  demanded,  to  the  drawer  to  indemnify 
him  against  all  persons  whatsoever,  in  case  the  said  bills  so 
alleged  to  be  lost  or  miscarried  shall  be  found  again." ' 
And  the  same  author  adds  :^  "It  should  seem,  that  from 
the  word  '  such '  the  statute  does  not  extend  to  all  bills  of 
exchange,  but  only  to  the  particular  bills  therein  mentioned, 
namely,  such  as  are  expressed  to  be  for  value  received,  and 
payable  after  date  ;^  but  it  has  been  observed  that  the  equity 
of  the  statute  would  comprehend  indorsements  also,  and 
that  the  3  &  4  Anne,  c.  9,  which  gives  the  like  remedies 
upon  notes  as  were  then  in  use  on  inland  bills,  would  ex- 
tend the  statute  of  William  to  notes."*  It  is  stated  in 
Byles  on  Bills  that  the  above-quoted  provision  "  is  not  pe- 
culiar to  the  law  of  England,  but  agreeable  to  the  mercan- 
tile law  of  other  countries."^ 

§  1467.  "  In  case  of  a  foreign  bill  drawn  in  sets,  if  one 
part  be  lost  by  the  drawee,  or  be  by  his  mistake  given  to  a 
wrong  person,  or  otherwise  disposed  of,  so  that  the  holder 
can  not  have  a  return  of  the  bill,  either  accepted  or  not  ac- 
cepted, it  is  said  that  the  drawee  is  bound  to  give  to  the 
holder,  or  to  his  order,  a  promissory  note  for  payment  of 
the  amount  of  the  bill  on  the  day  it  becomes  due,  on  the 
delivery  of  the  second  part,  if  it  arrive  in  time  ;  if  not, 
upon  the  note  ;  and  that  if  the  acceptor  refuse  to  give  the 
note,  the  holder  should  immediately  protest  for  non-ac- 
ceptance, and,  when  due,  demand  the  money,  though  he 
have  neither  note  nor  bill ;  and  that  if  payment  be  refused, 
a  protest  must  be  regularly  made  for  non-payment."  * 

§  1468.  The  finder  acqui7'es  no  title  to  a  lost  bill  or 
note,  and  the  owner,  upon  identifying  it,  and  tracing  it  to 

'  Chitty  [*263],  300.  "  Ibid. 

^  Sedqucere  (he  says) ;  see  Walmsley  v.  Child,  i  Ves.,  Sen.,  346,  347  ;  Leftly  v. 
Mills,  4  T.  R.,  170;  2  Camp.,  215. 

*  Powell  V.  Monnier,  I  Atk.,  613;  Walmsley  v.  Child,  i  Ves.,  Sen,,  346;  2 
Camp.,  215. 

'  Byles  (Sharswood's  ed.)  [*366],  544. 

'  Edwards  on  Bills,  304,  citing  Beawes,  188. 


472  LOST  AND  DESTROYED  BILLS  AND  NOTES.         §  1468^. 

his  possession,  may  maintain  trover  against  him.'^  And  he 
may  also  maintain  an  action  for  money  had  and  received 
for  his  use,  if  the  finder  has  received  payment  of  the  bill 
or  note.^  The  finder  has  no  lien  on  the  bill  or  note  for  his 
expenses  on  account  of  finding  the  same.  But  in  action 
upon  lost  bills  such  expenses  would  probably  be  set  off 
against  the  owner's  claim.^  When  there  is  no  question  as 
to  such  expenses,  he  is  liable  for  the  full  value  of  the  bill 
or  note.^ 

§  1468^.  A  bailee  who  tortious ly  converts  a  negotiable 
instrument  may  be  sued  either  in  trover,  or  for  money  had 
and  received.^  And  trover  lies  also  against  the  maker  or 
drawee  who  wrongfully  seizes  or  detains  the  note  or  bill.*' 
The  measure  of  damages  when  the  action  is  for  the  conver- 
sion of  the  negotiable  note  of  a  third  person,  is  the  amount 
of  such  note  and  interest,  unless  it  is  of  less  value  by  rea- 
son of  payment  of  the  same,  insolvency  of  the  maker,  or 
some  other  lawful  defence  which  legitimately  impairs  or 
diminishes  from  its  value,  or  affects  its  validity.'^  If  the 
maker  wrongfully  destroy  the  note,  he  may  be  sued  for  con- 
version, and  the  payee  may  recover  its  face  value,  with  in- 
terest, as  damages,  notwithstanding  it  be  barred  by  the 
statute  of  limitations.*' 

^  1468(5.  A  thief,  of  course,  acquires  no  title  to  a  nego- 
tiable security  which  he  steals,  nor  can  any  one  else  who 
has  notice  of  the  theft ;  and  the  owner  may  follow  the  se- 

'  Lucas  V.  Haynes,  i  Salk.,  130 ;  Adkin  v.  Blake,  2  J.  J.  Marsh,  40;  Byles  on 
Bills  (Sharswood's  ed.)  [*365],  543. 

2  Down  V.  Hailing,  4  B.  &  C,  330.  '  2  Parsons  N.  &  B.,  264,  265. 

*  Holiday  v.  Sigil,  2  Car.  &  P.,  176.  As  to  rights  of  finder  of  bank  note,  see 
vol.  2,  580. 

=-  Bleaden  v.  Charles,  7  Bing.,  246 ;  Marston  v.  Allen,  8  M.  &  W.,  494 ;  Gar- 
lock  V.  Geortner,  7  Wend.,  198. 

'  Knight  V.  Legh,  4  Bing.,  589 ;  De  la  Chaumette  v.  Bank  of  England,  9  B.  & 
C  208;  Reynolds  v.  French,  8  Vt.,  85  ;  Lamb  v.  Moberly,  3  T.  B.  Monroe,  179. 

^  Thayer  v.  Manley,  73  N.  Y.,  308 ;  Sedgwick  on  Damages,  2d  ed.,  488  ;  Mer- 
chants' and  P.  N.  B.' v.  Trustees,  62  Ga.,  271. 

"*  Outhouse  V.  Outhouse,  20  N.  Y.  S.  C.  (13  Hun),  130. 


^  14.70.       DUTIES  OF  THE  LOSER,  FINDER,  AND  HOLDER.         473 

curity  itself,  or  its  proceeds  so  long  as  they  or  their  substi- 
tute can  be  identified  or  distinguished,  in  the  hands  of  the 
thief  or  any  assignee  with  notice.^ 

§  1469.  How  title  may  be  acquired  fi'om  thief  or  finder. 
— Although  the  robber,  or  finder  of  a  negotiable  instru- 
ment can  acquire  no  title  against  the  real  owner,  still  if  it 
be  indorsed  in  blank,  or  payable  or  indorsed  to  bearer,  a 
third  party  acquiring  it  from  the  robber,  or  finder,  bona 
fide,  for  a  valuable  consideration,  and  before  (but  not  so,  if 
after)  ^  maturity,  without  notice  of  the  loss,  may  retain  it 
as  against  the  true  owner,  upon  whom  the  loss  falls,  and 
enforce  payment  by  any  party  liable  thereon ;  upon  the 
principle  that  whenever  one  of  two  innocent  persons  must 
suffer  by  the  act  of  a  third,  he  who  has  enabled  such  third 
person  to  occasion  the  loss  must  sustain  it;^  And  it  is  now 
settled  in  England  and  in  the  United  States  that  even  gross 
negligence  on  the  part  of  such  bona  fide 'Sxoyiditx  in  receiving 
the  instrument  does  not  impair  his  title,  nothing  short  of 
mala  fides  impeaching  it.'*  Not  only  does  the  77iala  fide 
transferee  or  holder  of  a  negotiable  instrument  acquire  no 
right  to  enforce  payment,  but  the  loser  may  at  once  hold 
him  liable  in  an  action  of  trover  or  assumpsit,  or  for  money 
had  and  received.^  But  under  a  forged  indorsement  even 
a  bo7ia  fide  holder  without  notice  acquires  no  title.^ 

§  1470.  Presumptions  as  to  bona  fide  ownership  of  lost 
bills  and  notes. — Some  doctrines  of  evidence  remain  to 
be  stated.  The  legal  presumption  is  that  the  holder 
of  a  note  is  not  a  finder  or  thief,  but  a  bojia  fide  transferee 

'  Newton  v.  Porter,  69  N.  Y.,  133.  '  Stt  post,  §§  1505,  1506. 

'  Murray  v.  Lardner,  2  Wall.,  710;  chapter  xxiv,  §  776,  vol.  i  ;  Chitty  on 
Bills  [*254],  290.     See  Garvin  v.  Wiswell,  83  111.,  216. 

■•  See  chapter  xxiv,  on  Rights  of  Purchaser  of  Negotiable  Instruments, 
§§  775  et  seq.,  vol.  )  ;  Story  on  Notes,  §  382;  Story  on  Bills,  §  416;  Chitty  (13 
Am.  ed.)  [*254,  255],  291-294. 

'  Clarke  v.  Shea,  i  Cowp.,  197  ;  Smith  v.  Braine,  16  Q.  B.,  244;  Mafon  v. 
Waite,  17  Mass.,  560  ;  Henderson  v.  Irby,  i  Speers,  43. 

'  Colsen  V.  Arnot,  57  N.  Y.,  253,  vol.  i,  §  677  ;  Graves  v.  American  Exchange 
Bank,  17  N.  Y.,  205. 


474  LOST  AND  DESTROYED  BILLS  AND  NOTES.  §   147 L 

for  value.^  When,  however,  the  loss  by  the  original  owner, 
or  the  theft  from  him,  is  proved,  the  burden  of  proof  shifts, 
and  the  holder  must  show  that  he  acquired  it  bona  fide  for 
value,^  and  before  maturity,  or  from  some,  one  who  had 
a  perfect  title.^ 

§  1 47 1.  The  origmal  existence,  genuineness,  identity, 
and  loss  (9r  destruction  of  the  instrument  must  be  proved, 
if  disputed  in  a  suit  against  the  maker,  otherwise  a  copy 
will  not  be  received  in  evidence/  And  if  evidence  of  de- 
struction is  not  conclusive,  the  plaintiff  must  generally  show 
that  diligent  search  has  been  made  for  it  in  those  places 
where  if  existing  it  would  be  most  likely  to  be  found. ^  The 
loss  where  alleged  can  seldom  be  proved  by  "  direct  and 
positive  evidence,"  and  therefore  must,  in  almost  all  cases, 
be  made  out  by  circumstances.^  "  As  it  is  generally  occa- 
sioned by  negligence,  it  is  seldom  capable  of  being  given."* 
The  courts  will  be  less  exacting  as  to  the  measure  of  proof 
of  loss  or  destruction,  where  the  maker  is  safe  against  any 
future  claim  of  a  bojia fide  transferee;^  and  more  exacting 
where  the  circumstances  are  suspicious  as  against  the  plain- 
tiff's claim,  or  the  maker  is  not  so  protected  and  safe. 
Where  the  note  is  not  negotiable  the  proof  need  not  be  so 
strong  as  where  it  is  negotiable.^  It  is  not  necessary  for  a 
creditor  to  show  that  a  debt  evidenced  by  a  lost  paper  is 
not  paid.^° 

'  King-  V.  Milsom,  2  Camp.,  5 ;  ante,  §  812,  vol.  i. 

°  See  chapter  XXIV,  on  Rights  of  Bona  Fide  Holder  or  Purchaser,  sec.  vii, 
vol.  I,  §  815;  Union  N.  B.  v.  Barber,  9  N.  W.  Reporter,  890,  Iowa  S.  C,  Oct., 
1881. 

^  Hinckley  v.  Merchants'  Bank,  131  Mass.,  — .  See  Hinckley  v.  Union  Pacific 
R.R.,  129  Mass.,  52.     See  ante,  §  1461  and  note. 

*  Farmers'  Bank  v.  Reynolds,  4  Rand,  186;  Palmer  v.  Logan,  3  Scam.,  56; 
Grimes  v.  Talbot,  i  A.  K.  Marsh,  205  ;  Jackson  v.  Jackson,  6  Dana,  257. 

^  Palmer  v.  Logan,  3  Scam.,  56;  Herndon  v.  Givens,  16  Ala.,  261  ;  Viles  v. 
Moulton,  II  Vt.,  470;  Foster  v.  Mackay,  7  Mete,  531. 

°  Holiday  v.  Sigil,  2  Car.  &  P.,  176  ;  Greenstreet  v.  Carr,  i  Camp.,  251  ;  Lewis 
V.  Petayvin,  16  Mart.,  4. 

'  Walmsley  v.  Child,  I  Vesey,  Sr.,  341.  '  Swift  v.  Stevens,  8  Conn.,  431. 

'  Nagel  V.  Mignot,  8  Mart.  (La.\  488.    '"  Bell  v.  Young,  i  Grant's  Cases,  175. 


§   1473-       DUTIES  OF  THE  LOSER,  FINDER,  AND  HOLDER.        475 

§  1472.  The  plaintiff's  affidavit  ^.ddrcsstd  to  the  court 
is  admissible  to  prove  the  loss  of  a  bill  or  note,  and  to  lay 
the  foundation  for  secondary  evidence  of  its  contents.  And 
the  question  of  loss  or  destruction  is  in  general  for  the 
court,  and  not  the  jury.  In  many  of  the  States  there  are 
statutory  regulations  on  this  subject,  and  to  them  and  the 
adjudicated  cases  interpreting  them,  reference  should  be 
made  in  any  particular  case.  A  duplicate  protest  may  be 
offered  in  evidence,  without  producing  the  original  bill, 
when  it  is  proved  to  have  been  lost  after  protest.^  And  so 
may  a  duplicate  notarial  copy  of  the  bill  when  the  loss  has 
been  proved.^  In  respect  to  a  note,  it  has  been  held  that 
the  notarial  copy  is  not  necessary  as  primary  evidence  of  its 
contents  when  lost.^  The  copy  of  a  lost  bill  or  note  sued  on 
must  be  a  full  copy  as  to  all  parties.*  It  will  not  be  pre- 
sumed, but  must  be  affirmatively  shown,  that  the  lost  in- 
strument was  negotiable.^  Neither  an  acknowledgment  of 
the  debt,  or  a  promise  to  pay  it,  dispenses  with  necessity  of 
producing  the  instrument,  or  accounting  legally  for  its 
absence  ;  for  they  import  no  more  than  the  instrument 
itself,  that  is,  an  obligation  to  pay  upon  proper  voucher  or 
indemnity.® 

§  1473.  In  the  case  of  a  bill  or  note  lost  after  stczt 
bro2ight  at  law,  the  court  is  not  ousted  of  its  jurisdiction,'' 
but  the  plaintiff  may  recover  as  in  other  cases  of  lost  notes.^ 

'  Usher  v.  Gaither,  2  Harris  &  McH.,  457. 

''Wright  V.  Hancock,  3  Munf.,  521  ;  2  Parsons  N.  &  B.,  307. 

^Renner  v.  Bank  of  Columbia,  9  Wheat.,  581. 

■*  Bond  V.  Whitfield,  32  Ga.,  215. 

'Wright  V.  Wright,  54  N.  Y.,  437  ;  Lazell  v.  Lazell,  12  Vt.,  443  ;  Hough  v. 
Barton,  20  Vt.,  455  ;  Youngling  v.  Kohlkass,  18  Md.,  148  ;  McNair  v.  Gilbert, 
3  Wend.,  344;  Pintard  v.  Tackington,  10  Johns,  104;  Edwards,  296,  302. 

"  Vanauken  v.  Hornbeck,  2  Green  (N.  J.),  178  ;  Story  on  Notes,  §  450. 

'  Bliss  V.  Covington,  9  Dana,  265  ;  2  Parsons  N.  &  B.,  309 ;  contra,  Chitty  on 
Bills  (13  Am.  ed.)  [*266],  303. 

*  Abbott  V.  Striblem,  6  Iowa,  191  ;  Jones  v.  Fales,  5  Mass.,  loi ;  Jacks  v. 
Darrin,  3  E.  D.  Smith,  548  ;  Weston  v.  Hight,  17  Me.,  287;  Renner  v.  Bank  of 
Columbia,  9  Wheat.,  581  ;  Brown  v.  Messiter,  3  Maule  «S:  S.,  281  ;  Clarke  v. 
Quince,  3  Dowl.,  26 ;  2  Parsons  N.  &  B.,  309. 


47^  LOST  AND  DESTROYED  BILLS  AND  NOTES.         §    1474- 

It  will  not  be  necessary  for  the  plaintiff  to  offer  indemnity 
against  future  liability,  but  the  court,  if  asked,  will  stay  ex- 
ecution until  indemnity  is  furnished.^  In  the  case  of  a  note 
which  had  been  lost,  and  a  copy  sued  on — but  was  found 
before  the  trial,  and  there  produced — it  was  held  that  the 
suit  at  law  could  be  sustained,  though  no  indemnity  was 
offered.^ 

Where  a  lost  note  was  found  before  trial  of  an  action  at 
law,  and  it  appeared  that  it  was  lost  at  the  time  of  demand 
and  notice,  but  this  was  not  known  to  any  of  the  parties, 
and  no  indemnity  was  tendered,  it  was  held  that  recovery 
could  be  had  against  the  maker  and  indorser.^ 

§  1474.  When  a  debtor  remits  his  creditor  a  bill  or  note 
by  post  or  otherwise,  of  his  own  motion,  and  it  be  lost  or 
stolen,  it  is  his  own  risk  and  loss  ;  but  if  done  by  the  cred- 
itor's direction,  the  loss  falls  on  him.^ 


SECTION    II. 

SUIT    AGAINST    PARTIES    TO   A   LOST    NEGOTIABLE   INSTRUMENT. 

§  1475.  The  owner  who  has  lost  a  negotiable  instru- 
ment, and  has  duly  fixed  the  liability  of  the  parties 
thereto  by  regular  demand,  protest,  and  notice,  where 
they  are  necessary,  may  undoubtedly  enforce  payment 
by  legal  proceedings  against  such  parties.  But  the  au- 
thorities are  not  in  harmony  as  to  the  proper  form  of 
procedure.  In  England,  where  the  Hne  of  demarcation  be- 
tween legal  and  equitable  jurisdiction  is  well  defined,  and 
strictly  observed,  it  is  well  settled  that  the  remedy  upon  a 
lost  negotiable  instrument  can  be  sought  only  in  a  court  of 

'  Bisbing  v.  Graham,  14  Penn.  St.,  14. 

^  Smith  V.  Rockwell,  2  Hill,  482,  Nelson,  C.  J. 

'Gilbert  v.  Dennis,  3  Mete,  495. 

*  Warwick  v.  Noakes,  Peake  N.  P.,  67 ;  see  anie,  §  287,  vol.  I. 


§  1476.       SUIT  AGAINST  PARTIES  TO  LOST  INSTRUMENT.  477 

equity;  which  alone  can  require  the  plaintiff  to  secure 
the  defendants  by  execution  of  sufficient  indemnity,  and 
administer  fully  the  equities  between  the  parties.  If 
the  instrument  be  payable  to  bearer,  or  indorsed  in  blank, 
it  is  obvious  that  it  might  reach  the  hands  of  a  bona 
fide  holder  for  value,  without  notice  of  the  loss  ;  and  that 
if  the  parties  liable  were  compellable  to  pay  the  amount 
thereof  to  the  owner  in  a  suit  at  law,  without  indemnity, 
such  parties  might,  without  the  slightest  negligence  on 
their  part,  be  forced  to  pay  it  a  second  time  to  such  botia 
fide  holder.  The  courts  of  law  which  proceed  in  accord- 
ance with  established  and  unbending  forms  do  not  possess 
the  elastic  machinery  necessary  to  require  the  owner  to 
make  suitable  indemnity  against  the  loss  which  might  thus 
occur,  or  the  lesser  loss  produced  by  defending  a  suit 
brought  by  a  party  in  actual  possession  of  the  instrument. 
And  therefore  such  cases  are  remitted  to  the  exclusive 
cognizance  of  courts  of  equity.^ 

§  1476.  It  is  said  also,  that  in  strict  law  the  defendant  is 
entitled  to  the  instrument  on  payment  thereof,  as  his 
voucher  of  discharge,  as  he  only  covenanted  to  pay  its 
value  on  its  presentment.*  And  it  is  intimated  to  be  an 
exercise  of  equitable  jurisdiction  to  permit  a  recovery 
without  its  production.  But  the  inability  of  courts  of  law 
to  provide  indemnity  is  the  main  ground  of  requiring  a 
resort  to  equity.^      When  suit  is  brought  against  the  in- 


'  Hansard  v,  Robinson,  7  B.  &  C,  90;  Wain  v.  Bailey,  10  Ad.  &  El.,  616; 
Price  V.  Price,  16  M.  &  W.,  232 ;  Pierson  v.  Hutchinson,  2  Camp..  211;  Uavis  v. 
Dodd,  4  Taunt.,  602  ;  Mossop  v.  Eadon,  16  Ves.,  430;  Powell  v.  Roach,  6  Esp., 
76;  ex  parte  Greenway,  6  Ves.,  Jr.,  812;  Mayor  v.  Johnson,  3  Camp.,  324; 
Crowe  V.  Clay,  9  Exch.,  604;  Rolt  v.  Watson,  12  J.  B.  Moore,  510;  Powell  v. 
Roach,  6  Esp.,  76;  Wright  v.  Maidstone,  i  Kay  &  J.,  701  ;  Kirby  v.  Sesson,  2 
Wend.,  551  ;  Lazell  v.  Lazell,  12  Vt.,  443;  Commack  v.  Conrad,  30  La.  An,, 
503  (when  note  lost  before  maturity);  2  Parsons  N.  &  B.,  288-9.  296;  Story  on 
Notes,  §§  445-450;  Story  on  Bills,  §  448;  Chitly  on  Bills  (13  Am.  ed.)  [*265], 
301  ;  (Brown  v.  Messiter,  3  Maule  &  S.,  281  ;  Glover  v.  Thompson,  Ry,  &  M., 
403 ;  and  Glynn  v.  Bank  of  England,  2  Ves.,  Sr.,  38,  are  overruled.) 

'  Hansard  v.  Robinson,  7  B.  &  C,  90 ;  Hilder  v.  Seelye,  8  Barb. ,  408. 

*  2  Pars.  N.  &  B.,  289 ;  ex  parte  Greenway,  6  Ves.,  Jr.,  812. 


47^  LOST  AND  DESTROYED  BILLS  AND  NOTES.         §   147/. 

dorser  of  a  lost  bill  or  note,  the  reasons  for  requiring  a 
resort  to  equity  apply  with  peculiar  force.^ 

§  1477.  Whether  suit  at  law  is  maintainable  on  a  nego- 
tiable instrument  lost  after  maturity. — A  distinction  was 
attempted  to  be  established  at  one  time,  in  England,  be- 
tween the  case  of  loss  of  the  bill  or  note  before  it  was  due, 
and  the  loss  of  it  after  it  had  become  overdue  ;  it  being 
contended  that  in  the  latter  case,  as  the  bona  fide  holder 
could  only  acquire  it  subject  to  all  the  equities  between 
antecedent  parties,  the  very  circumstance  of  its  staleness 
being  constructive  notice  of  defect  of  title,  the  owner 
should  be  entertained  in  a  suit  at  law,  without  giving  in- 
demnity. But  the  contrary  doctrine  is  well  settled.  For, 
although  a  bill  or  note  ceases  to  be  negotiable,  in  the  most 
enlarged  sense  of  that  term,  at  its  maturity,  it  still  passes 
from  hand  to  hand  by  indorsement  or  delivery ;  the  actual 
holder  is  always  presumed  to  have  acquired  it  before  ma- 
turity ;  a  court  of  law  can  not  judge  whether  an  indemnity 
is,  or  is  not,  sufficient ;  and,  although  the  defendant  may 
have  a  good  defence  against  the  subsequent  holder,  he  may 
be  put  to  risk,  trouble,  and  expense  in  establishing  it.  And 
tlie  courts  of  equity  therefore  maintain  exclusive  jurisdic- 
tion, even  when  the  instrument  has  been  lost  overdue.* 

§  1478.  In  the  United  States  the  decisions  of  the  courts 
vary.     In  Massachusetts  it  has  been  held  that  an  action  can 

'  In  Story  on  Promissory  Notes,  where  the  English  doctrine  is  approved  (see 
§  448),  it  is  said  :  "When  we  come  to  the  case  of  the  indorser,  who  is  called 
upon  to  pay  the  note,  in  default  of  payment  by  the  maker,  it  will  be  difficult  to 
find  any  solid  reason  upon  which  the  holder  can  be  entitled  to  recover  against 
him,  without  the  note  being  produced,  upon  any  mere  parol  proof  of  the  loss  of 
it ;  since  the  indorser  may  or  must  thereby  be  put  to  great  embarrassment  in 
making  out  his  own  title  against  the  maker,  or  against  other  parties,  liable  to 
him,  without  the  production  of  the  note.  What  right  can  the  holder  have  to 
shift  upon  him  the  burden  of  proving  the  loss  of  the  note  ?  Or  what  adequate 
means  can  he  have  of  preserving  and  commanding  all  the  proof  for  future  use, 
in  case  of  future  litigation  ?  The  English  doctrine  must,  under  such  circum- 
stances, apply  to  the  indorser  with  double  propriety  and  force."  Tuttle  v. 
Standish,  4  Allen,  481. 

"Hansard  v.  Robinson,  7  Barn.  &  C,  90;  Story  on  Notes,  §  450;  Story  on 
Bills,  §  307  ;  Chitty  on  Bills  (13  Am.  ed.)  [*266],  303  ;  Byles  on  Bills  (Shars- 
wood's  ed.)  [*363],  541. 


§  I47S-       SUIT  AGAINST  PARTIES  TO  LOST  INSTRUMENT.         479 

be  maintained  at  law  against  the  parties  to  a  negotiable  note 
lost  before  maturity,  the  court  considering  the  idea  that  a 
court  of  law  could  not  order  or  judge  of  the  sufficiency  of 
an  indemnity  "  rather  ideal  than  solid";  and  that  the  objec- 
tion that  the  action  at  law  would  not  lie,  because  protest  of 
the  instrument  could  not  be  made,  as  equally  applicable  in  a 
court  of  equity.^  There  is  undoubtedly  great  force  in  the 
reasoning  of  this  decision  ;  but,  we  think,  the  weight  of  au- 
thority and  reason  are  both  against  it.  And  in  those  States 
where  the  distinction  between  law  and  equity  is  well  pre- 
served, the  law  may  be  regarded  as  settled  to  the  contrary, 
in  accordance  with  the  English  precedents.*  In  some  of 
the  States  the  distinction  between  negotiable  instruments 
lost  before,  and  those  lost  after  maturity,  is  recognized ; 
and  where  lost  after  maturity,  the  right  to  an  action 
at  law,  without  making  an  indemnity,  is  maintained.^ 
But  the  better  opinion,  sustained  by  high  authority,  is  that 
the  distinction  is  not  well  taken,  and  that  equity  must  be 
resorted  to.'*  If  the  bill  or  note  be  indorsed  specially  to  a 
particular  person,  its  negotiation  is  restricted,  as  may  be 
seen  in  another  part  of  this  work  •,^  and  in  that  case  no  in- 
demnity is  needful  or  required  in  the  event  of  its  loss.® 

'  Fales  V.  Russell,  16  Pick.,  315  ;  Hinckley  v.  Union  Pacific  R.R.,  129  Mass., 
52.  To  same  effect,  see  Union  Bank  v.  Warren,  4  Sneed,  167  ;  Meeker  v.  Jack- 
son, 3  Yeat.,  442  ;  Bullet  v.  Bank  of  Pennsylvania,  2  Wash.  C.  C,  172;  Ander- 
son V.  Robson,  2  Bay,  495  ;  Bridgeford  v.  Masonville  Co.,  34  Conn.,  546  ;  Nagel 
V.  Mignot,  7  Mart.  (La.),  657 ;  8  Id.,  488  ;  Brent  v.  Ervin,  3  Martin  (La.)  N.  S., 
303;  Lewis  V.  Peta}^in,  16  Id.,  4;  Bean  v.  Keen,  7  Blackf,  152  ;  Welton  v.  Ad- 
ams, 4  Cal.,  37  ;  Robinson  v.  Bank  of  Darien,  18  Ga.,  65,  iii  ;  Commercial 
Bank  v.  Benedict,  18  B.  Men.,  307  ;  Freeman  v.  Boynton,  7  Mass.,  483  ;  Page  v. 
Page,  15  Pick.,  368  ;  Willis  v.  Cresey,  17  Me.,  9. 

*  Moses  V.  Trice,  21  Grat.,  556  ;  Rowley  v.  Ball,  3  Cow.,  303  (1824)  ;  Posey  v. 
Decatur  Bank,  12  Ala.,  802  ;  Morgan  v.  Reintzel,  7  Cranch,  273  ;  Hinsdale  v. 
Bank  of  Orange,  6  Wend.,  378  ;  Thayer  v.  King,  1 5  Ohio,  242  ;  Swift  v.  Stevens, 
8  Conn.,  431  ;  Aborn  v.  Bosworth,  i  R.  L,  401  ;  Edwards  v.  M'Kee,  i  Mo.,  123 ; 
Wofford  v.  Board  of  Police,  44  Miss.,  579;  Story  on  Notes,  §  448;  Story  on 
Bills,  §  348  ;  Edwards  on  Bills,  295  ;  2  Parsons  N.  &  B.,  297,  298. 

'Thayer  v.  King,  15  Ohio,  242 ;  Smith  v.  Walker,  i  Smed.  &  M.,  432  ;  Jones 
V.  Fales,  5  Mass.,  loi  ;  Chaudron  v.  Hunt,  3  Stew.,  31  ;  Brent  v.  Ervin,  7  Mart. 
(La.),  518. 

*  Moses  V.  Trice,  21  Grat.,  556;  Rowley  v.  Ball,  3  Cow.,  303;  Chewning  v. 
Singleton,  2  Hill,  371  ;  Lazell  v.  Lazell,  12  Vt.,  443;  Hopkins  v.  Adams,  20  Vt., 
407  ;  Story  on  Notes,  §§  446,  450 ;  Edwards  on  Bills,  297  ;  see  an/e,  §  1477. 

*  See  §§  692,  698.  •  Dudman  v.  Earl,  49  Iowa,  37. 


480  LOST  AND  DESTROYED  BILLS  AND  NOTES.  §   I479. 

§  1479.  The  like  rule,  that  an  action  at  law  is  not  main- 
tainable, has  been  applied  in  England,  where  bills  and  notes, 
and  bank  notes  (which  are  more  frequently  transmitted  in 
halves),  are  divided  and  transmitted  by  post,  and  one  half 
is  lost  and  the  other  half  arrives  in  safety.  In  such  cases  it 
has  been  considered  that  the  holder  of  one  half  can  not  re- 
cover at  law,  because  the  other  half  may  have  passed  into 
the  hands  of  another  bona  fide  holder,^  But  the  contrary 
view  seems  more  reasonable,  because  the  party  who  takes 
a  half  instrument  does  not  acquire  the  whole,  but  only  a  part, 
which  imposes  inquiry  upon  him  and  opens  all  equitable 
defences  ;  and  it  has  prevailed  in  the  United  States,  the 
severed  note  being  placed  on  the  same  footing  as  one  de- 
stroyed.^ 

Notwithstanding  these  views,  equity  is  generally  ad- 
mitted to  have  jurisdiction  of  lost  instruments,  even  where 
there  is  concurrent  jurisdiction  at  law.^ 

§  1480.  Tender  of  indemnity  before  payment  ca7i  be  re- 
quired.— The  parties  liable  upon  a  bill  or  note  are  entitled 
to  its  production  and  surrender  before  payment ;  but,  as  this 
is  physically  impossible  when  it  has  been  lost  the  owner 
should,  and  must,  tender  a  sufficient  indemnity  in  some  form 
against  any  future  claim,  by  a  finder  or  holder,  upon  the  lost 
instrument,'^    This  indemnity  is  not,  in  the  nature  of  things, 

'Mayor  V.  Johnson,  3  Camp.,  324;  Byles  on  Bills  (Sharswood's  ed.),  [*365], 
543  ;  I  Parsons  N.  &  B.,  231  ;  Farmers'  Bank  v.  Reynolds,  4  Rand,  168  ;  Bank 
of  Va.  V,  Ward,  6  Miinf.,  169  ;  Exchange  Bank  v.  Morrall,  16  W.  Va.,  551 
(semble)  ;  Story  on  Bills,  §  44S ;  see  chapter  L,  on  Bank  Notes,  sec.  vi,  infra. 

"  Bank  of  U.  S.  v.  Sill,  5  Conn.,  106  ;  Hinsdale  v.  Bank  of  Orange,  6  Wend., 
378 ;  Martin  v.  Bank  of  U.  S.,  4  Wash.  C.  C,  253  ;  Bullett  v.  Bank  of  Pennsyl- 
vania, 2  Id.,  172;  Armat  v.  Union  Bank,  2  Cranch  C.  C,  180;  Allen  v.  State 
Bank,  i  Dev.  &  B.  Eq.,  i  ;  Bank  of  Va.  v.  Ward,  6  Alunf.,  169 ;  2  Parsons  N.  & 
B.,  312,  313;  Redfield  &  Bigelow's  Lead.  Cas.,  706  ;  Edwards,  307;  see  chap. 
L,  sec.  vi. 

'  Farmers'  Bank  v.  Reynolds,  4  Rand,  186 ;  Bank  of  Va.  v.  Ward,  6  Munf., 
166;  Allen  V.  State  Bank,  i  Dev.  &  B.  Eq.,  3;  Stout  v.  Ashton,  5  T.  B.  Monr., 
251;  Smith  v.  Walker,  i  Smed.  &  M.  Ch.,  432 ;  Irwin  v.  Planters'  Bank,  I 
Humph.,  145  ;  Jackson  v.  Jackson,  6  Dana,  257;  ^.r  ^ar/^  Greenway,  6  Ves.,  Jr., 
812  ;  Mossop  V.  Eadon,  16  Ves.,  433  ;  Davis  v.  Dodd,  4  Taunt.,  602. 

*  Fisher  v.  Carroll,  6  Ired.  Eq.,  485;  Meeker  v.  Jackson,  3  Yeat.,  442;  Free- 
man V.  Boj'nton,  7  Mass.,  483  ;  Donelson  v.  Taylor,  8  Pick.,  390  ;  Fales  v.  Rus- 
sell, 16  Pick.,  315  ;  Almy  v.  Reed,  10  Cush.,  421  ;  Exchange  Bank  v.  Morrall, 
16  W.  Va.,  546  ;  2  Parsons  N.  &  B.,  302  ;  Edwards  on  Bills,  304. 


§   1 48  I.       SUIT  AGAINST  PARTIES  TO  LOST  INSTRUMENT,         48  I 

as  adequate  a  protection  as  the  delivery  of  the  instrument  to 
the  payor,  but  it  approximates  it  as  nearly  as  practicable. 
And  it  should  be  offered  to  every  party  of  whom  payment 
is  demanded.  The  indorser  and  drawer  should  be  tendered 
indemnity  as  well  as  the  maker  and  acceptor  of  a  lost  note 
or  bill,  because  as  the  principals  are  not  bound  to  pay  with- 
out production  of  the  instrument,  or  indemnity  in  case  of 
loss,  for  that  very  reason  payment  ought  not  to  be  required 
of  the  drawer  or  indorser  till  the  proper  steps  have  been 
taken  to  secure  them  recourse  against  their  principals.  Be- 
sides, the  indorser's  and  drawer's  own  liability  upon  the 
paper  demands  indemnity  to  himself,  which  should  be  given 
without  delay,  so  that  he  may  be  in  a  situation  to  pay  the 
demand  at  any  time  after  notice,  and  look  to  the  maker  or 
acceptor.^ 

§  1 48 1.  Exceptions  as  to  indejnnity. — The  rule  requiring 
indemnity  is  applied  by  the  courts  of  law,  in  which  actions 
upon  lost  instruments  are  considered  maintainable,  as  well 
as  by  courts  of  equity.  But  there  are  some  cases  in  which 
the  defendant  can  run  no  risk,  and  in  which  the  plaintiff  is, 
therefore,  entertained  in  a  court  of  equity  or  law  without 
giving  a  bond  of  indemnity ;  that  is,  (i)  where  the  note  is 
not  negotiable  ;  ^  and  the  note  will  not  be  presumed  to  be 

'  Smith  V.  Rockwell,  2  Hill,  484  (1842),  Nelson,  C.  J. :  "Tender  of  indemnity 
should  be  made  to  both  maker  and  indorser  at  the  time  of  demand  and  notice, 
because,  as  the  former  is  not  bound  to  make  payment  without  the  production  of 
the  note,  or  indemnity  in  case  of  loss,  for  that  very  reason  payment  ought  not 
to  be  required  of  the  latter  till  the  proper  steps  have  been  taken  to  secure  his 
immediate  recourse  against  his  principal.  Besides,  the  indorser's  own  liability 
upon  the  paper  demands  indemnity  to  himself,  which  should  be  given  without 
delay,  so  that  he  may  be  in  a  situation  to  pay  the  demand  at  any  time  after  notice, 
and  look  to  the  maker.  Any  prejudice  he  might  suffer  by  reason  of  neglect  on 
the  part  of  the  holder  to  give  the  necessary  indemnity  in  either  case,  would,  no 
doubt,  afford  ground  for  refusing  to  enforce  payment  against  him  on  application 
to  a  court  of  equity  for  that  purpose.  The  holder,  therefore,  should  take  the 
necessary  steps  with  all  reasonable  diligence  to  secure  a  speedy  resort  to  that 
court  in  behalf  of  the  surety,  as  the  consequences  of  delay  would  justly  fall 
upon  the  holder,  so  far  as  the  indorser,  or  any  other  party  standing  in  that  rela- 
tion upon  the  paper,  is  concerned."  Wilder  v.  Seelye,  8  Barb.,  410  ;  Edwards 
on  Bills,  305. 

■  Clark  v.  Reed,  t?.  Smed.  &  M.,  554 ;  Lazell  v.  Lazell,  12  Vt.,  443  ;  2  Parsons 
N.  &  B.,  303 ;  V^right  v.  Wright,  54  N.  Y.,  437. 

Vol.  II.— -,i 


482  LOST  AND  DESTROYED  BILLS  AND  NOTES.  §   1481. 

negotiable  in  the  absence  of  proof  ;  ^  (2)  where  though  ne- 
gotiable, it  is  payable  to  order  and  unindorsed,  or  has  been 
specially  indorsed  ;  ^  (3)  where  the  instrument  is  clearly 
shown  to  have  been  destroyed  ;  ^  (4)  where  the  lost  instru- 
ment has  been  traced  to  the  defendant's  custody  ;■*  and  (5) 
when  it  is  shown  that  the  defendant  is  protected  by  the 
statute  of  Hmitations  against  future  liability.®  In  Louisiana 
it  has  been  held  that  no  indemnity  will  be  required  when  it 
has  been  proved  that  the  instrument  was  protested  and  re- 
turned to  the  plaintiff,  because  an  indorsee  would  palpably 
acquire  it  subject  to  all  precedent  equities.^  But  this  is 
against  the  better  doctrine  elsewhere  stated.^ 

Professor  Parsons,  after  stating  the  general  principles  of 
the  subject,  observes  :^  "In  short,  the  American  rule  upon 
indemnity  is  simply  that  if  it  can  be  shown  in  any  way  that 
the  defendant  may  be  wrongfully  injured  by  paying,  he  may 
require  security,  but  only  then.  It  has,  nevertheless,  in 
some  jurisdictions  been  thought  best,  upon  the  whole,  to 
require  indemnity  in  all  cases,  whether  the  note  be  alleged 
to  be  lost  or  destroyed,  notwithstanding  its  occasional  hard- 
ship and  inconvenience."^ 

In  Massachusetts,  where  the  maker  of  a  lost  negotiable 
note  may  be  sued  at  law,  indemnity  being  given,  an  indorser 
can  not  be  likewise  sued,  the  distinction  being  taken  that  a 
bond  of  indemnity  will  not  sufficiently  protect  him  as  it 
would  the  maker ;  and  the  plaintiff  is,  therefore,  required 
to  resort  to  equity.  ^° 

'  Wright  V.  Wright,  54  N.  Y.,  437. 

^  Sttpost,  §  1484,  note ;  Hopkins  v.  Adams,  20  Vt.,  407 ;  Lazell  v.  Lazell,  12 
Vt.,  443. 

'  See  post,  §  1482.  *  See  post,  §  1483.  "  See  post,  §  14S5. 

«  Brent  v.  Ervin,  15  Mart.  (La.),  303  ;  3  Mart.  N,  S.,  303  ;  7  Mart.,  518. 

'  St&ante,  §§  1477-8. 

*  2  Parsons  N.  &  B.,  304. 

»  Welton  V.  Adams^  4  Cal.,  37 ;  Price  v.  Dunlap,  5  Id.,  583 ;  Wade  v.  New 
Orleans,  etc.,  Co.,  8  Rob.  (La.),  140. 

'°  Tuttle  V.  Standish,  4  Allen,  481.  Hoar,  J.,  delivered  the  opinion  of  the 
court,  explaining  and  qualifying  Jones  v.  Fales,  5  Mass.,  loi,  and  Rennerv.  Bank 
«f  Columbia,  9  Wheat.,  581. 


§    1482.       SUIT  AGAINST  PARTY  TO  LOST  INSTRUMENT.  483 

§  1482.  Exceptions  to  the  general  rule  as  to  suit  at  law. 
— The  rule  is  different  as  to  non-negotiable  instruments, 
parties  to  which  may  be  sued  at  law,  and  no  indemnity  is 
necessary.  And  there  are  several  exceptions  to  the  rule 
denying  the  right  to  sue  at  law  when  the  lost  instrument  is 
negotiable.  First:  When  the  lost  negotiable  paper  is 
proved  to  have  been  destroyed,  for  in  that  case  it  can  never 
rise  in  judgment  against  the  defendants.  This  view  obtains 
now  both  in  the  United  States^  and  in  England,^  although 
at  one  time  in  the  latter  country  the  doctrine  prevailed 
that,  notwithstanding  the  alleged  destruction  of  the  instru- 
ment, equity  should  be  resorted  to^  for  the  several  reasons  : 
(i)  that  because  he  who  pays  a  bill  or  note  is  entitled  to 
receive  it  back  as  a  voucher ;  (2)  because  it  may  have  been 
negotiated  before  its  destruction,  and  have  become  the 
property  of  another  ;  and  (3)  because  (as  stated  by  Story)* 
"evidence  which  is  merely  presumptive  may  be  offered  of 
the  destruction  of  the  note,  and  then  it  may  expose  the 
maker  to  all  the  inconveniences  of  a  subsequent  second 
payment,  if  the  note  should  subsequently  reappear."  But 
if  it  be  shown  that  the  plaintiff  himself  destroyed  the  note 
or  bill,  this  right  to  recover  would  be  affected.  If  done 
deliberately  and  voluntarily,  he  could  not  recover  at  all;^ 
but  if  done  by  accident  or  mistake — of  which  clear  proof 
should  be  required — he  would  then  be  entitled  to  recover.^ 

'  Hinsdale  v.  Bank  of  Orange,  6  Wend.,  378  ;  Scott  v.  Meeker,  20  Hun,  163  ; 
Moore  v.  Fall,  42  Me.,  450;  Des  Arts  v.  Leggett,  16  N.  Y.,  582;  Thayer  v. 
King,  15  Ohio,  242;  Bank  U.  S.  v.  Sill,  5  Conn.,  106;  Moses  v.  Trice,  21  Grat., 
556  ;  Hough  V.  Barton,  20  Vt.,  455 ;  Patton  v.  State  Bank,  2  Nott  &  McC,  464  ; 
Branch  Bank  v.  Tillman,  12  Ala.,  214  ;  Dean  v.  Speakman,  7  Blackf.,  317  ;  Wade 
V.  Wade,  12  III.,  89  ;  Aborn  v.  Bosworth,  i  R.  I.,  401  ;  2  Parsons  N.  &  B.,  293, 
294  ;  Wells  V.  Wade,  20  Kansas. 

'Wright  V.  Maidstone,  i  Kay  &  J.,  701  ;  Woodford  v.  Whitely,  Moodv  &  M., 
517  ;  Clarke  v.  Quince,  3  Dowl.,  26  ;  Blackie  v.  Pidding,  6  Com.  B.,  196  ;  Pier- 
son  V.  Hutchinson,  2  Camp.,  211 ;  Chitty  on  Bills  (13  Am.  ed.)  [*267,  268J,  305  ; 
Chitty,  Jr.,  776  ;  2  Parsons  N.  &  B.,  292-295. 

^  Hansard  v.  Robinson,  7  B.  &  C,  90,  Lord  Tenterden. 

*  Story  on  Notes,  §§  107,  108,  448. 

"Angel  V.  Felton,  6  Johns,  149;  Van  Auken  v.  Hombeck,  2  Green  (N.  J.), 
178  ;  Fisher  v.  Mershon,  3  Bibb,  527  ;  Blade  v.  Noland,  12  Wend.,  173  ;  2  Par- 
sons N.  &  B.,  293  ;  Edwards  on  Bills,  303. 

'  Clarke  v.  Quince,  3  Dowl..  26. 


484  LOST  AND  DESTROYED  BILLS  AND  NOTES.        §   1 483. 

§  1483.  Second :  If  the  bill  or  note,  payable  to  order, 
and  indorsed  in  blank,  or  payable  to  bearer,  be  traced  to 
the  defendant's  possession  after  its  loss,  then  the  action  at 
law  would  lie,  because  it  could  then  never-  be  negotiated 
save  by  his  fault,  and  there  would  be  no  just  ground  for  his 
demanding  an  indemnity.^  In  such  a  case  it  would  not  be 
necessary  to  notify  the  defendant  to  produce  the  paper,  but 
simply  to  substitute  a  copy  for  it,  and  sue  at  law.^  Equity, 
it  has  been  held,  would  have  no  jurisdiction  under  such 
circumstances,  as  there  would  be  a  cbmplete  and  adequate 
remedy  at  law.^  Instead  of  suing  the  defendant  upon  the 
instrument  itself,  the  plaintiff  might  sue  in  trover  for  its 
possession/  Thus,  where  the  plaintiff  placed  a  bill  of  ex- 
change in  his  attorney's  hands  for  collection,  and  it  was  left 
on  his  office  table,  and  there  was  circumstantial  evidence 
that  the  acceptor  had  abstracted  it,  it  was  left  to  a  jury, 
after  notice  given  to  produce  it,  to  say  whether  or  not  such 
was  the  case,  and  to  give  a  verdict  for  the  plaintiff  without 
production  of  the  bill.'' 

§  1484.  Third :  When  the  instrument  is  not  payable  to 
order  or  to  bearer,  or  is  payable  to  order  and  is  unindorsed 
by  the  payee,  or  has  been  indorsed  in  full  to  a  particular 
person  (and  remains  unindorsed  in  blank  or  to  bearer  by  the 
indorsee),  for  in  such  a  case  no  legal  title  could  pass  so  as 
to  invest  any  one  with  the  privileges  of  a  bona  fide  holder 
in  the  usual  course  of  business,  and  no  indemnity  would 
be  necessary.^    In  England,  this  view,  which  obtains  in  the 

'  Smith  V.  McClure,  5  East.,  476  ;  Knight  v.  Legh,  4  Bing.,  589  ;  Paterson  v. 
Hardacre,  4  Taunt.,  114;  De  la  Chaumette  v.  Bank  of  England,  9  B.  &  C, 
208;  2  B.  &  Ad.,  385;  Decker  v.  Mathews,  2  Kern,  313;  Murray  v.  Burling, 
10  Johns,  172;  Lamb  v.  Moberly,  3  T.  B.  Mon.,  179  ;  Buck  v.  Kent,  3  Vt.,  99; 
Edwards  on  Bills,  303 ;  Chitty  (13  Am.  ed.)  [^265],  301  ;  2  Parsons  N.  &  B.,  293. 

^Garlock  v.  Goertner,  7  Wend.,  198;  McLean  v.  Hertzog,  6  S.  &  R.,  154; 
Robinson  v.  Curry,  6  Ala.,  842  ;  Burton  v.  Payne,  2  Car.  &  P.,  520 ;  Bucher  v. 
Jarratt,  3  B.  &  P.,  143. 

'Cooke  V.  Darwin,  18  Beav.,  60.  ''Howe  v.  Hale,  14  East.,  274. 

*  Smith  V.  McClure,  5  East.,  477. 

'  Rowley  v.  Ball,  3  Cow.,  303  ;  Pinterd  v.  Tackingfton,  10  Johns,  104  ;  Branch 
Bank  v.  Tillman,  12  Ala.,  214;  Rogers  v.  Miller,  4  Scam.,  333  ;  Dean  v.  Speak- 


§  1485-       SUIT  AGAINST  PARTIES  TO  LOST  INSTRUMENT.         485 

United  States,  was  at  one  time  adopted,*  but  was  subse- 
quently overruled,  and  the  right  of  action  at  law  confined 
to  those  cases  in  which  the  instrument  was  never  nego- 
tiable.^ 

§  1485.  Fo2irth:  When  the  debt,  at  the  time  of  contest- 
ing the  action  at  law,  would  be  barred  by  the  statute  of 
limitations,  if  a  third  party  were  to  demand  payment  of  the 
instrument,  it  is  said  that  then  also  the  action  at  law  would 
be  sustainable,  because  the  defendant  would  not  be  exposed 
to  danger.^ 

man,  7  Blackf.,  317  ;  Depew  v.  Wheelan,  6  Blackf.,  485  ;  Moore  v.  Fall,  42  Me., 
450  ;  Price  v.  Dunlap,  5  Cal.,  483  ;  Cleveland  v.  Worrell,  13  Ind.,  545  ;  Hough 
V.  Barton,  20  Vt.,  455  ;  Mossop  v.  Eadon,  16  Ves.,  430;  Long  v.  Bailie,  2  Camp., 
214  ;  2  Parsons  N.  &  B.,  289-291  ;  Edwards  on  Bills,  302 ;  Chitty  (13  Am.  ed.), 
305- 

>  Rait  V.  Watson,  4  Bing.,  273  ;  11  J.  B.  Moore,  510  ;  Long  v.  Bailie,  2  Camp., 
214. 

^  Ramuz  v.  Growe,  i  Exch.,  167,  overruled  in  Clay  v.  Crowe,  8  Exch.,  295, 
but  re-establised  in  Crowe  v.  Clay,  9  Exch.,  604. 

'  Moore  v.  Fall,  42  Me.,  450  ;  Torrey  v.  Foss,  40  Me.,  74  ;  2  Parsons  N.  & 
B.,  296,  303. 


BOOK  VI. 


VARIETIES  OF  NEGOTIABLE  INSTRUMENTS  OTHER 
THAN  BILLS  AND  NOTES. 


CHAPTER  XLVIL 

COUPON    BONDS. 


SECTION  I. 

DEFINITION  AND   NATURE   OF   COUPON   BONDS. 

§  i486.  The  inventive  spirit  of  modern  finance  and  com- 
merce, stimulated  by  the  prodigious  strides  of  internal 
improvements,  has  thrown  into  circulation  a  new  species  of 
security  for  money  which  has  sprung  at  once  to  the  front 
rank  of  negotiable  instruments.  This  security  is  styled  a 
"  coupon  bond."  It  is  issued  by  the  Federal  Government,^ 
by  States,^  by  Territorial  Governments,  or  the  local  divisions 
thereof,^  by  municipalities,  by  railroad,  canal,  and  steam- 
boat companies,  and  all  manner  of  trading  corporations.  A 
vast  portion  of  the  wealth  of  the  country  is  represented  in 
"  coupon  bonds."     The  reports  of  all  the  courts  have  been 

'  Ringling  v.  Kohn,  4  Mo.  Ap„  444;  Lafayette  Sav.  Bank  v.  Stoneware  Co., 
4  Mo,  Ap.,  276. 

"  See  chapter  xvi,  on  The  Federal  and  State  Governments  as  Parties  to 
Negotiable  Instruments,  vol.  i,  §§  440,  446. 

^  National  Bank  v.  County  of  Yankton,  loi  U.  S.  (il  Otto),  133  ;  Waite,  C. 
J.,  "  The  Territories  are  but  political  subdivisions  of  the  outlying-  dominion  of 
the  United  States.  Their  relation  to  the  general  government  is  much  the  same 
as  that  which  counties  bear  to  the  respective  States,  and  Congress  may  legislate 
for  them  as  a  State  does  for  its  municipal  organizations."  Held,  therefore,  that 
railroad  aid  bonds  of  Yankton  County,  Dakota  Territory,  authorized  by  act  ot 
Congress,  were  valid. 
(486) 


§   14^7-       DEFINITION  AND  NATURE  OF  COUPON  BONDS.  487 

filled  for  the  last  ten  years  with  decisions  respecting  theii 
nature  and  uses.  Every  banker,  merchant,  capitalist,  and 
business  man  is  deeply  interested  in  the  law  concerning 
them  ;  and  w^e  shall  endeavor  here  to  summarize  the  settled 
principles  which  control  their  issue  and  negotiation. 

§  1487.  Whether  individuals,  as  well  as  corporations 
and  States,  may  execute  negotiable  coupon  bojids. — Since 
the  seal  does  not  affect  the  negotiability  of  such  securities 
issued  by  corporations  and  States,  there  is  no  reason  why 
the  same  principle  should  not  be  extended  to  them  when 
issued  by  individuals.  In  a  recent  New  York  case,  in  the 
United  States  District  Court,  where  individual  coupon 
bonds  were  in  suit,  Blatchford,  J.,  said :  "  I  think  that  on 
the  authority  of  the  decision  of  the  highest  courts  of  this 
State,  and  of  the  United  States,  the  bonds  and  coupons  in 
question  are  negotiable  instruments,  although  issued  by  an 
individual  under  his  seal,  and  not  by  a  corporation,  and  are 
not  specialties  so  as  to  make  them  subject,  in  the  hands  of 
their  assignee,  to  equities  existing  against  their  assignor. 
Although  under  seal,  they  were  issued,  as  shown  on  their 
face,  to  secure  the  payment  of  money  on  time  ;  and  they 
contain  on  their  face  expressions  showing  that  they  are  ex- 
pected to  pass  from  one  to  another  by  delivery.  Therefore, 
the  attributes  of  commercial  paper  attach  to  them.  Their 
character  can  not  be  controlled  or  varied  by  the  mere  fact 
that  their  maker  put  a  seal  after  his  name.^  Such  bonds 
and  their  coupons  pass  by  delivery  ;  a  purchaser  of  them  in 
good  faith  is  not  affected  by  want  of  title  in  their  vendor, 
and  the  burden  of  proof  on  a  question  as  to  such  good 
faith  lies  on  the  party  who  assails  the  possession.  The  evi- 
dence in  this  case  shows  that  the  Union  Square  National 
Bank  became,  to  all  substantial  intents,  the  purchaser  of 
these  bonds  and  coupons  in  good  faith  for  a  full  and  fair 


'  Citing  Brainard  v.  New  York  &  Hudson  River  R.R.  Co.,  25  N.  Y.,  496; 
White  V.  Vermont  R.R.  Co.,  21  How.,  575;  Mercy  County  v.  Hacket,  i 
Wall..  83. 


488  COUPON  BONDS.         §§  I488,  I489. 

consideration,  in  the  usual  course  of  business,  and  without 
notice  of  any  possible  defect  in  the  title  of  their  assignor. 
These  views  proceed  on  the  assumption  that  the  claim  of 
the  bank  will  absorb  all  dividends  on  the  bonds  and 
coupons,  and  apply  only  to  the  interest  of  the  bank  therein. 
If  there  shall  be  a  surplus  beyond  paying  the  claim  of  the 
bank,  questions  as  to  the  title  and  position  of  their  assignor 
may  become  material."^  There  is  no  doubt  that  an  indi- 
vidual may  execute  bonds  and  coupons,  but  whether  or  not 
they  are  negotiable  instruments  may  depend  upon  the 
statutory  provisions  of  the  States  wherein  they  are  issued. 
Custom  has  fixed  the  negotiability  of  corporate  securities 
of  this  character  regardless  of  statutory  tests ;  but  it  re- 
mains to  be  seen  whether  individual  securities  of  the  like 
kind  will  be  generally  considered  upon  the  same  footing.* 

§  1488.  Description  of  coupon  bonds. — K  coupon  bond  \S2iX\ 
instrument  complete  in  itself,  and  yet  composed  of  several 
distinct  instruments,  each  of  which  is  in  itself  as  complete 
as  the  whole  together.  As  originally  issued,  the  "coupon 
bond"  consists  of — (i)  an  obligation  to  pay  a  certain 
amount  of  money  at  a  future  day  ;  and  (2),  annexed  to  it 
is  a  series  of  coupons,  each  one  of  which  is  a  promise  for 
the  payment  of  a  periodical  instalment  of  interest.  The 
contract  between  the  payor  and  the  holder  is  contained  in 
the  bond,  but  the  coupons  are  furnished  as  convenient  in- 
struments to  enable  the  holder  to  collect  interest  without 
presenting  the  bond,  by  separating  and  presenting  the 
proper  coupon  ;  and  it  also  enables  him  to  anticipate  his 
interest  by  negotiating  the  coupon,  which  represents  it,  to 
another  person,  at  any  time  before  its  maturity. 

§  1489.  Definition  and  use  of  coupons. — The  term 
"  coupon  "  is  derived  from  the  French  '' couper — to  cut," 
and  it  is  defined  by  Worcester,  in  his  dictionary,  to  signify 

^  Simeon  Leland  in  Bankruptcy,  6  Ben.,  175.  ^  Stt post,  §  1507a. 


§   I490-       DEFINITION  AND  NATURE  OF  COUPON  BONDS.  489 

"one  of  the  interest  certificates  attached  to  transferable 
bonds,  and  of  which  there  are  usually  as  many  as  there  are 
payments  to  be  made  ;  so  called,  because  it  is  ctU  off  when 
it  is  presented  for  payment."  This  is  a  succinct  and  clear 
definition,  and  indicates  the  design  of  the  coupons.  They 
are  furnished  as  attached  to  the  bond  as  evidence  of  suc- 
cessive periodical  liabilities.  They  may  be  severed  and 
negotiated  before  the  maturity  of  the  interest  they  repre- 
sent, and  thus  pass  as  separate  and  independent  securities,^ 
like  other  commercial  instruments.  For  in  whosesoever 
hands  they  are,  they  are  evidence  of  title  to  demand  the 
interest  on  the  bond,  and  they  serve  the  purpose  of 
vouchers  when  the  interest  is  paid  ;  but  the  contract  to  pay 
the  interest  is  in  the  bond.  Yet  so  intimate  is  the  relation 
between  it  and  the  coupons,  that  legislative  authority  to 
issue  bonds  implies  authority  to  issue  coupons  attached  to 
them  for  interest.^  "Coupons  are  substantially  a  minute 
repetition  of  what  is  contained  in  more  concise  terms  in  the 
bond.  They  are  attached  to  the  bond  to  be  separated 
therefrom  at  the  convenience  of  the  holder,  and  to  be 
thereafter  negotiated  as  money,  or  the  representative  of 
money  by  simple  delivery."  ^ 

§  1490.  Coupons  are  either  actually  notes,  or  like  them. 
— Coupons  are  more  closely  assimilated  to  promissory  notes 
than  to  bank  notes,  bills  of  exchange,  or  checks,  although 
in  their  formal  wording  they  may  sometimes  less  resemble 
them. 


'  Arents  v.  Commonwealth,  18  Grat.,  776 ;  Clark  v.  Iowa  City,  20  Wall.,  584  ; 
Commissioners  of  Knox  County  v.  Aspinwall,  21  How.,  539  ;  Thomson  v.  Lee 
County,  3  Wall.,  327  ;  Town  v.  Culver,  19  Wall.,  84;  City  v.  Lamson,  9  Wall., 
477  ;  Beaver  County  v.  Armstrong,  44  Penn.,  63  ;  Clarke  v.  Janesville,  10  Wis., 
136;  Maddox  v.  Graham,  2  Melc.  (Ky.),  56;  Rose  v.  City  of  Bridgeport,  17 
Conn.,  243  ;  Brainard  v.  N.  Y.  &  H.  R.R.,  25  N.  Y.,  496  ;  Railway  v.  Cleneay.  13 
Ind.,  i6i  ;  Evertsen  v.  National  Bank  of  Newport,  11  N.  Y.  S.  C.  (4  Hun),  694  ; 
5  Robinson's  Practice,  238  ;  Spooner  v.  Holmes,  102  Mass.,  503  ;  Commonwealth 
V.  Emigrant  Industrial  Assn.,  98  Mass.,  12;  National  Exch.  Bank  v.  Hartford 
R.R.  Co.,  8  R.  I.,  375  ;  Langston  v.  S.  C.  R.R.,  2  S.  C,  249. 

"  Arents  v.  Commonwealth,  18  Grat.,  773. 

'  Evertsen  v.  Nat.  Bank,  11  N.  Y.  S.  C.  (4  Hun),  569. 


490  COUPON    BONDS.  §    1490^. 

It  is  obvious  from  their  nature  and  purpose  that  they 
are  not  intended  for  indefinite  circulation  like  bank  notes. 
They  are  made  to  facilitate  the  prompt  payment  of  interest, 
and  by  no  means  designed  to  become  a  part  of  the  currency 
of  the  country,  although  sometimes  made  use  of  as  a  sub- 
stitute for  money. 

Therefore,  even  when  drawn  in  the  form  of  checks  upon 
banks,  they  are  regarded  as  due  on  the  very  day  fixed  for 
payment,  and  not  as  payable  on  demand  like  bank  notes.-^ 
Nor  are  they  like  checks,  which  must  be  presented  to  the 
bank  before  the  drawer  can  be  sued,  even  when  worded  like 
them.  They  are  the  primary  engagements  of  their  payor, 
and  if  payable  at  a  bank,  they  are  simply  like  notes  so  pay- 
able ;  if  sued  upon  without  previous  presentment  at  the 
bank,  the  defendant  may  show  that  there  were  funds  to 
meet  them,  but  otherwise  must  stand  suit.^ 

§  i\goa.  Differences  between  cotipo7is  and  bills.  Not  en- 
titled to  grace. — Coupons  are  unlike  bills  of  exchange, 
from  which  they  differ  in  several  distinctive  respects  :  (i) 
They  are  not  intended  for  acceptance  when  drawn  upon  a 
bank  or  banking  house.  (2)  They  are  not  entitled  to 
grace.^  (3)  In  short,  they  are  simply  in  effect  promissory 
notes  payable  on  the  very  day  of  their  maturity  without 
grace.  It  has,  however,  been  recently  held  in  New  York, 
that  coupons  are  entitled  to  grace  like  other  commercial 
paper,  in  a  case  directly  presenting  that  question ;  so  that 
judicial  views  of  that  point  are  now  contradictory.*     As 

'  Arents  v.  Commonwealth,  i8  Grat.,  750. 

"  Virginia  &  Tenn.  R.R.  Co.  v.  Clay,  MSS.  Special  Court  of  Appeal  of  Va. 

*  Arents  v.  Commonwealth,  18  Grat..  773.  Contra,  Evertsen  v.  Nat.  Bank, 
66  N.  Y.  (22  Sickels),  18  ;  11   N.  Y.  S.  C.  (4  Hun),  692.     See  §§  1505,  1506. 

*  Evertsen  v.  Nat.  Bank,  66  N.  Y.  (22  Sickels),  22  (1876),  Allen,  J.  :  "It  is 
probably  true  that  they  are  regarded  and  treated,  as  well  by  promisor  as  prom- 
isee, as  payable  at  the  day,  and  paid  as  if  in  terms  payable  without  grace  ;  but 
this  can  not  destroy  the  character  or  change  the  legal  effect  of  the  instruments, 
the  interpretation  of  which  is  for  the  courts.  It  is  only  as  negotiable  commer- 
cial paper  that  the  plaintiff,  as  a  bona  fide  purchaser,  could  acquire  a  good  title  to 
the  coupons  from  one  having  no  title  thereto;  and  he  can  only  acquire  such 
title  by  a  purchase  under  the  same  circumstances  that  would  give  him  a  title  tq 


§  l^gia.      DEFINITION  AND  NATURE  OF  COUPON  BONDS.    49 1 

the  coupons  are  mere  separable  fragments  of  the  bond,  we 
think  the  text  contains  the  better  view.  And  it  is  evident 
from  the  very  nature  of  coupons,  and  of  the  bonds  to 
which  they  are  attached,  that  the  reasons  out  of  which  the 
allowance  of  grace  is  made  upon  mercantile  paper  do  not 
apply  to  them.  They  are  instruments  of  investment  and 
traffic,  and  not  ordinarily  used  like  bills  and  notes  to  effect 
exchanges. 

§  1 49 1.  Bonds  and  coupons  are  not  bills  of  credit. — 
Bonds  and  coupons,  though  designed  to  circulate  as  market- 
able commodities,  are  not  bills  of  credit  within  the  meaning 
of  the  United  States  Constitution.^ 

§  1491^.  Bonds  and  cotipons  seciired  by  mortgage. — A 
coupon  is  part  of  the  debt  covered  by  the  mortgage  which 
secures  its  bond,  and  the  security  of  the  mortgage  inures  to 
the  assignee  of  the  coupon.^  Interest  on  the  coupon  is 
also  covered  by  the  mortgage.^  All  of  the  same  series  of 
bonds  secured  by  a  mortgage  share  ratably  in  the  proceeds, 
and  their  holders  should  be  paid  pari  passu,  without  regard 
to  the  amounts  they  paid  for  the  bonds.*  In  New  York 
it  has  been  held,  that  the  interest  coupons  upon  the  bonds 
of  a  railroad  corporation,  received  by  one  who  has  advanced 


other  commercial  paper ;  and  if  there  were  no  days  of  grace  for  the  payment  ot 
these  coupons,  they  could  not  be  transferred  so  as  to  give  a  good  title."  See 
Cooper  V.  Town  of  Thompson,  13  Blatchf.,  434,  and  Jones  on  R.R.  Securi- 
ties, §  323. 

'  McCoy  V.  Washington  County,  3  Wall.  Jr.,  386. 

'^  Miller  v.  Rutland,  etc.,  R.R.,  4  Vt.,  399  ;  County  of  Beaver  v.  Armstrong,  44 
Penn.,  63 ;  Haven  v.  Grand  Junction  R.R.  Co.,  109  Mass.,  88  ;  Union  Trust  Co. 
V.  Monticello,  etc.,  R.R.,  63  N.  Y.,  314. 

'  Gibert  v.  W.  C.  V.  M.,  etc.,  R.R.,  33  Grat.,  599. 

*  In  re.  Regent's  Canal  Iron  Works  Co.,  3  Chancery  Div.,  43  (1876);  Stanton 
V.  A.  &  C.  R.R.,  2  Woods  C.  C,  523;  Hodge's  Appeal,  84  Penn.  St.,  359  (1877), 
in  which  case  it  was  also  held  that  if  the  holder  of  the  bond  was  entitled  to 
share  in  proceeds,  other  holders  would  not  set  up  any  informality  in  the  manner 
of  its  acquisition.  In  Ketchum  v.  Duncan,  96  U.  S.  (6  Otto),  671,  it  was  held 
that  coupons  had  no  superior  equity  to  that  of  the  bonds  from  which  they  were 
taken,  or  the  subsequently  maturing  coupons.  Strong,  J.,  said  :  "  The  mortgage 
in  this  case  secures  no  priority  to  the  coupons  past  due,  nor  to  those  first  due. 
It  places  all  bondholders  or  coupon  holders  on  the  same  level."  See  also  Pen- 
nock  V.  Coe,  23  How.,  130. 


492  COUPON    BONDS.  §  1491^. 

the  money  with  which  they  are  taken  up,  under  an  agree- 
ment with  him  that  they  were  to  be  dehvered  to  him  un- 
cancelled, as  security  for  the  advances,  were  valid  securities 
in  the  hands  of  the  holder  ;  and  that  the  smortgage  upon 
the  corporate  property  given  to  secure  the  bonds  might  be 
enforced  for  his  benefit ;  but  as  between  him  and  the 
bondholders  who  received  the  amount  of  their  coupons  in 
ignorance  of  the  transaction,  and  supposing  their  coupons 
to  have  been  paid,  that  the  latter  had  the  prior  equities,  and 
if,  upon  foreclosure  and  sale  of  the  mortgaged  property, 
the  sum  realized  w^ere  insufficient  to  pay  the  face  of  the 
bonds,  the  holder  of  the  coupons  would  not  be  entitled  to 
share  in  the  proceeds.-' 

§  i49i<5.  Wheti  consideration  paid  corporation  for  invalid 
bond  may  be  recovered. — When  the  transaction  is  not  malum 
in  se,  and  the  parties  are  not  particeps  criminis  in  a  viola- 
tion of  law,  money  received  by  a  corporation,  as  well  as  by 
a  person,  for  a  security  issued,  may  be  recovered  by  the 
party  paying  it,  if  such  security  be  void  by  reason  of  some 
technical  defect  or  illegality.^  And  if  a  county  should  re- 
pudiate a  bond  given  in  payment  of  an  antecedent  debt, 
the  original  consideration  would  revive.^  Where  a  city 
issued  bonds  falsely  dated,  and  w^hich  were  invalidated  by  a 
registry  act  in  force  at  time  of  their  issue,  and  received  the 
money  for  them,  a  purchaser  for  value  without  notice,  al- 
though not  entitled  to  enforce  the  bond,  it  has  been  held 


'  Union  Trust  Co.  v.  Monticello  &  P.  J.  R.  R.  Co.,  63  N.  Y.,  31 1,  Earl,  J.,  saying  : 
"Equity  will  keep  the  securities  in  life,  in  such  cases,  to  promote  the  ends  of 
justice ;  but  not  against  any  person  having  a  superior  equity."  Harbeck  v. 
Vanderbilt,  20  N.  Y„  398;  Robinson  v.  Leavitt,  7  N.  H.,  100;  Miller  v.  Rut- 
land, etc.,  R.R.,  40  Vt.,  399 ;  James  v.  Johnson,  6  J.  Ch.,  423  ;  Haven  v.  Grand 
Junction  R.R.  Co.,  109  Mass.,  88. 

^  Thomas  v.  City  of  Richmond,  12  Wall.,  354 ;  Oneida  Bank  v.  Ontario  Bank, 
21  N.  Y.,  496;  Draper  v,  Springport,  U.  S.  S.  C,  Januar}',  1882,  Morrison's 
Transcript,  vol.  3,  No.  3,  432.  Bradley,  J. :  "  If  valid,  a  recovery  may  be  had  on 
it ;  if  invalid,  a  recovery  may  be  had  upon  the  original  consideration." 

*  Jackson  Co.  v.  Hall,  55  111.,  444. 


§  1492^.  FORMAL  PARTS  OF  BONDS  AND  COUPONS.  493 

may  recover  the  amount  he  paid  with  interest  from  time 
the  obligation  of  the  city  to  pay  was  denied.^ 

§  1 49  If.  The  bonds  of  a  county  are  debts  as  fully  as  any 
other  of  its  liabilities,  and  though  issued  in  pursuance  of  a 
law  which  authorizes  a  lev7  of  a  special  tax  to  pay  them, 
"  not  to  exceed  one-twentieth  of  one  per  cent,  upon  the 
assessed  value  of  taxable  property  for  each  year,"  but  con- 
tained no  provision  that  only  the  funds  so  derived  should 
be  applied  to  their  payment — in  such  a  case  any  balance  re- 
maining due  after  applying  the  proceeds  of  the  special  tax 
to  payment  of  the  bonds,  should  be  paid  out  of  the  gen- 
eral funds  of  the  county. '^ 


SECTION   11. 

THE  FORMAL  PARTS  OF  NEGOTIABLE  BONDS  AND  COUPONS. 

§  1492.  The  bond,  with  its  coupons  annexed,  is  usually 
printed  upon  a  sheet  of  paper  resembling  in  texture  and 
style  that  used  in  the  issue  of  currency.  And  the  engraver's 
art  is  taxed,  as  a  general  thing,  to  invest  the  instrument 
with  as  much  attraction  to  the  eyes  of  capitalists  as  possi- 
ble, and,  as  well,  for  the  purpose  of  fortifying  it  against  the 
ingenious  imitations  of  the  forger.  The  bond  is  usually 
large  and  showy  in  its  lettering  and  its  devices,  while  the  cou- 
pons are  usually  small  (as  they  must  needs  be  on  account 
of  their  number)  and  less  ostentatious.  They  are  generally 
arranged  so  as  to  be  easily  severable  in  the  order  of  their 
maturity. 

§  1492^.  The  sigjiatiire  to  the  bonds  and  coupons  is  gen- 
erally written  by  the  president  of  the  corporation,  or  the 

'  Louisiana  v.  Wood,  102  U.  S.  (12  Otto),  294,  affirming  s.  C,  5  Dillon  C.  C, 
122. 

«  United  States  v.  County  of  Clark,  96  U.  S.  (6  Otto),  211. 


494 


COUPON    BONDS.  §  1493- 


chief  executive  of  the  municipality  issuing  them  ;  and  there 
is  generally  a  counter  signature  by  the  secretary,  or  treas- 
urer, or  chief  clerk  of  the  corporation  or  municipality. 
The  signature  to  the  coupons,  where  the  bonds  are  properly 
signed  and  sealed,  need  not  be  written,  but  may  be  printed 
in  facsimile,  or  otherwise  ;  ^  and  if  the  bonds  be  properly 
executed,  it  is  no  valid  objection  to  the  coupons  that  they 
are  signed  by  only  one  of  the  officers  who  signed  the  bonds." 

§  1493.  Wording  of  coupons,  and  variotis  forms. — It  is 
entirely  immaterial  in  what  words  the  coupons  are  ex- 
pressed, provided  they  indicate  by  whom  they  are  due, 
and  the  amount  and  time  of  payment.  Sometimes  they 
contain  words  of  promise,  making  them  substantially 
promissory  notes  in  themselves.  Thus,  in  Thomson  v. 
Lee  County,  3  Wall.,  327,  the  form  was  :  "  Promise  to  pay 
to  the  bearer,  at  the  Continental  Bank,  in  the  city  of  New 

York,  forty  dollars  interest  on  bond  No. ."     Sometimes 

they  are  in  the  form  of  a  bill  of  exchange,  or  draft  upon 
the  treasury  of  the  corporation  issuing  them.  Thus,  in 
Moran  V.  Commissioners  of  Miami  County,  2  Black,  722,  the 
form  was  :  "The  treasurer  of  said  county  will  pay  the  legal 
holder  hereof  one  hundred  dollars  on  the  first  day  of  Sep- 
tember, 1857,  on  presentation  thereof,  being  for  interest  due 
on  the  obligation  of  said  county.  No.  16,  given  to  the  Peru 
&  Indianapolis  Railroad  Company."  Sometimes  they  are 
in  the  form  of  a  mere  ticket,  or  token  or  "  Interest  War- 
rant," as  it  is  called.  Thus,  in  Woods  v.  Lawrence  County, 
I  Black,  U.  S.  R.,  360,  the  coupon  is  in  this  form  :  "  County 

of  Lawrence— Warrant  No. ,  for  thirty  dollars,  being 

for  six  months'  interest  on  bond  No. ,  payable  on  the 

(Jay  of at  the  office  of  the  Pennsylvania  Rail- 


'  Pennington  v.  Baehr  (Supreme  Court  California),  Cent.  Law  Jour,  of  St. 
Louis,  vol.  2,  No.  6,  p.  92,  February  5,  1875  ;  Lynde  v.  County,  16  Wall.,  6; 
McKee  v.  Vernon  Co.,  3  Dillon  C.  C,  210;  Dillon  on  Municipal  Bonds,  p.  12, 
note. 

*  Thayer  v.  Montgomery  Co.,  3  Dillon  C.  C,  389. 


§   1494-  FORMAL  PARTS  OF  BONDS  AND  COUPONS.  495 

road  Company,  in  the  city  of  Philadelphia."  Sometimes 
they  are  in  the  form  of  a  check  upon  a  banking  house,  as 
in  Arents  v.  Commonwealth,  i8  Grat,  753,  where  the  form 
was:  "Duncan,  Sherman  &  Co.,  of  New  York,  will  pay 
the  bearer  thirty  dollars,  the  half-yearly  interest  on  the 
Wheeling  bond  due  i  January,  1867."^  Sometimes  they 
are  in  the  form  of  drafts  or  bills,  but  name  no  drawee,  as  in 
Mercer  County  v.  Hubbard,  45  III,  140,  where  the  form 
was:  "  Six  per  cent,  stock,  Mercer  County,  State  of  Illi- 
nois, Railroad  Bond  No.  20.  Pay  the  bearer  sixty  dollars 
on  first  day  of  July,  1863,  interest  to  that  date.  John 
Cowden,  Chairman  of  Board  of  Supervisors  of  Mercer 
County."  However  the  forms  may  vary,  the  intent  and 
legal  effect  are  the  same.  In  all  of  the  cases  the  coupon 
is  furnished  as  evidence  of  a  sum  due  on  the  bond  for  in- 
terest at  a  particular  time  and  place,  and  as  authority  to  the 
holder  to  receive  it.  And  whether  the  coupon  be  assimi- 
lated to  a  note,  bill,  or  check,  or  be  a  mere  ticket  or  warrant 
of  amount,  and  place  of  payment,  the  holder  may  sue  on  it 
without  producing  the  bond ;  but  in  all  cases  he  re- 
ceives a  sum  due  and  payable  according  to  the  terms  of  the 
bond. 

§  1494.  Payee. — The  fact  that  no  payee  is  mentioned  in 
the  coupon — an  omission  which  would  vitiate  an  ordinary 
promissory  note — will  make  no  difference,  for  it  is  suffi- 
ciently evident  from  the  general  character  of  the  instrument 
that  it  was  issued  as  the  binding  obligation  of  the  payor  to 
the  purchaser  of  the  bond,  and  was  designed  to  be  paid  to 
him  or  to  the  bearer.^  Nor  will  it  matter  that  it  contains 
no  words  of  promise.  For  while  they  may  be  necessary  to 
constitute  an  ordinary  promissory  note,  which  without  them 
may  be  a  mere  memorandum,  the  very  form  of  the  coupon 
clearly  evinces  an  intention  that  it  shall  be  an  obligation  to 

'See  also  Mayor,  etc.,  v.  Potomac  Ins.  Co.,  58  Tenn.,  298. 
*  Woods  V.  Lawrence  County,  i  Black,  360;  Virginia  &  Tenn.  R.R.  Co.  v. 
Clay  (Special  Court  of  Appeals  of  Va.,  unreported).     See  §§  1496,  1499. 


496  COUPON  BONDS.  §  1495- 

pay  the  amount  designated,  and  the  intention  of  the  payor 
is  what  the  law  at  all  times  seeks  to  enforce.^  We  have 
thus  stated  what  seems  to  us  the  true  theory  as  to  coupons ; 
but  in  a  New  York  case,  reported  since  the  first  edition  of 
this  work  was  in  the  press,  variant  views  have  been  ex- 
pressed.^ The  requisite  certainty  in  designating  the  payee 
of  negotiable  instruments  in  general  has  been  discussed  in 
another  portion  of  this  work.^ 

§  1495.  The  bond  not  izecessarily  sealed. — In  common 
parlance  the  term  bond  is  generally  understood  to  signify  a 
sealed  instrument,  in  contradistinction  to  bills  and  notes  of 
hand,  which  are  unsealed,  and  need  only  the  party's  signature 
to  their  completion.  And  as  a  general  rule  a  bond  is  a 
sealed  instrument.  But  it  does  not  follow  that  it  always  is . 
or  must  be.  It  is  certainly  usual  for  the  coupon  bonds  of 
States  and  corporations  to  be  authenticated  by  the  State  or 
corporate  seal ;  and  it  has  been  said  by  high  authority  that 
it  is  necessary  they  should  be  so  authenticated,  for  the  rea- 
son that  they  are  executed  by  States  and  corporations."*  But 
the  old  idea  that  States  and  corporations  can  only  bind 
themselves  under  seal  is  utterly  obsolete.^  Their  bills  and 
notes  are  as  binding  as  their  sealed  obligations.  And  it  is 
now  pretty  well  settled  by  authority,  as  indeed  it  is  clear  in 
reason,  that  it  is  not  necessary  to  constitute  a  corporate 
oblio-ation  a  bond  that  it  should  bear  its  seal.  And  the 
term  "  bond,"  as  now  applied  to  State  and  corporate  obli- 
gations, is  simply  intended  to  signify  a  permanent  invest- 
ment security  in  contradistinction  to  those  of  an  ordinary 
and  current  nature,  such  as  bills  of  exchange  and  promissory 
notes.  In  New  York,  where  the  legislature  authorized  the 
town  of  Genoa  to  issue  "  bonds,"  and  instruments  were  is- 


*  See  p.  495,  note  2. 

■'Evertsen  v.  National  Bank,  66  N.  Y.  (22  Sick.),  19.  20  ;  st&  post,  %  1497. 
'^Anie,%  99.  *  Mercer  County  v.  Hackett,  i  Wall.,  83. 

'  Dinsmore  v.  Duncan,  57  N.  Y.,  577  ;  Connecticut  Mut.  Life  Ins.  Co.  v.  Cleve- 
land, etc.  R.R.  Co.,  41  Barb.,  22 ;  see  §  381,  vol.  i. 


§   1495^'    FORMAL  PARTS  OF  BONDS  AND  COUPONS.      497 

sued  with  coupons  attached,  and  formal  in  all  respects 
except  that  they  bore  no  seals,  it  was  held  that  they  were 
valid  bonds  notwithstanding.^  The  like  view  has  also  pre- 
vailed in  Maine.^  And  in  Virginia,  where  no  seals  were 
discoverable  in  a  certain  number  of  the  instruments  issued 
by  the  Virginia  and  Tennessee  Railroad  Company  styled 
bonds,  and  having  coupons  attached,  while  on  others  in 
the  same  suit  the  seals  appeared,  being  distinctly  impressed 
by  an  instrument  on  the  paper,  it  was  held  that  those  with- 
out were  as  valid  as  those  with  seals,  there  being  nothing 
in  the  act  of  Assembly  which  required  that  seals  should  be 
used.^ 

§  1495^.  Decisions  of  U.  S.  Szipreme  Court  as  to  seals. 
— In  a  case  before  the  U.  S.  Supreme  Court,  it  was  said  by 
Swayne,  J.  :  "The  principal  securities  delivered  to  the  com- 
pany were  not  bonds,  because  they  were  unsealed  ;  but  this 
is  immaterial.  The  twelfth  section,  under  which  they  were 
issued,  expressly  declared  that  those  charged  with  the  duty 
of  subscribing  may  issue  bonds  bearing  interest,  or  other- 
wise pledge  the  faith  of  the  city."  *  But  we  do  not  think 
these  remarks  necessarily  conflict  with  the  views  of  the 
text. 

In  another  and  recent  case  before  the  U.  S.  Supreme 
Court,  it  appeared  that  the  Town  of  Springport,  N.  Y., 
was  authorized  to  subscribe  to  a  railroad,  and  issue  bonds 
to  pay  for  such  subscription  ;  and  that  the  subscription  was 
to   be  made   by  commissioners,  who  were  to   execute  the 

'The  People  v.  Mead,  24  N.  Y.,  124  (1861).  The  act  provided  that  they 
should  be  executed  under  official  sigriatures  of  supervisors  and  commissioners. 
Denio,  J.,  said :  "  Whatever  force  there  may  generally  be  in  the  words  '  bond  or 
bonds,'  which  were  used  in  the  act,  it  is  overcome  by  the  explicit  direction  as  to 
their  execution  which  has  been  mentioned."  The  case  shows  in  what  sense  the 
legislature  of  New  York  used  the  word  "  bond."  So  in  Conn.  Mut.  Life  Ins.  Co. 
V.  Cleveland,  etc.,  R.R.  Co.,  41  Barb.,  22,  the  bonds  had  no  seals  ;  see  Phelps  v. 
Yates,  16  Blatchford,  C.  C,  192. 

^  Augusta  V.  Augusta  Bank,  56  Me.,  176. 

'Virginia  &  Tenn.  R.R.  Co.  v.  Clay,  Va.  Spec.  Ct.  of  App.  (1873),  unre- 
ported. 

*  San  Antonio  v.  Meharty,  96  U.  S.  (6  Otto),  315. 

Vol.  II. — 32 


498  COUPON  BONDS.  §  I496. 

bonds  under  their  hand  and  seal.  The  bonds  were  duly 
executed  with  the  exception  that  seals  were  omitted  ;  and 
it  was  held  that  the  requirement  as  to  seals  was  merely 
directory  and  formal,  and  their  omission  immaterial.^ 

§  1496.  To  whom  payable. — Coupon  bonds^are  generally 
made  payable  to  the  party  to  whom  they  are  issued,  or 
bearer  ;  and  in  such  cases  are  transferable  by  delivery.^ 
By  the  Supreme  Court  of  Illinois  it  has  been  said  :  "  It  is 
the  well-settled  doctrine  that  bonds  of  this  character  are  to 
be  treated  as  commercial  paper  ;  and  this  court  has  held 
coupons  attached  to  them  to  be  negotiable  by  delivery  only 
without  indorsement."  ^  Sometimes  they  are  payable  to 
order,  and  then  they  pass  by  indorsement,^  Sometimes 
they  are  payable  to  the  holder,  which  term  is  regarded  as 
equivalent  to  bearer.  Any  other  equivalent  expression 
manifesting  an  intention  to  make  the  instrument  negotia- 
ble will  suffice  for  that  purpose.^  Sometimes  they  are  pay- 
able to  a  certain  party,  "  or  his  assign";  and  in  that  case 
the  party's  assignment  is  necessary  to  pass  title.  But  if  he 
make  an  assignment  in  blank,  the  title  then  passes  by  de- 
livery.^ A  bond  or  coupon  payable  to  "A.  B.  or  bearer," 
is  in  legal  effect  payable  to  bearer,  and  passes  by  delivery.' 
Sometimes  the  place  for  the  payee's  name  is  left  blank,  in 
which  case  any  holder  may  fill  the  space  with  his  name, 

'  Draper  v.  Springport,  U.  S.  S.  C,  Januar)',  1882,  Morrison's  Transcript,  vol. 
3,  No.  3,  p.  429. 

"^  Morris  Banking  &  Canal  Co.  v.  Lewis,  i  Beas.,  323  ;  Brookman  v.  Metcalf, 
32  N.  Y.,  591  ;  Eaton  &  H.  R.R.  Co.  v.  Hunt,  20  Incl.,  457  ;  Conn.  Insurance 
Co.  V.  C.  C.  &  C.  R.R.,  41  Barb.,  9;  Carr  v.  Le  Fevre,  27  Penn.  St.,  413 ;  City 
of  Kenosha  v.  Lamson,  9  Wall.,  478  ;  Mercer  County  v.  Hackett,  i  Wall.,  83 ; 
Roberts  v.  Bolles,  loi  U.  S.  (11  Otto),  122;  Johnson  v.  County  of  Stark,  24  111., 
75  ;  Supervisors  of  Mercer  County  v.  Hubbard,  45  111.,  139. 

'Town  of  Eagle  v.  Kohn,  84  III,  292  ;  Roberts  v.  Bolles,  loi  U.  S.  (11  Otto), 
122. 

*■  City  of  Lexington  v.  Butler,  15  Wall.,  295.     See  §  14993. 

"Ante,  vol.  i,  §99;  County  of  Wilson  v.  National  Bank,  103  U.  S.  (13 
Otto),  776  ;  Porter  V.  City  of  Janesville,  3  Fed.  R.,  619. 

"Brainard  v.  New  York,  etc.,  R.R.  Co.,  25  N.  Y.,  496 ;  10  Bosw.,  832. 

'  See  vol.  I,  §  633.  It  is  different  in  Illinois  by  statute.  See  Garvin  v.  Wiswellj 
83  111.,  218,  and  vol.  i,  §  633,  note ;  §  105,  note. 


§  1496^.    FORMAL  PARTS  OF  BONDS  AND  COUPONS.      499 

and  thus  make  the  instrument  payable  to  himself;  but 
until  filled  up  it  circulates  by  delivery  as  if  payable  to 
bearer.* 

§  1496^.  In  Virginia,  where  the  act  of  Assembly 
made  certain  bonds  "  payable  to  the  holder,"  it  was  held 
a  sufficient  indication  that  they  were  designed  to  be  nego- 
tiable and  payable  to  bearer.  Joynes,  J.,  said  :^  "The  act 
of  March  29th,  1857,  in  terms  makes  the  coupons  'trans- 
ferable by  delivery,'  but  does  not  in  terms  make  the  bonds 
themselves  transferable  by  delivery.  This,  however,  is  im- 
plied in  the  provision  that  '  they  shall  be  payable  to  the 
holder,'  the  obvious  intent  being  that  they  shall  be  payable 
to  such  persons  as  may,  from  time  to  time,  be  the  holder. 
These  bonds,  therefore,  as  well  as  the  coupons,  pass  from 
hand  to  hand  by  delivery."  But  if  the  bond  contained  no 
negotiable  words,  it  would  not  be  deemed  negotiable,^  nor 
would  the  coupons  without  negotiable  words,  if  detached 
from  the  bonds,  be  negotiable,  as  has  been  held  in  New 
York,  where  it  was  said  of  a  coupon  without  such  words,  by 
Allen,  J.  :  "  In  this,  as  in  other  contracts,  its  negotiability 
depends  upon  its  terms ;  and  the  rule  is,  with  certain  ex- 
ceptions not  applicable  to  this  case,  that  in  instruments 
for  the  payment  of  money,  if  no  one  be  designed  as  payee, 
either  by  name  or  as  bearer,  the  instrument  is  not  a 
promissory  note.      If   these  warrants  are  not   promissory 

notes  they  arc  not  negotiable There  is  no  usage  or 

custom  proved  that  would  give  these  warrants  a  negotiable 
character,  even  if  custom  and  usage  so  recent  as  one  appli- 
cable to  these  instruments  would  be,  could  change  their 


legal  effect.^ 


'White  V.  Vermont,  etc.,  R.R.  Co.,  21   Howard,  575;   Preston  v.  Hull,  23 
Grat.,  613.     See  §  1499. 

*  Arents  v.  Commonwealth,  18  Grat.,  750. 

'  City  of  Atchison  v.  Butcher,  3  Kans.,  104. 

*  Evertsen  v.  Nat.  Bank,  66  N.  Y.  (22  Sick.),  20,  22.     See  Jones  on  Railroad 
Securities,  §  323. 


500  COUPON  BONDS.  §  I497* 

§  1496(5.  Amou7it  payable. — The  amount  payable  must 
be  certain  in  order  to  render  the  bond  or  coupon  negotia- 
ble, the  same  rule  in  this  respect  applying  to  them  as  to 
other  negotiable  instruments.^  This  doctrine  was  well 
illustrated  in  a  case  before  the  United  States  Supreme 
Court,  in  which  it  appeared  that  a  railroad  company  in 
Louisiana  prepared  certain  bonds,  promising  to  pay  the 
bearer  either  ^^225  sterling  in  London,  or  $1,000  in  New 
York  or  Louisiana,  and  declaring  that  the  president  of  the 
company  was  authorized  by  his  indorsement  to  fix  the 
place  of  payment — a  blank  being  left  for  insertion  of  such 
place.  This  blank  was  never  filled  ;  and  the  bonds  were 
seized  and  carried  off  during  the  Confederate  war,  and  sold, 
with  past  due  coupons,  for  a  small  consideration,  in  New 
York.  The  court  held,  that  in  the  absence  of  the  required 
indorsement,  the  uncertainty  in  the  amount  payable  de- 
prived the  bonds  of  negotiability  ;  and  the  defect  being 
patent,  the  purchaser  could  not  be  regarded  as  a  bona  fide 
holder  without  notice.^ 

§  1497.  Place  of  payment — whether  it  may  be  outside  of 
the  State. — It  is  not  unusual  for  the  bonds  of  municipal 
and  other  corporations  to  specify  a  particular  banking 
house  as  a  place  of  payment,  and  still  more  frequently  is  it 
the  case  that  such  a  place  of  payment  is  specified  in  the 
coupons.  The  city  of  New  York,  as  the  great  monetary 
and  commercial  centre  of  the  country,  is  often  selected  for 
purposes  of  convenience  as  the  place  of  payment,  and  a 
particular  banking  house  designated. 

But  the  Supreme  Court  of  Illinois  has  held  that,  unless 
specially  authorized  so  to  do  by  the  legislature  of  the  State, 
a  municipal  corporation  can  not  bind  itself  to  pay  its  in- 
debtedness at  any  other  place  than  its  treasury.^     The  Su- 

'  Vol.  I.  §  53. 

"^  Parsons  v.  Jackson,  99  U.  S.  (9  Otto),  434.  See  Jackson  v.  Vicksburg,  etc.^ 
R.R.  Co.,  2  Woods  C.  C,  141 ;  §  1501. 

''Prettyman  v.  Tazewell  County,  19  III.,  406  ;  Pekin  v.  Reynolds,  31  111.,  530; 
People  ex  rel.,  etc.,  v.  Tazewell  County,  22  111.,  151,  Walker,  J.,  saying ;     "  It  is 


§  1497.    FORMAL  PARTS  OF  BONDS  AND  COUPONS.       5OI 

preme  Court  of  the  United  States  has,  however,  taken  a 
different  view ;  and  where  bonds  of  the  city  of  Muscatine 
were  made  payable  in  New  York  City,  and  objection  was 
made  that  it  was  unauthorized,  Swayne,  J.,  said  :  "  It  was 
according  to  general  usage  to  make  such  bonds  and  cou- 
pons payable  in  the  city  of  New  York.  It  added  to  the 
value  of  the  bonds,  and  was  beneficial  to  all  parties.  No 
legal  principle  forbids  it.  The  power  of  a  municipal  cor- 
poration to  make  any  contract  does  not  depend  upon  the 
place  of  performance,  but  upon  its  scope  and  object."* 
This  case,  which  seems  to  us  correct,  has  been  followed  in 
subsequent  ones  by  the  same  tribunal,  in  which  it  has  en- 
forced coupons  payable  beyond  State  limits.  And  the  like 
course  has  been  pursued  by  some  of  the  State  courts  in 
suits  on  the  coupons  of  railroad  companies.^     In  Illinois, 

objected  that  the  county  had  no  right  to  issue  bonds  or  other  obligations,  pay- 
able at  any  other  place  than  at  the  county  treasury.  This  court  held,  in  the  case 
of  Prettyman  v.  The  Board  of  Supervisors  of  Tazewell  County,  19  111.  R..  406, 
that  it  was  only  by  virtue  of  the  act  of  February,  1857,  authorizing  the  county 
courts  of  each  county  which  had  subscribed  to  the  Tonica  and  Petersburg  road 
to  make  the  interest  of  their  bonds  payable  at  any  place  they  might  choose. 
That  act  only  applied  to  subscriptions  to  that  particular  road,  and  can  have  no 
application  to  any  other.  And  it  was  tliere  held  that  the  county  court  had  no 
power  to  issue  bonds  payable  in  the  city  of  New  York,  for  want  of  express  au- 
thority by  legislative  enactment.  States,  counties,  and  corporations,  created  for 
public  convenience  only,  are  not  required  to  seek  their  creditors  to  discharge 
their  indebtedness,  but  when  payment  is  desired  the  demand  should  be  made  at 
their  treasury.  That  is  the  only  place  at  which  payment  can  be  legally  insisted 
upon,  and  it  is  the  onlv  place  where  the  treasurer  can  legally  have  the  public 
funds  with  which  he  is  intrusted.  To  authorize  the  auditor  to  draw  his  warrants 
on  the  treasurer,  payable  in  a  sister  Stale  or  in  a  foreign  countr\',  necessarily 
imposes  an  obligation  on  the  creditor  to  provide  funds  at  that  place  to  meet 
them.  And  his  duties  requiring  him  at  the  treasury,  would  require  the  employ- 
ment of  agents,  the  transmission  of  the  funds  at  a  risk  of  loss  and  at  a  consid- 
erable expense  in  charges,  insurance,  and  discounts,  which  are  not  incident  to 
its  payment  at  the  treasury.  And  the  same  reasons  apply  with  equal  lorce  to 
cities,  counties,  and  public  corporations  of  a  similar  character.  The  legislature 
has  conferred  no  such  general  power  upon  such  bodies,  and  in  its  absence  they 
have  no  power  to  make  their  indebtedness  payable  at  any  other  place  than  at 
their  treasury." 

'  Thompson  v.  Lee  Countv,  3  Wall.,  338  (coupons  of  Lee  County,  Iowa,  pay- 
able at  the  Continental  Bank,  New  York);  Gclpcke  v.  Dubuque,  I  Wall.,  178 
(coupons  of  the  city  of  Dubuque,  payable  at  the  Metropolitan  Bank,  New  York); 
Citv  of  Kenosha  v.  Lamson,  8  Wall.,  478  ;  Lynde  v.  County  of  Wmnebago,  i6 
Wall.,  13;  City  of  Lexington  v,  Butler,  14  Wall.,  289  (coupons  of  Lexmgton, 
Ky.,  payable  in  New  York). 

^  Conn.  Mut.  Life  Ins.  Co.  v.  Cleveland,  etc.,  R.R.  Co.,  41  Barb..  9.  The  cou- 
pons were  issued  by  the  Columbus,  P.qua  and  Indiana  R.R.  Co.  ot  Ohio,  and 
were  payable  at  the  office  of  the  Life  and  Trust  Co.  in  New  York  City. 


502  COUPON  BONDS.         §§  I498,  I499 

where  the  corporation  exceeds  its  authority  by  making  its 
securities  payable  outside  of  the  State,  it  has  been  held 
that,  although  that  particular  provision  would  be  invalid, 
nevertheless  the  security  would  be  binding  and  payable  at 
its  treasury,  in  like  manner  as  if  it  had  been  so  expressed 
upon  its  face.  Walker,  J.,  said  :  "  If  this  coupon  had  not 
contained  the  language,  '  at  the  city  of  New  York,'  it  would 
have  been  a  legal  instrument,  strictly  conforming  to  all  the 
requirements  of  the  law  authorizing  counties  to  issue  evi- 
dences of  indebtedness.  If,  then,  this  unauthorized  portion 
of  the  coupon  were  rejected,  it  would  be  in  conformity  to 
the  law,  and  for  the  purpose  of  upholding  it  the  law  will 
reject  that  portion  as  surplusage."^ 

§  1498.  Delivery. — Delivery  is  essential  to  the  validity  of 
a  coupon  bond,  as  it  is  to  every  contract  for  the  paym.ent 
of  money.  If  an  incomplete  bond  be  stolen,  without  any 
delivery  preceding,  it  has  been  held  that  it  would  be  void  in 
all  hands.^  But  if  completed,  it  is  conceived  that  the  law 
would  be  different.^  The  name  of  the  ■  payee  may  be  left 
blank  for  the  purpose  of  having  the  blank  filled  by  the 
name  of  the  holder.'*  If  the  coupons  refer  to  the  bonds  to 
which  they  were  attached,  and  purport  to  be  for  interest 
thereon,  the  purchaser  of  them  is  chargeable  with  notice 
of  all  that  the  bonds  contain.^ 

§  1499.  Bonds  blank  as  to  payee,  and  right  of  holder  to 
sue  in  Federal  courts. — In  the  United  States  Supreme 
Court,  where  suit  was  brought  upon  coupon  bonds  of  a 
railroad  company  payable  in  blank,  no  payee  being  named, 
and  it  appeared  that  they  were  issued  in  Massachusetts  to 
a  citizen  of  that  State,  and  passed  through  several  inter- 

'  Johnson  v.  County  of  Stark,  24  111.,  91. 

» Ledwick  v.  McKim,  53  N.  Y.,  31 5  ;  see  Redlick  v.  Doll,  54  N.  Y.,  236 ;  and 
chapter  xxvi,  §§  841,  842,  vol.  i;  i  Parsons  N.  &  B.,  114;  §  840,  note  I,  vol.  I. 

'  Chapter  xxvi,  §  i,  630,  vol.  i. 

*  See  chapter  v,  §  145,  note  3,  vol.  i  ;  and  chapter  XXVI,  §§  843,  844,  vol.  I. 

'  McClure  v.  Township  of  Oxford,  94  U.  S.  (4  Otto),  429 ;  Silliraan  v.  Fred 
ericksburg,  etc.,  R.R.,  27  Grat.,  119. 


§   I499'^-  FORMAL  PARTS  OF  BONDS  AND  COUPONS.  503 

vening  holders  to  the  plaintiff,  a  citizen  of  New  Hamp- 
shire, who  inserted  his  name  as  payee,  and  brought  suit  on 
the  bonds  in  the  Circuit  Court  of  the  United  States,  it  was 
objected  that,  as  the  bonds  were  issued  to  a  citizen  of  Mas- 
sachusetts, and  as  they  were  not  negotiable,  or,  if  negotia- 
ble, were  not  payable  to  bearer,  the  plaintiff  could  not  sue 
in  the  Federal  court.  But  the  United  States  Supreme 
Court  held,  that  "  it  was  the  intention  of  the  company,  by 
issuing  the  bonds  in  blank,  to  make  them  negotiable  and 
payable  to  the  holder  as  bearer,  and  that  the  holder  might 
fill  up  the  blank  with  his  own  name,  or  make  them  payable 
to  himself  or  bearer,  or  to  order.  In  other  words,  the 
company  intended  by  the  blank  to  leave  the  holder  his  op- 
tion as  to  the  form  or  character  of  negotiability  without 

restriction Until  the  plaintiff  chose  to  fill  up  the 

blank,  he  is  to  be  regarded  as  holding  the  bonds  as  bearer, 
and  he  held  them  in  this  character  until  made  payable  to 
himself  or  order.  At  that  time  he  was  a  citizen  of  New 
Hampshire,  and  therefore  competent  to  bring  the  suit  in 
the  court  below."  ^ 

§  1499(2.  Figures  denoting  fiumber  of  bond  arc  no  part 
of  it. — Frequently  the  bond  and  its  coupons  are  marked  by 
the  party,  with  figures  denoting  their  number  in  the  par- 
ticular series  to  which  they  belong.  The  number  is  put 
upon  them  for  the  convenience  and  protection  of  the 
maker,  but  it  does  not  enter  into,  or  in  anywise  affect,  the 
agreement  embodied  in  them.  The  purchaser  of  the  bond 
or  coupon  has  nothing  to  do  with  it,  and  need  give  it  no 
heed.  Therefore,  an  alteration  or  erasure  of  the  number 
is  immaterial,  and  will  not  affect  the  rights  of  the  holder 
of  the  instrument.* 


'  White  V.  Vermont,  etc.,  R.R.  Co.,  21  How.,  575  ;  quoted  and  approved  in 
Preston  v.  Hull,  23  Grat.,  613.     See  §§  1494.  HQ^- 

»  Citv  of  Elizabeth  v.  Force,  29  N.  J.  Eq.,  591,  overruling  28  N.  J.  Eq.,  587; 
Berdsell  V.  Russell,  29  N.  Y.,  220;  Commonwealth  v.  Industrial  Emigration 
Savings  Bank,  98  Mass.,  12.     See  ante,  §  86. 


504  COUPON  BONDS.  §§  i499<5, 1499^. 

§  1499(5.  Transfer  by  indorsement  a7id  by  delivery. 
Sales  of  bonds. — We  have  seen  already  that  negotiable 
bonds  may  be  transferred  by  indorsement,  or  by  delivery, 
as  the  case  may  be.^  It  has  been  held  that  a  railroad  com- 
pany, which  has  transferred  by  indorsement  a  negotiable 
bond  issued  by  a  mmiicipal  corporation,  is  bound  as  an  in- 
dorser  of  negotiable  paper,  if  its  liability  be  fixed  by  a 
proper  demand  and  notice.  It  has  been  suggested  tha*- 
such  a  liability  is  not  fairly  within  the  contemplation  of  the 
parties  to  an  indorsement  of  a  bond  which  may  have  twenty 
or  even  forty  years  to  run  ;  but  the  reply  is  made  that 
"whatever  force  this  view  might  have  in  case  of  an  in- 
dorsement of  such  an  instrument  by  an  individual,  it  has 
none  in  case  of  a  corporation  which  does  not  die."^  The 
transferrer  by  delivery  of  a  negotiable  bond  engages  that 
it  is  the  genuine  article  it  purports  to  be  ;  and  if  it  turn  out 
to  be  forged,  the  transferee  may  recover  the  purchase  money 
from  the  transferrer,  without  any  offer  to  return  the  bond.^ 
The  sale  of  bonds  is  elsewhere  considered.^ 

§  1499^.  Where  bonds  of  a  corporation,  as  prepared  for 
issue  and  sale,  promise  payment  in  lawful  money,  and  as 
such  are  guaranteed  by  a  State,  a  stipulation  that  they  shall 
be  paid  in  coin  subsequently  indorsed  upon  them  by  the 
corporation  in  accordance  with  the  requirement  of  pur- 
chasers from  it  is  supplementary  and  subsidiary,  and  binds 
only  the  corporation.^ 


'  Ante,  §  1496. 

"^  Jones  on  Railroad  Securities,  §  348  ;  Bonner  v.   City   of  New   Orleans,  2 
Woods,  135. 

'  Smith  V.  McNair,  19  Kansas,  330;  First  Nat.  Bank  v.  Peck,  8  Kansas,  660. 
See  §§731  et  seq. 
*  §§  1533.  1534-  •*  Wallace  v.  Loomis,  97  U.  S.  (7  Otto),  147. 


§  1500.    THE  NEGOTIABILITY  OF  COUPON  BONDS.       505 


SECTION    III. 

THE   NEGOTIABILITY   OF   COUPON   BONDS,  AND  THE   RIGHTS  AND 
DUTIES   OF  THE   HOLDER   OR   PURCHASER. 

§  1500.  As  to  the  negotiability  of  coupon  bonds. — There 
no  longer  remains  a  shadow  of  doubt  that  the  coupon  bonds 
of  the  United  States,  of  the  several  States,  and  of  municipal 
and  other  corporations,  when  expressed  in  negotiable  words, 
are  as  negotiable  to  all  intents  and  purposes  as  bills  of  ex- 
change or  promissory  notes.  They  have  been  so  declared  by 
the  courts  of  highest  resort  in  many  of  the  States,^  and  by  a 
series  of  decisions  of  the  Supreme  Court  of  the  United 
States.^  A  solitary  decision  here  or  there  to  the  contrary 
may  be  found,^  but  as  authority  it  would  doubtless  weigh 
as  lightly  before  any  State  tribunal  which  has  not  yet  de- 

'  Arents  v.  Commonwealth,  18  Grat.,  773;  Virginia  and  Tenn.  R.R.  Co.  v. 
Clay  (Special  Court  of  Appeals  of  Va.,  1873,  not  reported) ;  Railway  v.  Cleneay, 
13  Ind.,  161  ;  Clark  v.  Janesville,  10  Wise,  136  ;  Mills  v.  Jefferson,  20  Wise,  50; 
Clapp  V.  County  of  Cedar,  5  Clarke,  15  ;  Barrett  v.  County  Court,  44  Mo.,  197; 
Ringling-  v.  Kohn,  4  Mo.  Ap.,  63  ;  Lafayette  Sav.  Bank  v.  Stoneware  Co.,  4  Mo. 
Ap.,  276;  see  Johnson  v.  County  of  Stark,  24  III.,  75;  Crai^  v.  City  of  Vicks- 
burg,  31  Miss.,  216 ;  Chapin  v.  Vt.  &  Mass.  R.R.,  8  Gray,  575  ;  Society  for  Sav- 
ings V.  Citv  of  New  London,  29  Conn.,  174;  National  Exchange  Bank  v.  Hart- 
ford, etc.,  R.R.  Co.,  8  R.  L,  379  ;  Virginia  v.  Ches.  &  Ohio  Canal  Co.,  32  Md., 
501;  Conn.  Mutual  Life  Ins.  Co.  v.  Cleveland,  etc.,  R.R.  Co.,  41  Barb.,  9; 
Spooner  v.  Holmes,  102  Mass.,  503  ;  Hinckley  v.  Union  Pacific  R.R.,  129  Mass., 
52;  Morris  Canal,  etc.,  Co.  v.  Fisher,  i  Stock.,  667;  Langston  v.  S.  C.  R.R.  Co., 
2  So.  Car.  N.  S.,  248  ;  Weith  v.  City  of  Wilmington,  68  N.  C,  341  ;  San  Antonio 
V.  Lane,  32  Tex.,  405  ;  Bank  of  Rome  v.  Village  of  Rome,  19  N.  Y..  24;  Seybel 
V.  National  Currency  Bank,  54  N.  Y.,  288 ;  Evertsen  v.  Nat.  Bank  of  Newport, 
4  Hun  (II  N.  Y.  S.  C.  R.),  695;  66  N.  Y.,  15;  Consolidated  Association  v. 
Avegno,  28  La.,  552  ;  City  of  Elizabeth  v.  Force,  29  N.  J.  Eq.,  587  ;  Durant  v. 
Iowa  County,  i  Woolworth  C,  C,  72  ;  State  ex  rel.  Flock  v.  Cobb,  64  Ala.,  128 ; 
Blackman  v.  Lehman,  63  Ala.,  519  ;  First  N.  B.  v.  Mount  Tabor,  52  Vt.,  87. 

"  White  V.  Vermont  &  Mass.  -R.R.  Co.,  21  How.,  575  ;  Moran  v.  Commission- 
ers of  Miami  County,  2  Black,  722 ;  Mercer  County  v.  Hackett,  i  Wall.,  83 ; 
Gelpcke  v.  City  of  Dubuque,  i  Wall.,  175;  Meyer  v.  Muscatine,  i  Wall.,  382; 
Murray  v.  Lardner,  2  Wall.,  no;  Thompson  v.  Lee  County,  3  Wall.,  227; 
Supervisors  v.  Schenck,  5  Wall.,  772  ;  Aurora  City  v.  West,  7  Wall.,  82  ;  Com- 
missioners of  Manor  v.  Clark,  94  U.  S.  (4  Otto),  279 ;  and  many  other  cases. 
See  next  chapter. 

'Diamond  v.  Lawrence  County,  37  Penn.  St.,  353.  "  We  will  not  treat  these 
bonds  as  negotiable  securities.  On  this  ground  we  stand  alone.  All  the  courts. 
American  and  English,  are  against  us." 


506  COUPON  BONDS.  §  I5OI. 

termined  the  question  as  a  decision  of  Lord  Holt  against 
the  negotiabihty  of  a  promissory  note  would  now  weigh  in 
Westminster  Hall.  If  the  bond  contain  no  negotiable 
words,  it  is  not  negotiable.^ 

§  1 50 1.  In  the  United  States  Supreme  Cour^,^  a  case  was 
heard  from  Pennsylvania,  in  which  the  obligatory  part  of 
the  bonds  ran  :  "  Know  all  men  by  these  presents,  that  the 
county  of  Mercer,  in  the  Commonwealth  of  Pennsylvania, 
is  indebted  to  the  Pittsburgh  &  Erie  Railroad  Company, 
in  the  full  and  just  sum  of  $i,ooo,  which  sum  of  money 
said  county  agrees  and  promises  to  pay  twenty  years  after 
the  date  hereof  to  the  said  Pittsburgh  &  Erie  Railroad 
Company,  or  bearer,  with  interest  at  the  rate  of  six  per 
centum  per  annum,  payable  semi-annually,  etc.,"  and  was 
signed  under  the  corporate  seal  of  the  county. 

The  court  sustained  their  negotiability,  and  said  Grier, 
J.  :  "This  species  of  bond  is  a  modern  invention,  intended 
to  pass  by  manual  delivery  ;  and  their  value  depends  mainly 
upon  this  character.  Being  issued  by  States  and  corpora- 
tions, they  are  necessarily  under  seal.^  But  there  is  nothing 
immoral  or  contrary  to  good  policy  in  making  them  nego- 
tiable, if  the  necessities  of  commerce  require  that  they  should 
be  so.  A  mere  technical  dogma  of  the  courts  or  the  com- 
mon law  can  not  prohibit  the  commercial  world  from  in- 
venting or  using  any  species  of  security  not  known  in  the 
last  century.  Usages  of  trade  and  commerce  are  acknowl- 
edged by  courts  as  part  of  the  common  law,  although  they 
may  have  been  unknown  to  Bracton  or  Blackstone  ;  and  this 
malleability  to  suit  the  necessities  and  usages  of  the  mer- 
cantile and  commercial  world  is  one  of  the  most  valuable 
characteristics  of  the  common  law.     When  a  corporation 


'  City  of  Atchison  v.  Butcher,  3  Kan.,  104. 

'  Mercer  County  v.  Racket,  I  Wall..  83. 

'This  is  not  a  correct  statement  of  the  law.  The  seal  maybe  omitted  except 
where  the  corporation  can  only  contract  by  its  charter  by  a  sealed  instrument 
Afite,  §  1485. 


§   1501^.  THE  NEGOTIABILITY  OF  COUPON  BONDS.  507 

covenants  to  pay  to  bearer,  and  gives  a  bond  with  negotia- 
ble qualities,  and  by  this  means  obtains  funds  for  the  use- 
ful enterprises  of  the  day,  it  can  not  be  allowed  to  evade 
the  payment  by  parading  some  obsolete  judicial  decision 
that  a  bond,  for  some  technical  reason,  can  not  be  made 
payable  to  bearer." 

Thus  we  see  that  the  usages  of  trade,  overriding  the 
ancient  doctrines  of  the  common  law,  engrafted  the  quality 
of  negotiability  upon  these  instruments — exhibiting  a  lively 
illustration  of  the  progressive  spirit  of  commercial  law  which 
is  continuously  moulding  itself  to  conform  to  the  wants  of 
society  and  the  transactions  of  business  men.  Where  the 
bonds  are  for  an  uncertain  sum — as,  for  instance,  for  so  many 
pounds  sterling,  if  payable  in  London,  or  for  so  many  dol- 
lars, if  payable  in  New  York  or  New  Orleans,  and  the  cou- 
pons are  of  like  purport, — neither  bonds  nor  coupons  will 
be  negotiable,  the  uncertain  element  depriving  them  of 
their  otherwise  negotiable  character.^ 

§  1501^.  Whether  statutory  tests  of  negotiability  apply  to 
bonds  and  coupons. — In  some  of  the  States  there  are  peculiar 
requisites  to  the  negotiability  of  notes,  as  in  Virginia,  for 
instance,  where  it  is  necessary  that  they  be  payable  at  a 
bank.*  But  coupons  of  bonds,  and  the  bonds  themselves, 
when  issued  by  corporations  with  negotiable  words,  are 
there  deemed  negotiable  instruments,  although  not  conform- 
ing to  the  statutory  test.^  In  Alabama  it  is  provided  by 
statute  that  "  all  bonds,  bills,  or  notes,  except  those  issued  to 
circulate  as  money,  payable  to  anything  or  bearer,  to  any 
fictitious  person  or  bearer,  or  to  bearer  only,  must  be  con- 
strued as  payable  to  the  person  from  whom  the  considera- 
tion moved  ;  if  payable  to  an  existing  person  or  bearer,  must 
be  construed  as  payable  to  such  person  or  order."*     This 


1  Jackson  v.  Vicksburg-,  etc.,  R.R.  Co.,  2  Woods  C.  C,  141.  See  ante,  §  1496a. 

*  See  a7ite,  §§  90,  1497. 

'  Arents  v.  Commonwealth,  18  Grat.,  750;  ante,  §  1496. 

*Code  of  Alabofma  of  1876,  §  2098. 


5o8  COUPON  BONDS.  §§  i5oi^,  1502 

statute  has  been  there  held  to  apply  to  municipal  bondg 
payable  to  bearer,  and  it  was  adjudged  that  they  were  not 
neofotiable  unless  indorsed.^ 

§  1501^.  Registered  bonds. — The  provision  in  a  bond 
that  it  may  be  "  registered  and  made  payable  by  transfer 
only  on  the  books  of  the  company  "  issuing  it,  does  not  of 
itself  make  it  non-negotiable  by  the  customary  methods  of 
transfer.  Such  provisions  are  frequently  inserted  in  bonds, 
and  they  entitle  the  holder  to  convert  them  into  registered 
bonds,  and  to  render  them  transferable  only  upon  the  books 
of  the  company.^ 

§  1502.  The  holder  or  purchaser  of  coupon  bonds. — The 
rights  of  the  purchaser  or  holder  of  a  coupon  bond  are  de- 
termined by  the  same  principles  which  control  those  of  the 
purchaser  or  holder  of  a  bill  or  note.  If  a  party  proposes 
to  purchase  a  bond  from  the  State  or  corporation  issuing  it, 
he  should  inquire  in  the  first  place  whether  or  not  the 
State  or  corporation  has  legal  power  to  issue  it.  For  as  the 
bill  or  note  of  an  infant  or  lunatic  is  utterly  void,  so  is  any 
instrument  issued  by  a  State  or  corporation  when  it  has  no 
legal  power  to  do  so.  In  the  second  place,  the  negotiator 
should  see  that  the  person  undertaking  to  represent  the 
State  or  corporation  is  authorized  to  do  so.  For  if  the 
instrument  be  in  fact  a  forgery,  and  never  had  any  legal  in- 
ception as  an  obligation,  it  can  not  be  enforced,  because  the 
forgery  was  so  skilfully  performed  as  to  deceive  an  inno- 
cent purchaser.^  In  the  third  place,  the  competency  of 
principal  and  agent  being  established,  he  should  see  that  all 
the  formalities  of  a  public  character  required  by  law  are 
pursued  in  the  execution  and  issue  of  the  instrument. 
And  then  in  Xh^  fourth  place,  let  him  see  that  there  is  no 
usury  in  his  purchase. 


^Blackman  v.  Lehman,  63  Ala.,  547. 

"  Savannah  &  Memphis  R.R.  v.  Lancaster,  63  Ala.,  563. 

»  Maas  V.  M.  K.  &  T.  R.R.,  18  N.  Y.  S.  C.  (ii  Hun),  13. 


§   1503-  'T^^^  NEGOTIABILITY  OF  COUPON  BONDS.  5O9 

§  1 503.  Gross  negligence  does  not  vitiate  holder  s  title. — ■ 
Where  the  holder  has  acquired  the  bond  or  the  coupons 
under  such  circumstances  as  constitute  him  a  bona  fid& 
holder  for  value  and  without  notice,  he  is  entitled  to  full 
protection  against  all  equities  and  frauds  which  would  have 
affected  the  title  of  a  previous  holder.  And  it  is  well 
settled  that  gross  negligence  in  the  purchaser  will  not  alone 
vitiate  the  holder's  title.^  In  a  leading  case  decided  by  the 
Supreme  Court  of  the  United  States,  it  appeared  that 
Lardner  owned  Camden  and  Amboy  Railroad  coupon 
bonds,  payable  to  bearer,  which  were  deposited  in  an  iron 
safe  in  Philadelphia.  On  the  night  of  23d  of  February, 
1859,  they  were  stolen,  and  on  the  morning  of  the  next 
day,  the  24th,  they  were  negotiated  to  Murray,  a  broker,  at 
his  office  on  Wall  Street,  New  York.  Lardner  sued  Mur- 
ray in  detinue  for  the  bonds,  but  was  cast  in  the  suit  before 
the  Supreme  Court  of  the  United  States. 

Mr.  Justice  Swayne,  who  delivered  the  opinion,  disap- 
proved Gill  V.  Cubitt,  3  Barn.  &  Cres.,  466,  and  quoted 
with  approval  Goodman  v.  Harvey,  4  Ad.  &  El,  870,  in 
which  Lord  Denman  said  :  "  I  believe  we  are  all  of  opinion 
that  gross  negligence  only  would  not  be  a  sufficient  answer, 
where  the  party  has  given  a  consideration  for  the  bill. 
Gross  negligence  may  be  evidence  of  mala  fides,  but  is  not 
the  same  thing.  We  have  shaken  off  the  last  remnant  of 
the  contrary  doctrine.  Where  the  bill  has  passed  to  the 
plaintiff,  without  any  proof  of  bad  faith  in  him,  there  is  no 
objection  to  his  title";  and  considering  that  the  good  faith 
of  Murray  in  the  transaction  had  not  been  impeached, 
decided  in  his  favor.  He  cited  also  Swift  v.  Tyson,  16 
Pet.,  I  ;  Goodman  v.  Simonds,  20  How.,  343  ;  and  Bank 
of  Pittsburg  V.  Neal,  22  How.,  96  ;  and  declared  it  to  be 
the  settled  law  of  the  court  in  respect  to  commercial 
papers — 

•  See  chapter  xxiv,  sec.  i,  p.  627,  vol.  I, 


5IO  COUPON   BONDS.  §  I503 

1.  That  possession  and  title  are  one  and  inseparable. 

2.  The  party  who  takes  it  before  due  for  a  valuable  con- 
sideration, without  knowledge  of  any  defect  of  title,  and  in 
good  faith,  holds  it  by  a  title  valid  against  all  the  world. 
Suspicion  of  defect  of  title  or  the  knowledge  of  circum- 
stances which  would  excite  such  suspicion  in  the  mind  of  a 
prudent  man,  or  gross  negligence  on  the  part  of  the  taker, 
at  the  time  of  the  transfer,  will  not  defeat  his  title.  That 
result  can  be  produced  only  by  bad  faith  on  his  part. 

3.  The  burden  of  proof  lies  on  the  person  who  assails  the 
right  claimed  by  the  party  in  possession.^     It  should  be  ob- 


'  Murray  v.  Lardner,  2  Wall.,  no.  In  his  opinion  it  was  said  by  Mr.  Justice 
Swayne  :  "  What  state  of  facts  should  be  deemed  inconsistent  with  the  g-ood  faith 
required,  was  not  settled  by  the  earlier  cases.  In  Lawson  v.  Weston  (4  Esp.,  56), 
Lord  Kenyon  said  :  '  If  there  was  any  fraud  in  the  transaction,  or  if  a  botta  fide 
consideration  had  not  been  paid  for  the  bill  by  the  plaintiffs,  to  be  sure  they 
could  not  recover;  but  to  adopt  the  principle  of  the  defence  to  the  full  extent 
stated,  would  be  at  once  to  paralyze  the  circulation  of  all  the  paper  in  the  coun- 
try, and  with  it  all  its  commerce.  The  circumstance  of  the  bill  having-  been  lost 
might  have  been  material,  if  they  could  bring  knowledge  of  that  fact  home  to 
the  plaintiffs.  The  plaintiffs  might  or  might  not  have  seen  the  advertisement ; 
and  it  would  be  going  a  great  length  to  say  that  a  banker  was  bound  to  make 
inquiry  concerning  every  bill  brought  to  him  to  discount ;  it  would  apply  as  well 
to  a  bill  for  £^\o  as  for  ^10,000.'  In  the  later  case  of  Gill  v.  Cubitt  (3  B.  &  C, 
466),  Abbott,  C.  J.,  upon  the  trial,  instructed  the  jury,  '  That  there  were  two 
questions  for  their  consideration:  First,  whether  the  plaintiff  had  given  value 
for  the  bill,  of  which  there  could  be  no  doubt ;  and,  second,  whether  he  took  it 
under  circumstances  which  ought  to  have  excited  the  suspicion  of  a  prudent  and 
careful  man.  If  they  thought  he  had  taken  the  bill  under  such  circumstances, 
then,  notwithstanding  he  had  given  the  full  value  for  it,  they  ought  to  find  a  ver- 
dict for  the  defendant.'  The  jury  found  for  the  defendant,  and  a  rule  nisi  for  a 
new  trial  was  granted.  The  question  presented  was  fully  argued.  The  instruc- 
tion given  was  unanimously  approved  by  the  court.  The  rule  was  discharged, 
and  judgment  was  entered  upon  the  verdict.  This  case  clearly  overruled  the 
prior  case  of  Lawson  v.  Weston,  and  it  controlled  a  large  series  of  later  cases. 
In  Cook  v.  Jadis  (5  B.  &  Ad.,  509),  the  action  was  brought  by  the  indorsee  of  a 
bill  against  the  drawer.  It  was  held  that  it  was  '  no  defence  that  the  plaintiff 
took  the  bill  under  circumstances  which  ought  to  have  excited  the  suspicion  of 
a  prudent  man  that  it  had  not  been  fairly  obtained  ;  the  defendant  must  show 
that  the  plaintiff  was  guilty  of  gross  negligence.'  In  Backhouse  v.  Harrison  (5 
B.  &  Ad.,  1098),  the  same  doctrine  was  affirmed,  and  Gill  v.  Cubitt  was  earnest- 
ly assailed  by  one  of  the  judges.  Patterson,  J.,  said  :  '  I  have  no  hesitation  in 
saying  that  the  doctrine  laid  down  in  Gill  v.  Cubitt,  and  acted  upon  in  other 
cases,  that  a  party  who  takes  a  bill  under  circumstances  which  ought  to  have 
excited  the  suspicion  of  a  prudent  man  can  not  recover,  has  gone  too  far,  and 
ought  to  be  restricted.  I  can  perfectly  understand  that  a  party  who  takes  a  bill 
fraudulently,  or  under  such  circumstances  that  he  must  know  that  the  person 
offering  it  to  him  has  no  right  to  it,  will  acquire  no  title  ;  but  I  never  could  un- 
derstand that  a  party  who  takes  a  bill  bona  fide,  but  under  the  circumstances 
mentioned  in  Gill  v.  Cubitt,  does  not  acquire  a  property  in  it.     I  think  the  fact 


§1503.  THE  NEGOTIABILITY  OF  COUPON  BONDS.  5II 

served,  and  remembered  in  considering  this  subject,  that  the 
cases  in  which  estoppels  and  waivers  are  held  binding  upon 
the  corporation  issuing  coupon  bonds,  are  those  in  which  the 

found  by  the  jury  here,  that  the  plaintiff  took  the  bills  bona  fide,  but  under  cir- 
cumstances that  a  reasonably  cautious  man  would  not  have  taken  them,  was  no 
defence.'  In  Goodman  v.  Harvey  (4  Ad.  &  El.,  870),  the  subject  again  came 
under  consideration.  Lord  Denman,  speaking  for  the  court,  held  this  language  : 
'  I  believe  we  are  all  of  opinion  that  gross  negligence  only  would  not  be  a  sufficient 
answer  where  the  party  has  given  a  consideration  for  the  bill.  Gross  negligence 
may  be  evidence  of  viala  fides,  but  it  is  not  the  same  thing.  We  have  shaken 
off  the  last  remnant  of  the  contrary  doctrine.  Where  the  bill  has  passed  to  the 
plaintiff,  without  any  proof  of  bad  faith  in  him,  there  is  no  objection  to  his  title.' 
A  final  blow  was  thus  given  to  the  doctrine  of  Gill  v.  Cubitt.  The  rule  estab- 
lished in  this  case  has  ever  since  obtained  in  the  English  courts,  and  may  now 
be  considered  as  fundamental  in  the  commercial  jurisprudence  of  that  country. 
In  this  countr)'  there  has  been  the  same  contrariety  of  decisions  as  in  the  Eng- 
lish courts,  but  there  is  a  large  and  constantly  increasing  preponderance  on  the 
side  of  the  rule  laid  down  in  Goodman  v.  Harvey.  The  question  first  came  be- 
fore this  court  in  Swift  v.  Tyson.  Goodman  v.  Harvey,  and  the  class  of  cases 
to  which  it  belongs,  were  followed.  The  court  assumed  the  proposition,  which 
they  maintain  to  be  too  clear  to  require  argument  or  authority  to  support  it. 
The  ruling  in  that  case  was  followed  in  Goodman  v.  Simonds,  and  again  in  the 
Bank  of  Pittsburg  v.  Neal.  In  Goodman  v.  Simonds  the  subject  was  elaborate- 
ly and  exhaustively  examined  both  upon  principle  and  authority.  That  case 
affirms  the  following  propositions  :  The  possession  of  such  paper  carries  the  title 
with  it  to  the  holder.  '  The  possession  and  title  are  one  and  inseparable.'  The 
party  who  takes  it  before  due  for  a  valuable  consideration,  without  knowledge 
of  any  defect  of  title,  and  in  good  faith,  holds  it  by  a  title  valid  against  all  the 
world.  Suspicion  of  defect  of  title  or  the  knowledge  of  circumstances  which 
would  excite  such  suspicions  in  the  mind  of  a  prudent  man,  or  gross  negligence 
on  the  part  of  the  taker,  at  a  time  of  the  transfer,  will  not  defeat  his  title.  That 
result  can  be  produced  only  by  bad  faith  on  his  part.  The  burden  of  proof  lies 
on  the  person  who  assails  the  right  claimed  by  the  party  in  possession.  Such  is 
the  settled  law  of  this  court,  and  we  feel  no  disposition  to  depart  from  it.  The 
rule  may  perhaps  be  said  to  resolve  itself  into  a  question  of  honesty  or  dishon- 
esty, for  guilty  knowledge  and  wilful  ignorance  alike  involve  the  result  of  bad 
faith.  They  are  the  same  in  effect.  Where  there  is  no  fraud  there  can  be  no 
question.  The  circumstances  mentioned,  and  others  of  a  kindred  character, 
while  inconclusive  in  themselves,  are  admissible  in  evidence  ;  and  fraud  estab- 
lished, whether  by  direct  or  circumstantial  evidence,  is  fatal  to  the  title  of  the 
holder.  The  rule  laid  down  in  the  class  of  cases  of  which  Gill  v.  Cubitt  is  the 
antetype,  is  hard  to  comprehend  and  difficult  to  apply.  One  innocent  holder 
may  be  more  or  less  suspicious  under  similar  circumstances  at  one  time  than  at 
another,  and  the  same  remark  applies  to  prudent  men.  One  prudent  man  may 
also  suspect  where  another  would  not,  and  the  standard  of  the  jury  may  be 
higher  or  lower  than  that  of  other  men  equally  prudent  in  the  management  of 
their  affairs.  The  rule  established  by  the  other  line  of  decisions  has  the  advan- 
tage of  greater  clearness  and  directness.  A  careful  judge  may  readily  so  sub- 
mit a  case  under  it  to  the  jury  that  they  can  hardly  fail  to  reach  the  right  con- 
clusion. We  are  well  aware  of  the  importance  of  the  principle  involved  in  this 
inquiry.  These  securities  are  found  in  the  channels  of  commerce  everywhere, 
and  their  volume  is  constantly  increasing.  They  represent  a  large  part  of  the 
wealth  of  the  commercial  world.  The  interest  of  the  community  at  large  in  the 
subject  is  deep-rooted  and  wide-branching.  It  ramifies  in  every  direction,  and 
its  fruits  enter  daily  into  the  affairs  of  persons  in  all  conditions  of  life.  WHiile 
courts  should  be  careful  not  so  to  shape  or  apply  the  rule  as  to  invite  aggression 


^12  COUPON    BONDS.  §   I504' 

bonds  are  in  the  hands  of  bona  fide  holders  for  value  with- 
out notice  of  defects,  and  irregularities  in  their  issue.  Such 
defects  and  irregularities,  if  material,  are  available  against 
a  holder  who  paid  nothing,  or  who  had  notice  of  them,^  un- 
less indeed  he  sustains  himself  through  the  perfected  title 
of  an  antecedent  holder.^ 

§  1 504.  Views  of  the  English  courts  as  to  the  negotia- 
bility of  investment  securities. — In  England  there  is  a  grow- 
ing disposition  to  favor  the  negotiabiUty  of  instruments 
similar  to  the  coupon  bonds  of  this  country,  but  they  are 
not  yet  placed  upon  so  clear  and  stable  a  footing. 

In  181 1,  the  Court  of  King's  Bench  having  expressed 
strong  doubt  whether  a  bona  fide  purchaser  for  value  of 
bonds  of  the  East  India  Company  would  be  protected 
against  a  former  owner,  from  whom  they  had  been  obtained 
by  fraud  or  theft,  upon  the  ground  that  being  choses  in 
action  they  were  not  assignable  at  law,  and  that  the  pur- 
chaser acquired  no  legal  title,^  Parliament  immediately 
enacted  that  such  bonds  should  be  assignable  and  transfer- 
able by  delivery,  and  that  the  money  secured  by,  and  the 
property  in,  them  should  be  absolutely  vested  in  the  assignee 
at  law  as  well  as  in  equity."  Soon  after,  it  was  held  that  an 
exchequer  bill  passed  by  delivery,  and  that  the  property 


or  ffive  an  easy  triumph  to  fraud,  they  should  not  forget  the  considerations  of 
equal  importance  which  lie  in  the  other  direction.  In  Miller  v.  Race,  Lord 
Mansfield  placed  his  judgment  mainly  on  the  ground  that  there  was  no  differ- 
ence in  principle  between  bank  notes  and  money.  In  Grant  v.  Vaughn,  he  held 
that  there  was  no  distinction  between  bank  notes  and  any  other  commercial 
paper.  At  that  early  period  his  far-reaching  sagacity  saw  the  importance  and 
the  bearings  of  the  subject.  The  instruction  under  consideration  in  the  case 
before  us  i's  in  conflict  with  the  settled  adjudications  of  this  court."  See,  also, 
Morris  Canal  &  Banking  Co.  v.  Fisher,  i  Stockt.  Ch.,  667;  Mechanics  Bank  v. 
New  York  &  New  Haven  R.R.  Co.,  3  Kern,  599 ;  Moran  v.  Commissioners,  2 
Black,  722 ;  and  ante,  §§  770  et  seq.,  vol.  I  ;  City  of  Elizabeth  v.  Force,  29  N.  J. 
Eq..  587. 

'  Chambers  County  v.  Clews  21  Wall.,  321. 

=  See  vol.  I,  §§  803  et  seq. ;  Commissioners  v.  Balles,  94  U.  S.  (4  Otto),  109 
Commissioners  v.  Clark,  94  U.  S.  (4  Otto),  279  ;  McClure  v.  Township  of  Oxford 
94  U.  S.  (4  Otto),  432. 

"^  Glyn  v.  Baker,  i  East.,  510.  *  5^  George  III.,  ch.  64. 


§   15^5-  '^'^^^  NEGOTIABILITY  OI"  COUPON  BONDS.  513 

vested  in  a  bona  fide  holder.^  Subsequently,  the  same  doc- 
trine was  applied  to  Prussian  bonds,  payable  to  the  holder,^ 
and,  later  still,  it  was  left  to  a  jury  to  determine  whether 
Neapolitan  bonds,  with  coupons,  passed  in  like  manner.^ 
More  recently,  in  the  House  of  Lords,  it  has  been  held  (af- 
firming the  judgment  of  the  Court  of  Exchequer  Chamber, 
which  accorded  with  the  previous  judgment  of  the  Court  of 
Exchequer),  that  the  scrip  of  a  foreign  government,  issued 
by  it  on  negotiating  a  loan  (which  scrip  promised  to  give  to 
the  bearer,  after  all  instalments  should  have  been  duly  paid, 
a  bond  for  the  amount  paid,  with  interest),  is,  by  the  custom 
of  all  the  stock  markets  of  Europe,  a  negotiable  instrument, 
and  passes  by  mere  delivery  to  a  bona  fide  holder  for  value  ; 
that  the  English  law  follows  this  custom,  and  any  person 
taking  it  in  good  faith  obtains  a  title  to  it,  independent  of 
the  title  of  the  person  from  whom  he  took  it.^  And  the  like 
views  were  taken  as  to  scrip  of  a  banking  company,  which 
certified  that  the  bearer  would  be  entitled  to  be  registered 
as  the  holder  of  certain  of  its  shares.^ 

§  1505.  Overdue  coupons.— h.  coupon  becomes  due,  as 
we  have  already  seen,  on  the  very  day  fixed  for  payment  of 
interest  on  the  bond  (without  grace),  whether  it  be  drawn 
in  the  form  of  a  bill,  note,  check,  or  mere  interest  warrant.' 
And  as  soon  as  that  day  passes  it  is  regarded  as  dishonor, 
like  other  commercial  paper  remaining  unpaid  at  maturity  ; 
and  if  thereafter  transferred,  the  transferee  takes  it  subject 
to  all  frauds  and  equities  with  which  it  was  affected  in  the 
hands  of  his  transferrer.     In  a  case  in  Virginia,  it  appeared 

«  Wookey  v.  Pole,  4  B.  &  Aid.,  i.  '  Gorgier  v.  Melville,  3  B.  &  C,  45. 

'  Lang-  V.  Smith,  7  Bing.,  284. 

*  Goodwin  v.  Roberts,  i  Appeal  Cases,  476  (1S76)  ;  16  Moaks'  Eng.  Reports, 
119  (affirming  judgment  of  the  Court  of  Exchequer  Chamber),  L.  R.,  10  Exch. 
R-.  337  (1^75)  ;  14  Moaks'  R.,  591  ;  and  of  the  Court  of  Exchequer,  L.  R.,  10 
Exch.,  76  (1875) ;  12  Moaks'  R.,  525.  The  same  doctrine  is  held  in  Rumball  v. 
Metropolitan  Bank  (1877),  2  Q.  B.  Div„  194;  20  Moaks'  E.  R.,  276. 

'  Rumball  v.  Metropolitan  Bank,  2  Q.  B.  Div.,  194  (1877)- 

•  Arents  v.  Commonwealth,  18  Grat.,  773;  Bank  of  Louisiana  v.  City  of  New 
Orleans,  5  Am.  Law.  Reg.  N.  S.,  555  ;  ante,  §  1490. 

Vol.  II.— 33 


514  COUPON  BONDS.  §  I506 

that  the  coupons  of  certain  bonds  of  the  city  of  Wheeling, 
which  were  guaranteed  by  the  State  of  Virginia,  became 
due  and  payable  at  different  times  from  January  ist, 
1862,  to  January  ist,  1864,  inclusive.  The  plaintiff 
purchased  them  boiia  fide  from  the  Farmers'  Bank 
in  November,  1864.  It  did  not  appear  by  what  title 
the  bank  held,  and  the  coupons  had  been  stolen  from 
the  second  auditor  of  the  State  of  Virginia,  by 
whom  they  had  been  taken  up  soon  after  they  became 
payable.  They  were  held  by  the  court  as  overdue  after  the 
ist  of  January,  1864,  the  day  of  payment,  and  that  accord- 
ingly the  plaintiff  could  not  recover  against  the  State. 
"  No  principle,"  said  Joynes,  J.,  "is  better  settled  than  that 
a  party  who  takes  a  negotiable  instrument  by  indorsement 
or  delivery,  after  it  has  become  due,  gets  no  better  title 
than  the  party  had  from  whom  he  received  it.  These  cou- 
pons were  overdue  when  they  came  into  the  hands  of  the 
plaintiff,  and  the  transfer  to  him  was  subject  to  the  rules 
applicable  to  the  transfer  of  overdue  paper."  ^ 

§  1506.  A  different  view  from  that  above  stated  was 
taken  in  a  recent  New  York  case,  where  it  appeared  that 
coupons  due  April  ist,  1871,  w^ere  stolen  from  an  express 
company  on  April  3d,  1871,  and  sold  to  the  plaintiff,  a 
banker,  on  the  same  day.  The  court,  in  its  opinion,  made 
no  reference  to  the  fact  that  the  coupons  were  overdue — 
which,  it  seems  to  us,  was  sufficient  to  defeat  the  plaintiff — 
and  held  that  he  was  entitled  to  recover.^  No  authority 
was  quoted  in  support  of  the  particular  point  decided,  and 
the  decision  seems  to  be  at  direct  variance  with  the  settled 
doctrine    that    after   maturity  negotiable    instruments  are 

>  Arents  v.  Commonwealth,  18  Grat.,  773  (citing-  Ashurst  v.  Bank  of  Aus- 
tralia, 37  Eng.  L.  &  Eq.,  195) ;  First  Nat,  Bank  v.  County  Commissioners,  14 
Minn.,  79. 

2  Evertsen  v.  National  Bank  of  Newport,  11  N.  Y.  S.  C.  R.  (4  Hun),  694  (1875). 
The  opinion  may  have  been  based  on  the  view  that  the  coupons  were  entitled  to 
grace,  and  consequently  were  not  to  be  regarded  as  overdue  when  stolen  ;  but 
no  allusion  is  made  to  that  argument  of  counsel,  and  the  better  opinion  is  that 
no  grace  attaches  to  coupons.     Ante,  §§  1490,  1505. 


§   1506^.  THE  NEGOTIABILITY  OF  COUPON  BONDS.  515 

Stripped  of  that  peculiar  characteristic  which  enables  the 
transferrer  to  convey  a  better  title  than  the  transferrer  him- 
self possesses.^  [Since  the  foregoing  was  written,  the 
opinion  of  the  Court  of  Appeals  of  New  York,  in  the  case 
cited,  has  been  published,  and  it  will  there  be  seen  that  the 
court  held  the  coupons  to  be  entitled  to  grace,  and  hence 
not  overdue  at  the  time  they  were  acquired.]^  When  a 
negotiable  instrument  is  overdue,  that  fact  is  alone  such  a 
suspicious  circumstance  as  makes  it  incumbent  on  the  pur- 
chaser to  look  to  his  transferrer's  title.^ 

It  will  always  be  presumed  in  favor  of  a  holder  of  cou- 
pons, as  of  other  negotiable  instruments,  that  he  acquired 
them  bona  fide  before  maturity,  and  for  value,  without  no- 
tice of  any  defects.* 

§  1506^.  Effect  of  non-payment  of  coupons  07i  bonds. — 
The  simple  fact  that  an  instalment  of  interest  is  overdue 
and  unpaid,  disconnected  from  other  facts,  is  not  sufficient 
to  affect  the  position  of  one  taking  the  bonds  and  subse- 
quent coupons  before  their  maturity  for  value  as  a  bona  fide 
holder.  To  hold  otherwise  would  throw  discredit  upon  a 
large  class  of  securities  issued  by  municipal  and  private  cor- 
porations, having  years  to  run,  with  interest  payable  annu- 
ally or  semi-annually.     Temporary  financial   pressure,  the 

^  See  chapter  XXI,  on  Transfer  by  Indorsement,  §  724,  vol.  i ;  chapter  xxiv, 
on  Bona  Fide  Holder,  §§  782,  788  ;  chapter  XLix,  on  Checks,  section  ix,  vol.  2. 
See  also  Ashurst  v.  Bank  of  Australia,  37  E.  L.  &  Eq.,  195  ;  Brown  v.  Davies,  3 
T.  R.,  80.  In  Arents  v.  Commonwealth,  18  Grat.,  -JT],  Joynes,  J.,  said :  "  The 
point  of  the  objection  as  to  the  theft  is  simply  that  the  coupons  had  been  stolen, 
not  that  they  had  been  stolen  from  the  State  (the  gUc^rantor).  The  objection  to 
the  plaintiff's  title  on  this  ground  would  be  the  same,  no  matter  from  whom  they 

were  stolen A  person  who  takes  a  negotiable  instrument  after  it  has 

become  due,  can  not  recover  upon  it  if  it  has  been  previously  stolen,  unless  it 
was  stolen  before  maturity  and  passed  afterward  into  the  hands  of  a  bona  fide 
holder,  from  whom  the  plaintiff  derived  his  title."  2  Parsons  N.  &  B.,  279; 
Chitty  on  Bills  (13  Am.  ed.)  [*2I7],  247. 

*  Evertsen  v.  National  Bank,  66  N.  Y.  (22  Sick.),  22,  23  (1876),  Allen,  J.  Sec 
ante,  §  1490. 

'  Brown  v.  Davies,  3  T.  R.,  80  ;  Rothschild  v.  Comey,  9  B.  &  C,  391  ;  Hinck 
ley  v.  Union  Pacific  R.R.,  129  Mass.,  52. 

*City  of  Lexington  v.  Butler,  141  Wall.,  295  ;  chapter  XXI,  §  728,  vol.  i,  p, 
583  ;  chapter  xxiv,  §§  769,  784,  vol.  i. 


5l6  COUPON    BONDS.  §   I506(5. 

fallino-  off  of  expected  revenues  or  income,  and  many  other 
causes  having  no  connection  with  the  original  vaHdity  of 
such  instruments,  have  heretofore,  in  many  instances,  pre- 
vented a  punctual  payment  of  every  instalment  of  interest 
as  it  matured .;  and  similar  causes  may  be  expected  to  pre- 
vent a  punctual  payment  of  interest  in  many  instances  here- 
after. To  hold  that  a  failure  to  meet  the  interest  as  it  ma- 
tures, renders  them,  though  they  may  have  years  to  run,  and 
all  other  coupons  dishonored  paper,  subject  to  all  defences 
good  against  the  original  holders,  would  greatly  impair  the 
currency  and  credit  of  such  securities,  and  correspondingly 
diminish  their  value.^  But  the  presence  of  overdue  and  un- 
paid coupons  on  bonds  may  be  a  circumstance  which,  when 
coupled  with  other  significant  indications  of  invalidity, 
prove  sufficient  to  put  a  purchaser  on  inquiry.^  Where  it 
is  provided  in  the  bonds  themselves,  that  if  default  be  made 
as  to  any  interest  coupon,  the  bonds  shall  be  due  and 
payable,  they  so  become  on  default  of  payment  of  any 
coupon.^ 

§  i5o6(5.  Lis  pendens. — The  doctrine  of  lis  pendens, 
which  is  elsewhere  considered,  in  reference  to  negotiable 
instruments,  does  not  extend  to  any  security  of  their  class 
before  maturity  ;  and,  therefore,  the  title  of  a  purchaser  of 
negotiable  coupon  bonds  before  their  maturity  is  not 
affected  by  a  pending  suit  impeaching  their  validity,  and  of 
which  he  has  no  actual  notice.* 


'Railway  Co.  v.  Sprague,  103  U.  S.  (13  Otto),  762,  distinguishing  the  case  of 
Parsons  v.  Jackson,  99  U.  S.  (9  Otto),  434 ;  Cromwell  v.  County  of  Sac,  6  Otto 
(96  U.  S.),  58,  Field,  J.,  saying :  "  All  that  we  now  decide  is,  that  the  simple 
fact  that  an  instalment  of  interest  is  overdue  and  unpaid,  disconnected  from 
other  facts,  is  not  sufficient  to  affect  the  position  of  one  taking  the  bonds  and 
subsequent  coupons  before  their  maturity  for  value,  as  a  (^tf/z^r/^/d' purchaser." 
See  also,  to  same  effect,  Indiana,  etc.,  R.R.  v.  Sprague,  Albany  L.  J.,  May,  1881, 
p.  434  ;  National  Bank  v.  Kirby,  108  Mass.,  497 ;  Boss  v.  Hewitt,  15  Wis.,  260; 
Gilbough  v.  Norfolk,  etc.,  Co.,  i  Hughes,  410  ;  State  ex  rel.  Block  v.  Cobb,  64 
Ala.,  158  ;  see  ante,  787  ;  contra.  First  N.  B.  v.  County  Com'rs,  14  Minn.,  77. 

'  Parsons  v.  Jackson,  99  U.  S.  (9  Otto),  434,  explained  in  Railway  Co.  v. 
Sprague,  103  U.  S.  (13  Otto),  762. 

'  Mayor,  etc.,  of  Griffin  v.  City  Bank,  58  Ga.,  584 ;  see  also  Walnut  v.  Wade, 
103  U.  S.  (13  Otto),  695. 

*  See  ante,  §  2,ooa  ;  County  of  Warren  v.  Marcy,  97  U.  S.  (7  Otto),  96. 


§  1508.     THE  NEGOTIABILITY  OF  COUPON  BONDS.        517 

§  1507.  The  p7'esent77tent  of  coupons  for  payment. — The 
degree  of  diligence  to  be  exercised  by  the  holder  of  a 
coupon  in  presenting  it  for  payment  is  to  be  ascertained  by 
reference  to  the  relations  of  the  parties  liable  upon  it.  It 
is  due  and  payable  on  the  very  day  fixed  for  payment  of  in- 
terest on  the  bond.  And  like  a  promissory  note,  payable 
on  a  day  certain,  it  need  not  be  demanded,  as  against  the 
maker,  on  that  day  to  preserve  his  liability,*  and  though  in 
the  form  of  a  draft  on  a  bank,  neither  demand  nor  notice 
are  necessary  to  charge  the  drawer.^ 

§  1508.  Presentine7it  as  to  guarantors  and  iudorsers. — 
If  there  be  a  guarantor,  the  coupon  must  be  presented 
within  a  reasonable  time  to  charge  him.^  And  if  there 
were  an  indorser,  it  should  be,  no  doubt,  presented  at  ma- 
turity, or  else  he  would  be  discharged.^  It  was  argued  in 
Virginia,  in  a  case  in  which  the  coupons  ran,  "  Duncan, 
Sherman  &  Co.,  of  New  York,  will  pay  the  bearer  thirty 
dollars,  the  half-yearly  interest  on  the  Wheeling  bond,  269, 
due  I  St  January,  1867,"  that  they  must  be  regarded  as  pay- 
able on  demand  on  or  after  the  day  specified,  and  not  on 
that  day,  because  the  bond  provides  that  the  interest  shall 
be  paid  by  Duncan,  Sherman  &  Co.  "  on  presenting "  to 
them  the  proper  coupons.  But  the  Court  of  Appeals  held 
otherwise,  and  Joynes,  J.,  said  :  "  Sometimes  the  form  of 
expression  in  such  bonds  is  that  the  coupons  shall  be  '  sur- 
rendered '  or  '  delivered.'  But  the  meaning  is  the  same, 
whether  the  coupon  is  to  be  '  presented,'  or  '  surrendered,' 
or  'delivered.'  The  coupon  passes  by  delivery,  and  is  evi- 
dence of  the  title  of  the  holder  to  demand  the  interest. 
This  evidence  of  title  must  be  produced  before  the  money 
it  calls  for  can  be  demanded,  and  it  must  be  surrendered 

'  Arents  v.  Commonwealth,  i8  Grat.,  773;  City  of  Jeffersonville  v.  Patterson. 
26  Ind.,  i6 ;  Langston  v.  S.  C.  R.R.  Co.,  2  S.  Car.  N.  S.,  248. 
'  Mayji,  etc.,  v.  Potomac  Ins.  Co.,  58  Tenn.,  296. 
'  Arents  v.  Commonwealth,  18  Grat.,  773. 
*  Bonner  v.  New  Orleans,  2  Woods  C.  C,  135  ;  antCy  %%  1496,  1499^. 


5l8  COUPON  BONDS.  §  I509 

when  the  money  is  paid.  This  is  just  what  the  law  requires 
of  every  holder  of  a  negotiable  security,  and  no  more.  But 
can  it  be  said  that  a  bill  of  exchange  or  promissory  note, 
payable  on  a  specified  day,  or  so  many  days  after  date,  is 
not  payable  on  a  day  certain,  because  paym~ent  can  not  be 
maintained  without  a  presentment  or  surrender  of  the  note  ? 
I  conclude,  therefore,  that  these  coupons  are  negotiable  in- 
struments, payable  at  a  day  certain,  namely,  the  day  men- 
tioned in  each  as  the  day  the  interest  called  for  by  the 
coupon  is  payable,  though  the  holder  was  not  bound  to 
present  them  for  payment  on  that  day,  so  as  to  save  the  lia- 
bility of  the  city  (the  principal  obligor),  or  of  the  State 
(the  guarantor)," 

§  1508^.  In  Alabama,  it  is  provided  by  statute  that 
county  commissioners  must  audit  all  claims,  and  no  suit 
can  be  brought  upon  a  claim  against  a  county  until  pre- 
sentment of  the  claim  and  the  statutory  provisions  have 
been  complied  with.  But  where,  pursuant  to  legal  author- 
ity, the  county  commissioners  had  subscribed  to  a  rail- 
road company,  and  issued  coupon  bonds,  the  statute  above 
referred  to,  it  has  been  held,  would  not  require  presentment 
of  either  the  bonds  or  coupons  to  the  commissioners  before 
bringing  suit  upon  them.-^ 


SECTION    IV. 

ACTION   ON   NEGOTIABLE   BONDS   AND   COUPONS. 

§  1 509.  There  is  no  doubt  that  the  holder  of  a  corpora- 
tion or  State  bond,  payable  to  the  holder  or  to  bearer,  may 
sue  upon  it  in  his  own  name  ;  ^  and  so  also  may  the  holder 
of  coupons  payable  in  like  manner.^ 

'County  of  Greene  v.  Daniel,  and  County  of  Pickens  v.  Daniel,  102  U.  S.  (12 
Otto),  187. 

"Carr  v.  Le  Fevre,  27  Penn.  St.,  413  ;  Society  for  Savings  v.  New  London,  29 
Conn.,  175. 

"Johnson  v.  County  of  Stark,  22  111.,  ^5. 


§  15  lO.   ACTION  ON  NEGOTIABLE  BONDS  AND  COUPONS.    519 

§  i509<^.  Interest  not  recoverable  on  bond  without  pro- 
ducing cotipon. — Where  a  suit  is  brought  for  the  collection 
of  interest  upon  coupon  bonds,  the  court  will  not  allow  the 
holder  of  the  bond  to  take  judgment  for  the  interest,  with- 
out producing  the  coupons,  as  they  might  be  outstanding 
and  valid  in  the  hands  of  other  parties.^ 

§  1509^.  Suit  maintaitiable  on  severed  coupon  without 
producing  bond. — From  what  has  been  already  said  it 
might  be  inferred,  and  it  is  now  well  established,  that  suit 
may  be  sustained  upon  a  severed  coupon,  without  produc- 
ing the  bond,  for  the  coupon  was  intended  for  the  very 
purpose  of  being  disconnected  from  the  bond.  In  the 
United  States  Supreme  Court,  on  the  point  being  raised 
that  suit  could  not  be  maintained  on  the  coupons  without 
producing  the  bond  to  which  they  had  been  attached. 
Nelson,  J.,  said:  "The  answer  is,  that  the  coupons  or 
warrants  for  the  interest  were  drawn  and  executed  in  a 
form  and  mode  for  the  very  purpose  of  separating  them 
from  the  bond,  and  thereby  dispensing  with  the  necessity 
of  its  production  at  the  time  of  the  accruing  of  each  in- 
stalment of  interest,  and  at  the  same  time  to  furnish  com- 
plete evidence  of  the  payment  of  the  interest  to  the  makers 
of  the  obligation."^ 

§  1 5 10.  Paymejit  of  bonds  does  not  affect  coupons. — 
The  fact  that  the  bonds  from  which  the  coupons  sued  on 
have  been  detached,  have  been  paid  and  surrendered,  does 
not  affect  the  right  of  recovery  upon  them.     They  thereby 


'  City  of  Kenosha  v.  Lamson,  9  Wall.,  482  ;  Redfield  on  Railways,  605  ;  U.  S. 
Circuit  Court,  Williamson  v.  New  Albany  &  Salem  R.R.,  9  American  Railway 
Times,  No.  37. 

*Comm'rs  of  Knox  Co.  v.  Aspinwall,  21  How.,  54.  To  same  effect,  see  Na- 
tional Exchange  Bank  v.  Hartford,  etc.,  R.R.  Co.,  8  R.  I.,  375  ;  County  of 
Beaver  v.  Armstrong,  44  Penn.  St.,  63  ;  Thomson  v.  Lee  Co.,  3  Wall.,  327; 
Kennard  v.  Cass  Co.,  U.  S.  C.  C,  Cent.  Law  Jour.,  Jan.  15th,  1874;  Mayor,  etc., 
V.  Potomac  Ins.  Co.,  58  Tenn.,  296;  Town  of  Cicero  v.  Clifford,  53  Ind.,  191  ; 
Kennard  v.  Cass  Co.,  3  Dillon  C.  C.,  147  ;  Walnut  v.  Wade,  103  U.  S.  (13  Otto) 
695  ;  First  N.  B.  v.  Mount  Tabor,  52  Vt.,  87;  Welch  v.  First  Division  St.  Paul 
&  P.  R.R.,  25  Minn.,  320. 


520  COUPON  BONDS.  §  I5IO. 

lose  their  character  as  incidents  of  the  bond,  but  are  stil) 
independent  and  self-sustaining  instruments.*  It  has  been 
held  that  in  declaring  on  coupons  the  instruments  in  suit 
should  be  identified  on  the  face  of  the  declaration  by  the 
number  of  the  bond,  date,  sum,  and  time  of  -payment.^ 

§  151 1.  Decision  in  Maine  criticised. — It  has  been  held 
in  Maine  that  the  holder  of  a  detached  coupon  running, 
"  The  York  &  Cumberland  Railroad  Company  will  pay 
nine  dollars  on  this  coupon  in  Portland,"  could  not  main- 
tain an  action  upon  it  as  a  distinct  and  independent  security, 
as  the  language  did  not  imply  any  negotiable  or  indepen- 
dent character.^  But  the  opinion  of  Goodenow,  J.,  who 
dissented,  and  sustained  his  views  in  an  elaborate  and  able 
argument,  has  received  general  commendation,  and  the 
whole  tendency  of  recent  decisions  is  to  concurrence  with 
him.  The  fact  that  the  coupon  contains  no  word  of 
promise  is  immaterial,  as  it  clearly  evinces  an  intention  to 
constitute  in  itself  an  obligation  to  pay,  and  could  have 
been  designed  for  no  other  purpose.'* 

§  151 2.  Decision  in  Connecticut  criticised. — It  has  been 
also  held  in  Connecticut,^  that  suit  could  not  be  maintained 
on  a  coupon  alone,  unless  it  contained  a  distinct  promise  to 
pay  the  amount  represented.  The  following  case  was  be- 
fore the  court  :  The  railroad  company's  bonds  acknowledged 
indebtedness  in  certain  amounts  to  certain  trustees,  pay- 
able to  bearer,  with  semi-annual  interest  thereon,  pay- 
able to  bearer,  at  the  office  of  the  company,  on  delivery 
of  certain  interest  warrants  annexed.  An  interest  war- 
rant   annexed    was    as    follows :     "  Interest    warrant   for 


•  National  Exchange  Bank  v.  Hartford,  etc.,  R.R.  Co.,  8  R.  I.,  375. 
'^  Kennard  v.  Cass  Co.,  3  Dillon,  147. 

'  Jackson  v.  Y.  &  C.  R.R.  Co.,  i  Amer.  Law  Reg.  N.  S.,  585. 

*  See  Judge  Redfield's  note  in  2  Amer.  Law  Reg.  N.  S.,  p.  585  ;  Virg.  &  Tenn. 
R.R.  Co.  V.  Clay  (Va.  Special  Court  of  Appeals,  unreported)  ;  Mercer  County  v. 
Hubbard,  45  111.,  142 ;  Johnson  v.  Stark  Co.,  24  Id.,  75  ;  ante,  §  1483. 

'  Crosby  v.  New  London,  etc.,  R.R.  Co.,  26  Conn.,  121. 


§    151  T.     ACTION  ON  NEGOTIABLE  BONDS  AND  COUPONS.         52I 

$30,  being  half-yearly  interest  on  bond  No.  30  of  the 
N.  L.  W.  &  P.  R.R.  Co.,  payable  on  the  first  day  of 
February,  1856 — J.  D.,  Treasurer."  An  action  of  debt 
being  brought  on  the  warrant,  the  Supreme  Court  of  the 
State  held  that  it  could  not  be  made  a  ground  of  action, 
as  it  was  a  mere  acknowledgment  of  interest  on  the  bond 
itself,  and  did  not  import  a  promise  ;  and  that  the  bond 
should  have  been  declared  on,  as  it  alone  contained  a 
promise  to  pay  the  interest.  But  Judge  Redfield,  com- 
menting on  this  decision  in  a  contribution  to  "  The  Ameri- 
can  Law  Register,"  ^  observes  :  "  We  apprehend  no  such 
distinction  as  this  is  maintained  in  practice  ;  but  that  the 
coupons  are  regarded  as  equally  negotiable  with  the  bonds , 
and  that  they  pass  currently  as  money,  the  same  as  the 
bonds  themselves.  And  the  fact  that  they  do  not  contain 
the  name  of  any  payor,  or  purport  to  be  made  payable  to 
bearer,  does  not  seem  to  us  of  any  practical  importance,  if, 
in  fact,  among  business  men  they  have  acquired  the  charac- 
ter of  negotiable  securities,  and  of  this  we  think  there  can 
be  no  question."  And  this  language  expresses  the  true 
view  of  the  law  as  we  conceive  it.  The  design  of  the  in- 
strument is  unmistakable.  What  further  inquiry  can  be 
necessary  ?  ^ 

§  1512^.  Coupons,  being  notes  or  drafts  not  sealed,  are 
admissible  in  evidence,  and  may  be  recovered  upon  under 
the  common  money  counts.^  A  judgment  that  a  party  is  a 
bona  fide  owner  of  certain  coupons  does  not  establish  that 
he  is  a  bona  fide  owner  of  the  bonds.'* 

The  aggregate  amount  of  coupons  sued  upon  in  one  of 
the  Federal  courts  of  the  United  States  determines  its  juris- 
diction of  the  suit.^ 


'  2d  Vol.  New  Series,  597. 

*  Virg.  &  Tenn.  R.R.  Co.  v.  Clay  (Va.  Special  Court  of  Appeals,  unreported). 
»  Mercer  County  v.  Hubbard,  45  HI-  U2  ;  Johnson  v.  Stark  County,  24  Id.,  75 

*  Steward  v.  Lansing,  4  Morrison's  Transcript,  No.  i,  p.  85. 
»  Smith  V.  Clark  County,  54  Mo.,  58. 


522 


COUPON    BONDS.  §  15^3* 


S  1 5 1 3.  Interest  and  exchange  are  recoverable  on  coupons. 

Xhe  coupons  being  in  themselves  promissory  notes,  de- 

sio-ned  to  secure  the  prompt  payment  of  interest  on  an 
investment,  it  is  but  just  and  right  that  if  not  paid  when 
due,  they  should  themselves  bear  interest  until  paid. 
As  has  been  said  by  the  Supreme  Court  of  the  United 
States :  "  Being  written  contracts  for  the  payment  of 
money,  and  negotiable  because  payable  to  bearer,  and 
passing  from  hand  to  hand  like  other  negotiable  instru- 
ments, it  is  quite  apparent  on  general  principles  that  they 
should  draw  interest  after  it  is  unjustly  neglected  or  re- 
fused."* And  this  view  is  concurred  in  by  numerous 
authorities.^  For  like  reasons,  exchange  should  be  recover- 
able upon  coupons  under  circumstances  which  would  war- 
rant its  recovery  on  any  other  species  of  commercial  paper. 
The  Supreme  Court  of  the  United  States  has  expressed 
its  opinion  to  the  effect  that :  "  Municipal  bonds  with 
coupons  payable  to  bearer,  having  by  universal  usage  and 
consent  all  the  qualities  of  commercial  paper,  a  party 
recoverino-  on  the  coupons  is  entitled  to  the  amount  of 
them  with  interest  and  exchange  at  the  place  where  by  their 
terms  they  were  made  payable."  ^  Interest  on  the  coupons 
is  covered  by  a  mortgage  securing  the  principal  of  the 
debt." 


'  Aurora  City  v.  West,  7  Wall.,  105  ;  Town  of  Genoa  v.  Woodruff,  92  U.  S.  (2 
Otto),  502  ;  Amy  v.  Dubuque,  98  U.  S.  (8  Otto),  471  ;  Koshkonong  v.  Burton,  U. 
S.  S.  C,  March,  1882,  Albany  L.  J.  for  May  6,  1882,  vol.  25,  No.  18,  p.  350; 
Walnut  V.  Wade,  103  U.  S.  (13  Otto),  695. 

^  Arents  v.  Commonwealth,  18  Grat.,  lid;  Gibert  v.  W.  C.  V.  M.,  etc.,  R.R. 
Co  33  Grat.,  599 ;  Gelpcke  v.  Dubuque,  i  Wall.,  206  ;  Thomson  v.  Lee  County, 
3  Wall,  332 ;  Hollingsvvorth  v.  City  of  Detroit,  3  McLean,  472  ;  Mills  v.  lown 
of  Jefferson,  20  Wis.,  50 ;  North  Penn.  R.R.  Co.  v.  Adams,  54  Penn.,  94 ;  San 
Antonio  v.  Lane,  32  Tex.,  405  ;  Virginia  v.  Ches.  &  O.  Canal  Co.,  32  Md..  501  ; 
Nat.  Exchange  Barjk  v.  Hartford  P.  &  F.  R.R.,  8  R.  L,  375  ;  Langston  v.  b.  C. 
R  R  Co.,  2  So.  Car.  N.  S.,  248  ;  Beaver  County  v.  Armstrong,  6  Wright.  63 ; 
Conn.  Mut.  Ins.  Co.  v.  Cleveland,  etc.,  R.R.,  41  Barb.,  9 ;  Welsh  v.  First  Divis- 
ion St.  Paul  &  P.  R.R.,  25  Minn.,  320. 

'  Gelpcke  v.  Dubuque,  i  Wall.,  20 ;  City  of  Jeffersonville  v.  Patterson,  26  Ind., 
16  (1866) ;  Koshkonong  v.  Burton,  U.  S.  S.  C,  March,  1882. 

^  Gibert  v.  W.  C.  V.  M.,  etc.,  R.R.  Co.,  33  Grat.,  599. 


§  1514-  ACTION  ON  NEGOTIABLE  BONDS  AND  COUPONS.    523 

§  15 14.  Prior  demand  of  pay7nent  not  necessary  to  re- 
covery of  interest  on  coupons. — In  Illinois  it  has  been  held 
that  coupons  do  not  bear  interest ;  and  in  a  case  where  suit 
was  brought  on  coupons  from  bonds  of  the  city  of  Pekin,  it 
was  held  that  at  any  rate  a  demand  was  necessary.  The 
court  said  :  "  There  was  no  averment  of  a  demand  upon 
the  city  treasurer  for  payment  of  these  coupons.  If  such 
instruments  could  in  any  event  draw  interest  without  an 
express  agreement,  it  could  only  be  after  an  express  demand 
of  payment.  Until  a  demand  is  made,  such  a  body  (a 
municipal  corporation)  is  not  in  default.  They  are  not  like 
individuals,  bound  to  seek  their  creditors  to  make  payment 
of  their  indebtedness.  It  was  held  in  the  case  of  the 
People  ex  rel.  v.  Tazewell  County,  22  111.,  147,  that  munic- 
ipal corporations  could  not  even  bind  themselves  to  pay 
their  indebtedness  at  any  other  place  than  their  treasury, 
unless  specially  authorized  by  legislative  enactment."  ^  But 
the  Supreme  Court  of  the  United  States  has  in  several 
cases  given  judgment  for  interest  on  municipal  coupons 
payable  at  particular  banks  named  in  another  State,  and 
without  any  evidence  of  a  demand  of  payment  at  such 
places ;  ^  and  it  has  been  distinctly  held  that  no  demand  is 
necessary  to  be  alleged  or  proved  as  a  foundation  of  claim 
for  interest  by  the  tribunals  of  some  of  the  States.^     And 

•  City  of  Pekin  v,  Reynolds,  31  111.,  531  (1863);  Chicago  v.  People,  56  111., 
327  ;  Johnson  v.  Stark  County,  24  111.,  75. 

"^  Gelpcke  v.  Dubuque,  i  Wall.,  175  ;  Thomson  v.  Lee  County,  3  Wall.,  327. 
See  also  Aurora  City  v.  West,  7  Wall.,  82  ;  Clark  v.  Iowa  City,  20  Wall.,  583  ; 
Genoa  v.  Woodruff,  92  U.  S.  (12  Otto),  502. 

'  North  Penn.  R.R.  Co.  v.  Adams,  54  Penn.  St.,  97  (railroad  coupons) ;  Lang- 
ston  V.  S.  C.  R.R.  Co.,  2  So.  Car.  N.  S.,  248  (railroad  coupons)  ;  Va.  &  Tenn. 
R.R.  Co.  V.  Clay  (Virginia  Special  Court  of  Appeals,  unreported).  See  also 
Mills  V.  Jefferson,  20  Wise,  50 ;  San  Antonio  v.  Lane,  32  Texas,  405 ;  Jefferson- 
ville  V.  Patterson,  26  Ind.,  16 ;  Virginia  v.  Chesapeake,  etc..  Canal  Co.,  32  Md., 
501  ;  contra,  W^hittaker  v.  Hartford,  etc.,  R.R.  Co.,  8  R.  I.,  47,  Ames,  C.  J.,  say- 
ing :  "  Until  presented,  the  defendant  (a  railroad  company)  could  have  been  in 
no  default  for  non-payment ;  but  after  it,  the  coupons  being  due,  the  refusal  to 
pay  was  a  clear  breach  of  the  contract,  and  interest  from  the  time  of  demand 
and  refusal  is  recoverable  by  way  of  damages.  Railroad  bonds,  with  interest 
coupons  attached,  are  purchased  for  investment  and  income,  and  when  the  latter 
is  not  paid  at  the  time  promised,  no  well-considered  authority,  properly  under- 


524  COUPON  BONDS.         §§  I515,  I516. 

SO  the  Supreme  Court  of  the  U.  S.  has  recently  directly 
decided.^ 

§  15 15.  Readiness  of  maker  to  pay  at  time  and  place  of 
payment,  abates  interest  on  coupons. — But  should  the 
defendant  corporation  show  a  continued  readiness  to  pay, 
at  the  time  and  place  of  payment,  the  interest  would  then 
be  abated.^  This  is  all  that  is  necessary  to  protect  the  de- 
fendant, and  it  is  no  more  than  justice  to  the  plaintiff. 

§  15 16.  In  respect  to  the  statute  of  li7nitations,  the 
negotiable  bond  and  its  coupons  so  far  constitute  an  integral 
instrument,  that  the  statute  applicable  to  the  bond  will  ap- 
ply also  to  the  coupons.  Thus  it  has  been  held  by  the 
United  States  Supreme  Court,  that  coupons  of  a  bond  of 
the  city  of  Kenosha  were  not  barred  in  less  time  than  twenty 
years  from  their  maturity,  because  that  was  the  period 
applicable  to  the  bond  as  a  sealed  instrument.  Nelson,  J., 
said  :  "  These  coupons  are,  substantially,  but  copies  from 

the  body  of  the  bond  in  respect  to  the  interest There 

was  but  one  contract,  and  that  evidenced  by  the  bond, 
which  covenanted  to  pay  the  bearer  five  hundred  dollars  in 
twenty  years,  with  semi-annual  interest,  at  the  rate  of  ten 
per  cent,  per  annum.  The  bearer  has  the  same  security  for 
the  interest  that  he  has  for  the  principal.  The  coupon  is 
simply  a  mode  agreed  on  between  the  parties  for  the  con- 
venience of  the  holder  in  collecting  the  interest  as  it  be- 
comes due.  Their  great  convenience  and  use  in  the  interests 
of  business  and  commerce  should  commend  them  to  the 
most  favorable  view  of  the  court  ;  but,  even  without  this 
consideration,  looking   at  their   terms,  and  in  connection 

stood,  forbids  what  principle  requires,  that  the  damages  from  delay  of  payment 
should  be  compensated  by  interest  on  the  amount  due,  computed  from  the  day 
of  demand  and  refusal." 

'Walnut  V.  Wade,  103  U.  S.  (13  Otto),  683;  Ohio  v.  Frank,  103  U.  S.  (13 
Otto),  697. 

■'  North  Penn.  R.R.  Co.  v.  Adams,  54  Penn.  St.,  97  ;  Walnut  v.  Wade,  103 
U.S.  (13  Otto),  683. 


§1517-      ACTION  ON  NEGOTIABLE  BONDS  AND  COUPONS.         525 

with  the  bond,  of  which  they  are  a  part,  and  which  is  re- 
ferred to  on  their  face,  in  our  judgment  it  would  be  a  de- 
parture from  the  purpose  for  which  they  were  issued,  and 
from  the  intent  of  the  parties,  to  hold,  when  they  arc  cut 
off  from  the  bond  for  collection,  that  the  nature  and 
character  of  the  security  changes,  and  becomes  a  simple 
contract  debt,  instead  of  partaking  of  the  nature  of  the 
higher  security  of  the  bond,  which  exists  for  the  same  in- 
debtedness. Our  conclusion  is,  that  the  cause  of  action  is 
not  barred  by  lapse  of  time  short  of  twenty  years."*  But 
while  the  coupons  and  the  bond  constitute  an  integral  con- 
tract, and  the  statute  of  limitations  applying  to  the  latter, 
applies  also  to  the  coupons,  nevertheless  it  commences  to 
run  against  the  coupons  from  their  respective  periods  of 
maturity,  although  not  as  against  the  bond  until  it  also 
matures.^ 

§  1517.  Use  of  bonds  as  collateral  security. — When  ne- 
gotiable coupon  bonds  of  counties,  corporations,  or  States 
are  pledged  as  collateral  security  for  a  debt,  and  there  is  a 
failure  to  pay  such  debt  according  to  contract,  the  fair  pre- 
sumption is  that  they  were  designed  to  be  held  as  a  pledge, 
and  were  expected  to  be  sold  after  due  demand  and  notice. 
Such  a  deposit  differs  essentially  from  a  deposit  of  ordinary 
bonds,  mortgages,  promissory  notes,  and  like  choses  in 
action,  which,  in  the  absence  of  any  agreement  to  that 
effect,  the  creditor  can  not  expose  to  sale,  because  they 
have  no  market  value,  and  it  can  not  be  presumed  it  was 
the  intention  of  the  parties  thus  to  deal  with  them.^     The 


'  City  of  Kenosha  v.  Lamson,  9  Wall.,  483,  484  ;  followed  in  City  of  Lexing- 
ton V.  Butler,  1 5  Wall.,  296. 

"  Clark  V.  Iowa  City,  20  Wall.,  586,  explaining  previous  cases ;  Amy  v. 
Dubuque,  98  U.S.,  471 ;  Koshkonong  v.  Burton,  Morrison's  Transcript,  vol.  4, 
No.  I,  p.  152. 

»  Alexandria,  Loudoun,  etc.,  R.R.  Co.  v.  Burke,  22  Grat.,  261  ;  Morris  Canal, 
etc.,  Co.  V.  Lewis,  i  Beas.  (N.  J.),  329  (1858) ;  see  §  833,  vol.  i. 


526  COUPON    BONDS.  §   IS^?^' 

debtor  is  entitled  to  notice  of  the  time  and  place  of  sale  ;  ■ 
but  if  he  has  knowledge,  formal  notice  is  unnecessary.^ 

§  1517^.  Amount  of  recovery. — When  negotiable  bonds 
have  been  wrongfully  put  in  circulation,  it  has  been  held 
that  the  purchaser  may  recover  the  full  amount  although 
he  paid  less.^ 

>  Ibid. 

2  Alexandria,  Loudoun,  etc.,  R.R.  Co.  v.  Burke,  22  Grat.,  263,  264. 

«  Grand  Rapids,  etc.,  R.R.  v.  Sanders,  16  Hun,  552  ;  see  vol.  i,  §  754. 


CHAPTER  XLVIII. 

THE    VALIDITY    OF    MUNICIPAL    BONDS. 

§  1 518.  Municipal  bonds  constitute  a  vast  portion  of  the 
wealth  of  the  country,  and  the  questions  daily  arising  re- 
specting their  validity  are  of  the  utmost  nicety,  and  of  the 
highest  importance  to  the  communities  bound  for  their  pay- 
ment, as  well  as  to  the  capitalists  and  business  men  trading 
in  them  as  mercantile  commodities.  We  shall  endeavor  to 
discuss  their  nature  and  properties  thoroughly,  dividing  the 
subject  under  the  following  heads  :  I.  Nature  of  municipal 
corporations,  and  what  powers  may  be  conferred  upon 
them.  II.  Express  and  implied  powers  of  municipal  cor- 
porations. When  they  may  issue  negotiable  bonds.  III. 
Power  of  the  officer  to  bind  the  municipality.  Views 
of  the  United  States  Supreme  Court.  IV.  How  invalidity 
of  the  bond  is  cured  by  acquiescence  or  ratification  of  the 
municipality.  V.  Review  of  the  foregoing  doctrines. 
Views  which  seem  sustained  by  reason  and  authority.  VI. 
Legislative  control  over  municipal  obligations. 


SECTION   I. 

NATURE     OF    MUNICIPAL    CORPORATIONS,   AND     WHAT    POWERS 
MAY   BE  CONFERRED   UPON   THEM. 

§  1 5 19.  A  municipal  corporation  is  an  involuntary  organ- 
ization of  the  inhabitants  within  certain  local  confines,  of 
all  ages,  sexes,  and  conditions,  under  the  will  and  direction 
of  the  legislative  branch  of  the  government,  by  which  they 

(527) 


528  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §    1519^. 

are  clothed  with  a  corporate  character,  for  the  purposes  of 
local  government. 

A  private  corporation  is  a  voluntary  association  of  per- 
sons capable  of  contracting,  who  enter  a  joint  enterprise  of 
private  business,  and  are  clothed  by  the  legislature  with  a 
corporate  character,  for  the  purpose  of  carrying  on  such 
private  business. 

§  1 5 1 9^.  Differences  betzveen  a  municipal  and  a  private 
corporation. — These  definitions  exhibit  the  fundamental, 
substantial,  and  numerous  differences  between  the  two  in- 
corporations. 

(i)  A  municipal  corporation  is  involuntary.  The  inhab- 
itants within  its  limits  need  not  accept,  nay,  may  unani- 
mously protest  against  its  charter.  But  they  are  clay  in 
the  hands  of  the  potter,  and  the  legislature,  at  its  sovereign 
will,  may  mould  them  into  a  municipal  corporation,  and 
then  may  dissolve  or  change  it  at  pleasure/  It  may 
"erect,  divide,  and  abolish  at  pleasure."^  But  a  pri- 
vate corporation  can  only  be  formed  by  the  voluntary  act 
of  each  member. 

(2)  A  municipal  corporation  is  composed  of  all  the  in- 
habitants within  its  limits :  men,  infants,  lunatics,  and  mar- 
ried women.  A  private  corporation  can  only  be  formed  of 
those  whom  the  law  designates,  and  who  are  capable  of 
contracting. 

(3)  A  municipal  corporation  involves  no  contract  be- 
tween its  members.  A  private  corporation  involves  a  con- 
tract by  its  members  inter  sese,  whereby,  as  against  each 
other,  they  acquire  vested  rights  and  privileges,  for  the 
agreed  consideration. 

(4)  A  municipal  corporation  involves  no  contract  be- 
tween the  State  and  itself,  and  none  between  the  State 
and  its  members.     A  private  corporation  must  accept  its 


'Soperv.  Henry  County,  26  Iowa,  264. 

*I  Dillon  on  Municipal  Corporations  (2d  ed.),  p.  139,  §  30. 


§1520.  NATURE  OF  MUNICIPAL  CORPORATIONS.  529 

charter.  And  when  accepted,  it  is  a  contract  between  the 
State  and  the  artificial  person  constituted  by  it ;  and  also 
between  the  State  and  the  members  composing  it,  subject 
only  to  such  control  as  the  State  may  reserve,  or  be  entitled 
in  its  sovereign  character  to  exercise  over  it. 

(5)  In  a  municipal  corporation  the  members  are  not 
shareholders.  They  need  hav^e  no  property  interest  in  it ; 
and  if  any,  their  voice  in  the  corporation  is  not  proportioned 
to  that  interest.  "  The  whole  interests  and  franchises  are 
the  exclusive  domain  of  the  government."^  In  a  private 
corporation  the  members  are  (as  a  general  rule)  share- 
holders, and  their  influence  is  proportioned  to  their  inter- 
ests.^ 

(6)  A  municipal  corporation  is  formed  purely  for  the 
purposes  of  local  government.  As  said  by  the  United 
States  Supreme  Court,  "  it  is  a  representative  not  only  of 
the  State,  but  is  a  portion  of  its  governmental  power.  It 
is  one  of  its  creatures,  made  for  a  specific  purpose,  to  exer- 
cise within  a  limited  sphere  the  powers  of  the  State. "^  A 
private  corporation  is  formed  for  the  purpose  of  private 
business. 

§  1520.  As  to  what  powers  may  be  co7if erred  upon  iniuiic- 
ipal  corporations. — Remembering  that  the  powers  of  a  cor- 
poration are  only  such  as  are  conferred  "  either  expressly  or 
as  incidental  to  its  very  existence,"  and  that  the  latter  are 
such  as  "  are  best  calculated  to  effect  the  object  for  w^hich  it 

*  Dartmouth  College  v.  Woodward,  4  Wheat. ,  636. 

^East  Hartford  v.  Hartford  Co.,  10  How.,  531.  Woodward,  J.:  "The  mem- 
bers (of  a  municipal  corporation)  are  not  shareholders  or  joint  partners  in  any 
corporate  estate,  which  they  can  sell  or  devise  to  others,  or  which  can  be 
attached  or  levied  on  for  their  debts.  Hence,  generally,  the  doings  between 
them  and  the  legislature  are  in  the  nature  of  legislation  rather  than  compact." 
There  are  some  private  corporations  to  which  this  remark  does  not  apply,  such 
as  schools  and  charities,  which  are  quasi  ptcblic,  and  of  course  the  legislature 
may  provide  by  charter  such  rules  as  it  may  see  fit. 

'United  States  V.Baltimore  &  Ohio  R.R.  Co.,  17  Wall.,  322  ;  i  Dillon  on 
Mun,  Corps.  (2d  ed.),  139,  note  ;  Jones  on  Railroad  Securities,  §  222.  In  Hodges 
V.  City  of  Buffalo,  2  Den.,  1 10,  it  was  held  that  the  common  council  had  no  author- 
ity to  furnish  an  entertainment  at  public  expense,  and  the  party  providing  it 
could  not  recover  against  the  citv. 

Vol.  II.— 34 


530  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1 520.' 

is  created,"  ^  we  come  to  consider  what  powers  are  incidental 
to  the  existence  of  municipal  corporations,  and  what  powers 
are  or  may  be  expressly  conferred.  Quite  certain  it  is,  we 
think,  that  there  is  no  incidental  power  in  a  municipal  cor- 
poration to  borrow  money,^  and  none  to  execute  negotiable 
or  other  securities  for  debt,^  though  there  is  upon  these,  as 
upon  almost  every  question  as  to  the  powers  of  such 
bodies,  a  perplexing  conflict  of  authority.*  "  A  municipal 
corporation,"  says  the  United  States  Supreme  Court,  "  can 
not  issue  bonds  in  aid  of  extraneous  objects  (a  railroad  in 
the  present  case),  without  legislative  authority,  of  which 
all  persons  dealing  with  the  bonds  must  take  notice."^  But 
equally  certain  it  is,  that  the  legislature  may  expressly  or 
impliedly  authorize  a  municipal  corporation  to  borrow 
money,  and  to  issue  its  securities  therefor,  negotiable  or 
non- negotiable,  provided  it  be  done  for  a  pubhc  purpose.® 
And  that  it  can  not  authorize  it  to  pledge  its  credit,  or  ap- 
propriate its  means  to  a  private  purpose  ;  for  such  a  pur- 
pose is  contrary  to  the  very  nature  of  the  institution,  and 
any  diversion  of  the  people's  property  to  it,  without  their 
unanimous  consent,  would  be  taking  one  private  citizen's 
substance  for  the  benefit  of  another,  and  would  operate  a 
virtual  confiscation.''' 


'  Dartmouth  College  v.  Woodward,  4  Wheat.,  636. 

"Miller  v.  Ray,  19  Wall.,  468;  Thomson  v.  Lee  County,  3  Wall.,  327  ;  Starin 
V.  Town  of  Genoa,  23  N.  Y.,  447-449  ;  Hitchcock  v.  City  of  Galveston,  U.  S. 
Dist.  Ct.,  Cent.  L.  J.,  May  21,  1875,  p.  331  ;  Jones  on  Railroad  Securities,  §  222. 
But  it  has  been  held  that  municipal  corporations  have  all  the  powers  of  natural 
persons  respecting  their  debts.     Kelley  v.  Mayor,  4  Hill,  263. 

'Thomson  v.  Lee  County,  3  Wall.,  327;  Starin  v.  Town  of  Genoa,  23  N.  Y., 
447-449;  Dively  v.  Cedar  Falls,  21  Iowa,  566;  Clark  v.  Des  Moines,  19  Id., 
200. 

*  Kelley  v.  Mayor,  4  Hill,  263. 

°  Town  of  South  Ottawa  v.  Perkins,  94  U.  S.  (4  Otto),  262.  See  also  Pendle- 
ton Co.  V.  Amy,  13  Wall.,  297;  Kennicott  v.  Supervisors,  16  Wall.,  452;  St. 
Joseph  Township  v.  Rogers,  16  Wall.,  644 ;  Town  of  Coloma  v.  Eaves,  92  U. 
S.  (2  Otto),  484. 

*See  infra,  §  1522,  2LXiA  post,  sec.  vi. 

'  National  Bank  v.  City  of  lola,  9  Kans.,  700  ;  Loan  Ass'n  v.  Topeka,  20  Wall., 
655. 


§    15-2.  NATURE  OF  MUNICIPAL  CORPORATIONS.  53 1 

§  152 1.  Municipal  corporations,  by  aiitJiority,  7nay  make 
donations  for  public  purposes. — But,  provided  the  purpose 
be  a  public  one,  the  legislature  may  empower  the  corpora- 
tion not  only  to  subscribe  to  it  for  a  consideration,  but  also 
to  devote  to  it  its  means  or  its  credit.^  Thus  it  has  been 
recently  decided  by  the  United  States  Supreme  Court,  that 
where  the  legislature  of  Nebraska  authorized  the  County  of 
Otoe  to  aid  the  Burlington  and  Missouri  River  R.R.Co. 
by  issuing  its  bonds  to  it  as  a  donation,  such  bonds  were 
valid, ^  and  that  decision  has  been  followed  and  reaffirmed 
in  other  cases.^ 

§  1522,  As  to  zvhat  purposes  are  public. — The  construc- 
tion and  grading  of  streets;**  the  construction  of  water 
works  ;^  of  a  bridge;®  of  a  town  hall;'''  gas  works  ;  ^  mar- 
kets;^ the  providing  of  fire  engines  ;^°  the  laying  out  of 
cemeteries,^^  are  proper  objects  of  municipal  care,  and  un- 
doubtedly the  legislature  may  authorize  the  municipality  to 
contract  with  reference  to  them,  to  borrow  money  for  the 
purpose  of  effecting  those  objects,  and  to  issue  its  negotia- 
ble securities  therefor.^^     But  the  loaning  of  money  to  en- 


'  Davidson  v.  Ramsey  County,  1 8  Minn.,  482  (1872);  see  i  Dillon  on  Alun. 
Corps.  (2d  ed.),  220,  §  104,  and  notes. 

^  Railroad  Company  v.  County  of  Otoe,  16  Wall.,  667  (1872). 

'  Olcott  V.  Supervisors,  16  Wall.,  678  (1872)  ;  Town  of  Oueensbur>'  v.  Culver, 
19  Wall.,  91  (1873) ;  Township  of  Pine  Grove  v.  Talcott,  19  Wall.,  667  ;  Harter 
V.  Kernochan,  103  U.  S.  (13  Otto),  568  ;  Clemens  on  Corporate  Securities,  p. 
39- 

"  Sturtevant  v.  City  of  Alton,  3  McLean,  393 ;  Rogers  v.  Burlington,  3  Wall., 
362. 

"  Rome  v.  Cabat,  28  Ga.,  50 ;  Hale  v.  Houghton,  8  Mich.,  458 ;  Stein  v.  Mo- 
bile, 24  Ala.,  591. 

'  County  Commissioners  v.  Chandler,  96  U.  S.  (6  Otto),  205,  Bradley,  J. : 
"  Railroads,  turnpikes,  bridges,  ferries,  are  all  things  of  public  concern,  and  the 
right  to  erect  them  is  a  public  right In  our  judgment,  the  bridge  in  ques- 
tion is  a  public  bridge,  and  a  work  of  internal  improvement  within  the  meaning 
of  the  statute."  Bonds  issued  in  aid  of  the  bridge  were  held  valid.  See  also 
Township  of  Burlington  v.  Beasley,  94  U.  S,  (4  Otto),  314. 

'  Greeley  v.  People,  60  111.,  19.  '  City  of  Aurora  v.  West,  9  Ind.,  74, 

•  State  V.  Madison,  7  Wise,  688. 

"  Mills  V.  Gleason,  11  Wise,  470;  Robinson  v.  St.  Louis,  28  Mo.,  488. 

"  Ibid.  "  I  Dillon  on  Mun.  Corps.,  §  66. 


532  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §  1^22a. 

able  citizens  to  rebuild  their  burned  houses,^  to  equip  and 
furnish  manufacturing  establishment  of  individuals,^  to 
construct  saw  or  grist  mills  ^  (unless  such  mills  be  made 
public  institutions,  in  which  case  it  would  be  different),*  to 
improve  a  water  privilege  and  manufacture  lumber,^  to  es- 
tablish a  citizen  in  business,^  to  provide  destitute  citizens 
with  provisions  and  grain  for  seed  and  feed,'  would  not  be 
within  the  scope  of  public  purposes,  and  the  legislature 
could  confer  no  authority  to  subscribe  to  such  objects, 

§  1522^.  Injunction  lies  to  resti^-ain  sub  scrip  tio7i  for  pri- 
vate purposes. — If  the  municipal  authorities  undertake  to 
subscribe  on  behalf  of  the  municipality  to  a  private  object 
the  citizens  have  their  remedy ;  and  it  is  well  settled  that 
resident  tax-payers  may  invoke  the  interposition  of  the 
courts  to  prevent  illegal  disposition  of  municipal  funds,  or 
the  illegal  creation  of  a  debt.^ 

§  1523.  The  promotion  of  railroads  and  highways  is  a 
public  purpose. — Whether  or  not  the  construction  of  a 
railroad,  or  other  highway,  is  a  public  purpose  to  which  a 
municipal  corporation  may  be  authorized  to  contribute  is  a 
much-debated  question.  The  United  States  Supreme  Court 
has  affirmed  that  it  is  in  numerous  decisions,''  and  so  likewise 

'  Lowell  V.  Boston,  iii  Mass.,  454  (1873), 

*  Loan  Association  v.  Topeka,  20  Wall.,  655  ;  Commercial  N.  Bank  v.  lola,  2 
Dill.  C.  C.  R.,  353 ;  9  Kans.,  700. 

'  Allen  V.  Inhabitants  of  Jay,  60  Me.,  124  (1871)  ;  12  Am.  Law  Reg.  N.  S., 
481. 

*  Township  of  Burlington  v.  Beasley,  94  U.  S.  (4  Otto),  314. 

^  Weismer  v.  Village  of  Douglass,  11  N.  Y.  S.  C.  (4  Hun),  21  r. 

*  Cooley's  Const'al  Lim.,  494. 

^  The  State  ex  rel.  Griffith  v.  Osawkee  Township,  14  Kans.,  418. 
"  Crampton  v.  Zabriskie,  loi  U.  S.  (11  Otto),  601. 

*  Knox  County  V.  Aspinwall,  21  How.,  539;  Gelpcke  v.  City  of  Dubuque,  i 
Wall,  175  (1863)  ;  Seybert  v.  City  of  Pittsburg,  Id.,  272  ;  Meyer  v.  City  of  Mus- 
catine, 390  ;  Sheboygan  Co.  v.  Parker,  3  Wall.,  96  ;  Havemeyerv.  Iowa  County, 
3  Id.,  294 ;  Thomson  v.  Lee  County,  3  Id.,  330  ;  Rogers  v.  Burlington,  3  Id.,  362  ; 
Mitchell  V.  Burlington,  4  Wall.,  274  ;  Campbell  v.  Kenosha,  5  Id.,  196,  200  ;  Su- 
pervisors V.  Schenck,  5  Id.,  776 ;  The  City  v.  Lamson^  9  Id.,  479 ;  Bath  Co.  v. 
Amy,  13  Id.,  244;  Pendleton  Co.  v.  Amj',  13  Id.,  298;  Kennicott  v.  Supervisors, 
16  Id.,  452  ;  St.  Joseph  Township  v.  Rogers,  16  Id.,  644  ;  Olcott  v.  Supervisors, 
16  Id.,  678  ;  Township  of  Pine  Grove  v.  Talcott,  19  Wall.,  666. 


§>   1523-  NATURE  OF  MUNICIPAL  CORPORATIONS.  533 

have  many  of  the  State  courts  of  last  resort.^  And  it  has 
been  held  that  a  municipal  corporation  might,  under  legisla- 
tive authority,  donate  its  bonds  to  a  railroad  company,^  and 
even  though  it  was  outside  of  the  State,  but  looking  to  a 
connection  with  it.^  And  also  that  it  might  subscribe  under 
competent  authority  to  a  "  Railroad  and  Banking  Compa- 
ny ";■*  or  to  a  railroad  company  whose  charter  vested  it  with 
power  to  carry  on  the  business  of  a  coal,  mining,  furnace, 
or  manufacturing  company.^  But  these  decisions  are  com- 
bated with  great  power  of  reasoning  in  a  few  of  the 
States,^  and  the  disastrous  frauds  that  have  resulted  from 
judicial  recognition  of  their  doctrines,  reinforcing  logic 
with  great  considerations  of  public  policy,  would  doubtless 
now  overthrow  them,  were  they  not  so  solidly  imbedded  in 
our  jurisprudence,  with  vested  rights  of  property  resting 
upon  them.  Constitutional  inhibitions  are  now  coming  to 
the  relief  of  the  people  ;^  and  it  is  probable  that  in  a  few 
years  the  constitutions  of  the  States  will,  without  excep- 
tion, stand  between  the  people  and  the  repetition  of  such 

*  Goddin  v.  Crump,  8  Leigh,  120(1837)  (navigation  company)  ;  City  of  Bridge- 
port V.  Housatonic  R.R.  Co.,  15  Conn.,  475  (1843)  ;  Nichol  v.  Mayor  of  Nash- 
ville, 9  Humph.,  252  (1848)  ;  Talbot  v.  Dent,  9  B.  Mon.,  526  (1849)  ;  Slack  v. 
Maysville  R.R.  Co.,  13  Id.,  i  (1852)  ;  Commonwealth  v.  McWilliams,  11  Penn. 
St.,  61  (1S49)  ;  Sharpies  v.  Mayor,  21  Id.,  147  ;  Moers  v.  City  of  Reading,  21  Id., 
188;  Davis  V.  Ramsey  Co.,  18 Minn.,  482;  Hallenbeck  \-.  Hahn,  2  Neb.,  377; 
Strickland  v.  Railroad  Co.,  27  Miss.,  209 ;  City  v.  Alexander,  23  Mo.,  483  ;  Leav- 
enworth Co.  v.  Miller,  7  Kan.,  479 ;  Aurora  v.  West,  9  Ind.,  74  ;  Gibbons  v. 
R.R.  Co.,  36  Ala.,  410;  Prettyman  v.  Supervisors,  19  111.,  406;  Butler  v.  Dun- 
ham, 27  111.,  474 ;  Augusta  Bank  v.  Augusta,  49  Me.,  507  ;  Stein  v.  Mobile,  24 
Ala.,  591  ;  Starin  v.  Genoa,  23  N.  Y.,  439;  Gould  v.  Sterling,  Id.,  439;  Benson 
V.  Mayor,  24  Barb.,  248  ;  Duanesburg  v.  Jenkins,  40  Barb.,  579 ;  San  Antonio 
V.  Lane,  32  Tex.,  405. 

'  Town  of  Queensbury  v.  Culver,  19  Wall.,  84. 

*  Railroad  Co.  v.  County  of  Otoe,  16  Wall.,  667.  See  also  Quincy,  etc.,  R.R. 
Co.  V.  .Morris,  84  111.,  410. 

*  Winn  v.  City  of  Macon,  21  Ga.,  275. 

'  County  of  Randolph  v.  Post,  93  U.  S.  (3  Otto),  502. 

*  People  V.  Township  Board  of  Salem,  20  Mich.,  452,  against  the  power;  so 
also  Thomai  v.  Port  Huron,  27  Mich.,  320.  In  Iowa  the  decisions  have  vacil- 
lated. At  hrst  the  power  was  affirmed,  Dubuque  Co.  v.  R.R.  Co.,  4  G.  Greene, 
i;  then  denied.  State  v.  Wapello  Co.,  13  Iowa,  388;  Hanson  v.  Vernon,  27 
Iowa,  28. 

''  In  Ohio,  Illinois,  and  Pennsylvania  such  subscriptions  are  prohibited  by  the 
constitution. 


534  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §  1523*3!. 

abuses  as  have   disgraced  the   municipal   history   of   this 
country,  and  overburdened  its  citizens  with  taxation. 

§  1523^.  Co7isolidatioii  of  railroads. — When  a  munici- 
pal corporation  has  lawful  authority  to  subscribe  to  a  rail- 
road company,  which  becomes  afterward  consolidated 
under  constitutional  enactments  with  other  companies  un- 
der another  name,  and  the  consolidated  company  succeeds 
to  the  rights  and  privileges  of  the  company  to  which  the 
subscription  was  authorized,  the  Supreme  Court  of  the 
United  States  has  held,  that  the  municipal  corporation 
may  execute  its  power  to  subscribe  to  the  consolidated 
company;^  but  that  authority  given  to  a  county  court  by  a 
township  election  to  subscribe  to  a  certain  railroad  com- 
pany would  not  extend  to  authorize  subscription  by  such 
court  on  behalf  of  the  township  to  another  company  which 
had  absorbed  the  original  by  consolidation,  the  distinction 
being  taken  that  the  county  court  in  the  latter  case  was  the 
mere  agent  of  the  township,  having  no  discretion  to  act 
beyond  the  power  given,  while  the  authorities  of  the  county 
invested  with  discretion,  as  it5  official  representatives  would 
have  a  more  extended  power.^ 

§  1524.  Constitutional  restrictions  tipon  public  subscrip- 
tions.— In  those  cases  where  it  appeared  there  were  consti- 
tutional restrictions  upon  the  legislatures  of  States,  forbid- 
ding the  contracting  of  debts,  or  subscriptions  to  internal 
improvements  by  them,  it  has  been  held  that  such  restric- 
tions did  not  apply  to  the  municipal  divisions  of  a  State.' 


*  County  of  Scotland  v.  Thomas,  94  U.  S.  (4  Otto),  692  ;  County  of  Schuyler 
V.  Thomas,  98  U.  S.  (8  Otto),  169;  Pompton  v.  Cooper  Union,  loi  U.  S.  (11 
Otto),  202.  See  also  The  State  v.  Greene  County,  54  Mo.,  540 ;  County  of  Ray 
V.  Vansyckle,  95  U.  S.  (5  Otto),  675. 

=  Harshman  v.  Bates  County,  92  U.  S.  (2  Otto),  569.  See  also  County  of  Bates 
V.  Winters,  97  U.  S.,  83  (7  Otto).  As  to  consolidation  of  corporations  and  ef- 
fect on  subscriptions,  see  County  of  Tipton  v.  Locomotive  Works,  103  U.  S.  (13 
Otto),  523 ;  Harter  v.  Kernochan,  Id.,  562 ;  Menaska  v.  Hazard,  102  U.  S.  (12 
Otto),  81. 

'  Township  of  Pine  Grove  v.  Talcott,  19  Wall.,  674  ;  Gelpcke  v.  City  of  Du- 
buque, I  Wall.,  204;  Clark  v.  Janesville,  10  Wis.,  136;  Clapp  v.  Cedar  Co.,  5 
Iowa,  15  ;  Thompson  v.  City  of  Peru,  29  Ind.,  305 ;  Cass  v.  Dillon,  2  Ohio  St. 


§   1524-  NATURE  OF  MUNICIPAL  CORPORATIONS.  535 

And  conversely,  that  restrictions  upon  the  powers  of  mu- 
nicipal corporations  do  not  apply  to  the  State,^  But  if  a 
constitution  forbid  the  General  Assembly  to  "authorize 
any  county,  city,  or  town,  to  become  a  stockholder  in,  or 
loan  its  credit  to,  any  company,  association,  or  corporation,'' 
unless  two-thirds  of  the  qualified  voters  assent,  townships 
will  be  comprehended  in  the  interdict,  as  they  are  mere 
tracts  of  territory,  having  no  more  existence  as  corpora- 
tions than  the  wards  of  a  city.'^ 

Where  such  provisions  are  incorporated  into  the  consti- 
tutions of  the  States,  if  they  appear  on  their  face,  by  fair 
and  reasonable  intendment,  to  apply  only  to  future  acts 
conferring  authority  by  the  legislature,  they  will  not  abro- 
gate and  annul  existing  acts  by  which  authority  is  conferred 
upon  municipal  bodies  to  make  particular  subscriptions, 
althoucrh  those  bodies  have  not  carried  them  out.  And 
bonds  issued  in  pursuance  of  such  pre-existing  acts  will  be 
valid.*  In  Minnesota,  where  the  constitution  forbade  the 
legislature  to  authorize  the  issue  of  municipal  bonds  in  ex- 
cess of  ten  per  cent,  of  taxable  property,  it  was  construed 
to  be  applicable  to  future  legislation,  and  not  to  laws  in  ex- 
istence.* The  United  States  Supreme  Court,  speaking  of 
a  prohibitory  clause  of  the  constitution  of  Missouri,  says  : 
"  This  prohibition,  it  will  be  observed,  is  against  the  legis- 
lature's authorizing  municipal  subscriptions  or  aid  to  private 

607  ;  Slack  v.  Railroad  Co.,  13  B.  Mon.,  16;  Prettyman  v.  Supervisors,  19  III, 
406;  Pattison  v.  Supervisors,  13  Cal.,  175  ;  Johnson  v.  Stark  Co  ,  24  111.,  75; 
Butler  v.  Dunham,  27  111.,  474  ;  Robertson  v.  City  of  Rockford,  21  111.,  452. 

*  Cooley  Const.  Lim.,  218,  219 ;  i  Dillon  on  Mun.  Corp.,  §  90,  p.  208. 
^  Harshman  v.  Bates  County,  2  Otto  (92  U.  S.),  569. 

"County  of  Cass  v.  Gillett,  100  U.  S.  (10  Otto),  585;  County  of  Henry  v. 
Nicolay,  95  U.  S.  (5  Otto),  619;  County  of  Schuyler  v.  Thomas,  98  U.  S.  (8 
Otto),  173  ;  County  of  Scotland  v.  Thomas,  94  U.  S.,  682  ;  Smith  v.  County  of 
Clark,  54  Mo.,  58  ;  Smead  v.  Trustees  of  Union  Township,  8  Ohio  St.,  394 ;  Cass 
V.  Dillon,  2  Ohio  St.,  398  ;  Commissioners  of  Knox  County  v.  Nichols,  14  Ohio 
St.,  260 ;  Woodward  v.  Supervisors  of  Calhoun  County,  U.  S.  District  Court  of 
Mississippi,  Cent.  L.  J.,  June  18,  1875,  p.  396.  The  State  v.  Sullivan  Co.,  51 
Mo.,  522;  The  State  v.  Greene  Co.,  54  Mo.,  540;  County  of  Callaway  v.  Foster 
93  U.  S.  (3  Otto),  567. 

*  State  V.  Town  of  Clark,  23  Minn.,  423. 


536  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   I  5  25. 

corporations  ;  it  does  not  purport  to  take  away  any  au- 
thority already  granted.  It  only  limits  the  power  of  the 
leo-islature  in  granting  such  authority  for  the  time  to 
come."  ^ 

§  1525.  Federal  decisions  as  to  the  validity  of  municipat 
bonds. — It  is  a  general  principle  of  the  jurisprudence  of  the 
United  States  that  the  construction  given  to  a  statute  of 
a  State  by  the  highest  court  thereof,  is  a  part  of  the  statute 
itself,  and  is  as  binding  upon  the  Federal  courts  of  the 
United  States  as  the  text  of  the  statute.^  And  if  the 
highest  court  of  a  State  adopt  new  views  as  to  the  proper 
construction  of  such  a  statute,  and  reverse  its  former  de- 
cision, the  Federal  courts  will  follow  the  latest  settled  ad- 
judications.^ But  still  they  will  not  follow  every  oscilla- 
tion of  opinion.  And,  therefore,  where  it  appeared  that  at 
the  time  when  the  city  of  Dubuque  issued  certain  coupon 
bonds,  their  legality  had  been  determined  by  a  series  of  de- 
cisions of  the  highest  court  of  Iowa,  the  Supreme  Court 
of  the  United  States  refused  to  follow  subsequent  decisions 
of  the  same  tribunal  holding  such  bonds  invalid,  Swayne, 
J.,  saying:  "  We  shall  never  immolate  truth,  justice,  and 
the  law,  because  a  State  tribunal  has  erected  the  altar  and 
decreed  the  sacrifice."  And  approved  as  the  sound  and 
true  rule  that  "if  the  contract,  when  made,  was  vaUd  by  the 
laws  of  the  State  as  then  expounded  by  all  the  departments 
of  the  government,  and  administered  in  its  courts  of  jus- 
tice, its  validity  and  obligations  can  not  be  impaired  by  any 
subsequent  action  of  legislature  or  decision  of  its  courts 
alterinor  the  construction  of  the  law."* 

■  County  of  Scotland  v.  Thomas,  94  U.  S.  (4  Otto),  688.  See  Moultrie  Co.  v. 
Fairtield,  vo-1.  4  Morrison's  Transcript,  No.  i,  p.  140. 

2U.  S.  V.  Morrison,  4  Pet.,  124;  Green  v.  Neal,  6  Pet.,  291  ;  Township  of 
Elmwood  V.  Many,  2  Otto  (92  U.  S.),  287. 

^  Leffingwell  v.  Warren,  2  Black,  599. 

« Gelpcke  v.  Dubuque,  i  Wall.,  202.  [See  Ohio  Life  and  Trust  Co.  v.  Debolt, 
16  How.,  432].  To  same  effect,"  see  also  Havemeyer  v.  Iowa  Co.,  3  Wall.,  294  ; 
Lamed  v.  Burlington,  5  Wall.,  275  ;  Mitchell  v.  Burlington,  5  Wall,  274  ;  Thom- 
son V.  Lee  County,  3  Wall,  327  ;  Lee  v,  Rogers,  7  Wall.,  181  ;  City  of  Kenosha 


§    1527.  EXPRESS  AND  IMPLIED  POWERS.  S37 

§  1526.  More  recently  the  United  States  Supreme  Court 
has  taken  a  step  farther,  and  held  that  questions  relating 
to  bonds  issued  in  a  negotiable  form  invoh'e  questions  re- 
lating to  commercial  securities  ;  and  that  whether  under 
the  constitution  of  the  State  such  securities  are  valid  or 
void  belongs  to  the  domain  of  general  jurisprudence.  And, 
accordingly,  that  the  decisions  of  the  highest  court  of  the 
State  relating  to  such  bonds  will  not  be  respected  by  that 
tribunal,  when  not  satisfactory  to  its  judges,  and  the  ques- 
tion arises  upon  a  bond  in  the  hands  of  a  bona  fide  holder 
who  is  the  citizen  of  another  State  or  a  foreigner.^ 


SECTION  II. 

EXPRESS  AND   IMPLIED   PO\VERS   OF    MUNICIPAL   CORPORATIONS. 
— WHEN  THEY    MAY   ISSUE    NEGOTIABLE   BONDS. 

§  1527.  The  powders  of  corporations  have  been  divided 
judiciously  into  three  classes  :  (i)  Those  granted  in  express 
words.  (2)  Those  necessarily  implied  or  necessarily  inci- 
dent to  the  powders  expressly  granted.  (3)  Those  abso- 
lutely essential  to  the  declared  purposes  and  objects  of  the 
corporation  not  simply  convenient,  but  indispensable.^ 
Whatever  powder  is  implied  is  as  effectual  as  what  is  ex- 
pressed.^ 

§  1527^;.  General  doctrines  as  to  municipal  powers. — 
In  the  United  States  the  following  propositions  are  sus- 
tained by  weight  of  authority  : 

V.  Lamson,  9  Wall.,  486  ;  Campbell  v.  Kenosha,  5  Wall.,  194  ;  Clemens  on  Cor- 
porate Securities,  32,  33;  Township  of  Elmwood  v.  Many,  92  U.  S.  (2  Otto), 
298  ;  Douglass  v.  County  of  Pike,  loi  U.  S.  (11  Otto),  679. 

*  Township  of  Pine  Grove  v.  Talcott,  19  Wall.,  667.     See  ante,  §  10,  vol.  i. 

'Dillon  on  Municipal  Corporations  (2d  ed.),  173,  §  55  ;  Merriam  v.  Moody's 
Ex'rs,  25  Iowa,  163;  Tucker  v.  City  of  Virginia,  4  Nev.,  20. 

'United  States  v.  Babbitt,  i  Black.,  61  ;  Gelpcke  v.  Dubuque,  i  Wall.,  221 
Lynde  v.  County  of  Winnebago,  16  Wall.,  13. 


538  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   I528. 

1.  That  whenever  a  municipal  corporation  has  power 
conferred  to  contract  a  debt,  borrow  money,  or  issue  a  ne- 
gotiable security,  it  is  to  be  regarded  quoad  hoc  as  a  private 
corporation.* 

2.  That  a  municipal  corporation  has  implied  power  to 
contract  a  debt  whenever  necessary  to  carry  out  any  power 
conferred  upon  it.^ 

3.  That  whenever  it  may  contract  a  debt,  it  may  borrow 
money  to  pay  it.^ 

4.  That  whenever  it  may  contract  a  debt  or  borrow 
money,  it  may  issue  its  negotiable  coupon  bonds  for  its 
payment* 

§  1528.  The yfri-/ proposition  can  not  be  sustained,  in  our 
judgment.  The  differences  between  the  public  and  the  pri- 
vate corporation,  indicated  in  the  beginning  of  this  chap- 
ter, show  that  their  natures  have  little  if  anything  in  com- 
mon. A  municipal  corporation,  indeed,  can  not  be  em- 
powered to  act  for  private  purposes.  Its  character  as  a  gov- 
ernment can  not  be  divested.  And  in  no  sense  can  it  be 
looked  upon  as  anything  else  than  as  a  local  arm  of  the 
sovereign  power.^ 

§  1529.  ThQ  second  proposition  is  undoubtedly  correct, 
but  the  authorities  differ  as  to  the  facts  which  justify  its  ap- 


1  De  Voss  V.  City  of  Richmond,  18  Grat.,  338,  345.  quoting  Moodalay  v.  East 
India  Co.,  i  Brown  C.  C,  469 ;  Touchard  v.  Touchard,  5  Cal.,  307 ;  City  of  Ga- 
lena  v.  Corwith,  48  111.,  424. 

'^Lynde  v.  County,  16  Wall.,  12. 

» Lynde  v.  County,  16  Wall,  12  ;  City  of  Galena  v.  Corwith,  48  HI.,  424. 

*De  Voss  V.  City  of  Richmond,  18  Grat.,  338  ;  Railroad  Co.  v.  Evansville,  15 
Ind  3QS;  Commonwealth  v.  Pittsburg,  34  Penn.  St.,  496  ;  Middleton  v,  Alle- 
ghany Co.,  37  Penn.  St.,  241  ;  Reinbath  v.  Pittsburgh,  41  Id.,  278 ;  Galena  v. 
Corwith,  48  111.,  423. 

^Roosevelt  v.  Draper,  23  N.  Y.,  318,  325;  Darlington  v.  Mayor,  31  N  Y.,  164. 
Tudge  Dillon  says  in  his  Treatise  on  Municipal  Corporations  (2d.  ed.,  p.  152, 
riote)  that  "  the  private  character  ascribed  to  it  (a  municipality)  is  difficult  ex- 
actly to  comprehend,"  and  pertinently  inquires,  "  Are  not  all  powers  conferred 
upon  municipalities,  whether  many  or  few,  given,  and  given  only,  for  their  better 
regulation  and  government,  and  to  promote  their  welfare  as  parts  of  the  State 
at  large  ?  "  He  evidently  discountenances  the  idea  of  a  municipality  being  re- 
garded as  private  in  any  regard. 


§    I530-  EXPRESS  AND  IMPLIED  POWERS.  539 

plication.  If  a  municipal  corporation  be  empowered  to 
erect  public  buildings,  court-houses,  markets,  etc.,  it  must 
necessarily  contract  debts  for  the  material  furnished,  and 
services  rendered.  And  it  has  been  held  that  it  may  exe- 
cute its  negotiable  bonds  for  the  amounts  agreed  to  be 
paid  to  the  contractors.^  But  if  the  statute  law  be  such  as  to 
indicate  that  taxation,  and  not  the  contraction  of  debts,  was 
contemplated  by  the  legislature  as  the  method  of  raising 
money  to  accomplish  the  proposed  objects,  that  method  alone 
can  be  relied  on  ;  for  authority  to  issue  obligations  must  be 
conveyed  in  express  terms,  or  by  necessary  implication.* 

§  1530.  The  third  proposition,  that,  whenever  the  mu- 
nicipality may  contract  a  debt,  it  may  borrow  money  to 
pay  it,  has  been  illustrated  in  numerous  cases.  Thus  it  has 
been  held  that,  where  the  town  of  Chilicothe  was  em- 
powered to  purchase  real  estate,  and  erect  public  buildings, 
its  power  to  borrow  money  for  these  purposes  was  implied, 
and  its  bonds  for  money  borrowed  valid.^  The  like  decis- 
ion has  been  rendered  where  money  was  borrowed  to  carry 
out  authority  to  a  municipal  corporation  to  build  markets  ; 
the  court  saying,  that  "  corporations  may  resort  to  the 
usual  and  convenient  means  of  carrying  out  powers 
granted,"  and  that  "no  means  is  more  usual  for  the  execu- 
tion of  such  objects  than  that  of  borrowing  money."  *  So 
where  a  county  w^as  authorized  to  construct  a  court-house, 
and  levy  a  tax  for  that  purpose,  it  was  held  that  the  county 
judge  (the  officer  designated)  had  authority  to  borrow 
monev,  and  issue  negotiable  county  bonds  therefor  ;  and  to 
sell  the  bonds  outside  of  the  State  to  raise  money  for  the 
purpose  indicated.^ 


'Lynde  v.  County,   16  Wall.,  12;    Mills  v.  Gleason,  n  Wis.,  470;  Bank  v, 
Chilicothe,  7  Ohio,  Part  II,  31. 

"Wells  V.  Supervisors,  102  U.  S.  (2  Otto),  625. 

'Bank  v.  Chilicothe.  7  Ohio,  Part  II,  31  (1836). 

*  Mills  V.  Gleason,  1 1  Wis.,  470  ;  State  v.  Madison,  7  Wis.,  688. 

'Lvnde  v.  County  of  Winnebago,  16  Wall.,  12  (1872),  Chief-Justice  Chase,  and 
Field  and  Miller,  JJ.,  dissenting.  See  Wells  v.  Supervisors,  102  U.  S  (12  Otto) 
625.  " 


540  THE  VALIDITY  OF  MUNICIPAL  BONDS.  ^   ^530* 

But  there  is  a  fundamental  difference  between  contract- 
ing a  debt  to  one  person,  and  borrowing  money  from 
another  to  pay  it.  It  may  be  convenient  to  do  so,  but  it 
can  not  be  necessary.  And  the  power  to  contract  a  debt 
to  A.  can  not,  by  any  reasonable  intendment,  be  construed 
into  a  power  to  borrow  money  from  B.  In  the  one  case 
the  application  of  the  credit  is  secured  to  the  advancement 
of  the  authorized  object,  while  money  borrowed  is  liable  to 
be  lost,  to  be  squandered,  or  to  be  diverted  to  illegitimate 
purposes.  And  the  logic  of  the  cases  which  impress  this 
view  seems  to  us  unanswerable.^  Recognizing  the  fact  that 
corporation  officers  are  special  agents,  and  that  municipal 
corporations  are  themselves  but  special  agents  of  govern- 
ment, it  is  difficult  to  see  how  the  power  of  the  corporation 
or  of  its  officers  (who  are  agents  of  agents)  can  be  so 
broadly  extended  by  implication,  as  some  of  the  cases  main- 
tain. If  the  corporation  be  authorized  to  contract  with  A. 
to  build  a  court-house,  its  bonds  given  for  the  amount  due 
him  would  be  good.  But  enlarging  the  power  to  authorize 
the  borrowing  of  money,  and,  under  color  of  building  one 
court-house,  municipal  officers  might  flood  the  markets 
with  millions  of  negotiable  bonds  for  money  borrowed 
from  different  persons,  which  they  might  put  in  their 
pockets,  and  leave  the  building  still  unpaid  for.  In  other 
words,  a  county  officer,  authorized,  as  in  the  case  cited 
below,^  to  provide  a  single  county  edifice,  may  dissolve  the 
whole  property  of  the  county  in  the  twinkling  of  an  eye,  and 
by  the  magic  of  a  negotiable  bond,  into  his  pocket.  Courts 
which  tolerate  such  doctrines,  and  support  them  by  the 
narrow  technicalities  of  estoppel,  seem  to  us  not  exempt 
from  that  "epidemic  insanity"  which  has  induced  extrava- 
gant corporate  subscriptions  to  public  works,  and  which 
has  been  so  much  deprecated.^    In  Louisiana  the  charter  of 

'  Ketchum  v.  City  of  Buffalo,  14  N.  Y.,  256. 

*  Lynde  v.  County  of  Winnebago,  16  Wall.,  12. 

•See  Mercer  County  v.  Racket,  i  Wall.,  96,  and  J>osi,  §  1541. 


§   1532-  EXPRESS  AND  IMPLIED  POWERS.  54I 

a  municipal  corporation  granted  authority  to  it  to  give  such 
bonds  as  might  be  necessary,  to  conduct  its  litigation,  or  on 
the  current  administration  of  its  affairs.  It  was  held  that 
this  did  not  authorize  the  issue  of  bonds  for  raising  money ; 
and  that  bonds  issued  for  such  a  purpose  were  void,  even 
in  the  hands  of  a  bona  fide  holder.^ 

§  1 53 1.  As  to  the  fourth  proposition,  when  the  power  to 
borrow  the  money  is  clear,  it  necessarily  involves  in  its  ex- 
ercise the  execution  of  a  security  for  its  repayment ;  and 
negotiable  coupon  bonds,  being  the  common  and  most 
acceptable  form  of  municipal  securities,  when  given  for 
money  legitimately  borrowed,  would  undoubtedly  be  valid, 
as  has  been  stated.^  And  it  is  generally  considered  that 
when  the  municipality  has  authority  to  contract  a  debt  it 
has  the  power  to  evidence  the  same  by  a  bill,  note,  bond,  or 
other  instrument.^ 

§  1532.  Decisions  of  U.  S.  Supreme  Court. — The  United 
States  Supreme  Court  has  held  that  authority  to  a  city  to 
subscribe  to  stock  in  a  railway  company  "  as  fully  as  an  in- 
dividual," imported  power  to  subscribe  to  the  stock  on 
credit,  and  issue  its  negotiable  bonds  in  payment.*  So  that 
authority  to  a  city  "  to  borrow  money  for  any  object  in  its 
discretion,"  authorized  it  to  subscribe  to  a  railroad  cor- 
poration, and  to  borrow  money  upon  its  negotiable  bonds 
to  pay  for  it.^  It  has  carried  its  doctrines  on  this  subject 
to  great  lengths,  and  has  held  that  authority  to  "  borrow 


'  Wilson  V.  City  of  Shreveport,  29  La.,  678  (1877),  Marr,  J. :  "The  cred'.'  r  of 
a  coqjoration  is  bound  to  see  that  the  contract  or  obligation  of  which  he  claims 
the  benefit  is  within  the  power  which  the  corporation  may  lawfully  exercise.  The 
fact  that  the  obligation  is  in  the  shape  of  a  negotiable  instrument,  or  that  it  was 
acquired  in  good  faith,  for  a  valuable  consideration,  before  maturity,  in  no  man- 
ner enlarges  the  power  of  the  corporation,  or  gives  any  additional  force  or  valid- 
ity to  its  unauthorized  acts." 

^  See  ante,  §  1527. 

^  City  of  Williamsport  v.  Commonwealth,  84  Penn.  St.,  500. 

*  Seybert  v.  City  of  Pittsburg,  i  Wall.,  372  ;  Commonwealth  ex  rel.  Reinbatb 
V.  Pittsburg,  41  Penn.  St.,  278. 

•Meyer  v.  Muscatine,  i  Wall.,  387. 


542  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1533- 

money  for  any  public  purpose,"  authorized  the  city  of  Bur- 
lington to  subscribe  to  railroad  stock,  and  to  issue  its  nego- 
tiable bonds  to  the  company  to  be  sold  by  it,  the  proceeds 
realized  by  the  company  to  be  appropriated  to  pay  for  the 
stock/  But  borrowing  money  to  pay  for  ^stock  is  one 
thing,  and  hypothecating  credit  in  the  shape  of  bonds  to  be 
sold  to  pay  for  it  is  another  and  very  different  thing ;  and 
this  decision  stretches  implication  to  the  last  attenuation. 
More  in  conformity  with  principle  we  think  is  the  decision 
to  the  contrary  in  New  York,  where  it  was  held  that 
authority  to  a  town  to  borrow  money  at  seven  per  cent, 
and  to  pay  it  out  for  railroad  stock  at  par,  did  not  warrant 
it  to  exchange  the  town  bonds  for  an  equal  nominal 
amount  of  stock,  leaving  it  in  the  power  of  the  railroad 
company  to  sell  the  bonds  at  a  discount.^ 

§  1533-  ^^  ^^  ^^^^  ^^^^  ^f  ^^''^''^^'^^P^^  bonds. — When  they 
have  been  once  issued  into  the  market  as  valid  subsisting 
securities,  they  may  be  sold  for  any  amount  by  the  holder, 
like  any  other  chattels.^  But  in  the  hands  of  the  munici- 
pality they  are  not,  unless  so  made  by  statute,  the  subject  of 


1  Rogers  v  Burlington,  3  Wall.,  654.  Field,  J.  (with  whom  concurred  Chase, 
C  T  and  Miller  and  Grier,  JJ.),  dissented,  in  an  opinion  of  rare  ability. 
"  Here  "  he  said,  "  the  authority  is  to  borrow  money,  yet  no  money  was  bor- 
rowed,' but  the  bonds  of  the  city  were  lent.  Borrowing  money  and  lendmg 
credit  are  not  convertible  terms.'' 

"-  Starin  v.  Town  of  Genoa,  23  N.  Y.,  454.  Lott,  J.,  saying:  "  It  was  evidently 
the  intention  of  the  act  that  money  should  be  raised  and  paid  over  to  aid  in  the 
construction  of  a  railroad,  and  no  color  is  given  to  the  idea  or  the  position  that 
the  credit  merely  of  any  town  should  be  given,  through  and  by  which  money 
mi"-ht  be  raised.  A  town  might  be  willing  to  incur  a  debt  to  a  limited  sum, 
witli  the  knowledge  that  the  whole  amount  for  which  it  was  incurred  was  actu- 
allv  to  be  appropriated  to  the  construction  of  a  railroad  that  might  be  deemed 
conducive  to  its  interests,  but  would  absolutely  retuse  to  issue  their  bonds,  for 
the  purpose  of  sale,  from  which  much  less  than  the  amount  for  which  they  were 
eiven  might  be  realized.  If  it  had  been  intended  to  authorize  bonds  to  be  given 
for  stock?  there  is  no  reason  why  that  intention  should  not  have  been  declared, 
as  was  done  in  the  law  in  relation  to  the  village  of  Rome,  above  referred  to 
See  also  Gould  v.  Town  of  Sterling,  23  N.  Y.,  458,  and  opinion  of  Selden,  J., 
quoted  by  Field,  J.,  dissenting,  in  above-quoted  case  Judge  Cooley,  m  his  ad- 
mirable  work  on  Constitutional  Limitations,  p.  218,  note,  approves  the  New 
York  view.  -nt        n 

=»  Town  of  Danville  v.  Sutherlin,  20  Gratt.,  555  :  City  of  Lynchburg  v.  Norvell 
20  Gratt.,  601  ;  Griffith  v.  Burden,  35  Iowa,  138.     See  §  750.  vol.  i. 


§   1534-  EXPRESS  AND  IMPLIED  POWERS.  543 

sale.  Legislative  authority  to  issue  bonds  for  the  stock  of 
a  railroad  corporation,  or  other  public  improvement,  does 
not  imply  authority  to  sell  them  and  apply  the  proceeds  to 
pay  for  the  stock,  especially  if  the  sale  be  below  par.*  And 
authority  to  issue  bonds  for  a  loan  of  money  does  not  imply 
authority  to  sell  the  bonds  below  par ;  and  such  a  sale  would 
be  usurious  if  the  discount  were  greater  than  allowed  by 
law,  and  render  the  bonds  absolutely  void.^  Any  one  who 
purchases  bonds,  knowing  that  they  were  negotiated  in  a 
manner  not  authorized  by  law,  is  not  a  bona  fide  holder,  but 
takes  them  subject  to  any  defence  existing  against  them  ;  ^ 
and  if  they  w^ere  usurious  in  their  inception,  even  a  bona 
fide  holder  for  value  and  without  notice,  it  seems,  can  not 
recover  against  the  corporation.*  But  a  third  party,  selling 
them  to  him,  w^arrants  their  validity,  and  he  may  recover 
from  him  the  consideration  paid.^ 

§  1 534.  When  sale  is  affected  with  usury. — The  fact  that 
the  bonds  acquired  from  a  city  are  issued  in  the  form  of  a 
sale,  and  are  paid  for  in  a  depreciated  medium,  nominally 
greatly  in  excess  of  their  face  value,  it  has  been  held,  does 
not  relieve  the  transaction  from  the  taint  of  usury,  if  in 
reality  the  real  value  of  such  depreciated  medium  bore  to 
the  face  value  of  the  bond  a  proportion  which  would  amount 
to  usury  ;^  and  it  has  been  also  held  that  the  taint  would 
not  be  removed  by  the  fact  that  the  bonds  might  be  paid 

'  City  of  Atchison  v.  Butcher,  3  Kans.,  104 ;  Daviess  County  Court  v.  Howard, 
13  Bush  (Ky.),  102,  III. 

""  Town  of  Danville  v.  Sutherlin,  20  Grat.,  555  ;  City  of  Lynchburg  v.  Norvell. 
20  Grat.,  601.  In  the  first  named  of  the  above  cases,  p.  580,  Staples,  J.,  said  ; 
"  In  every  sale  there  must  be,  not  only  parties,  but  a  thing  to  be  sold.  A  man 
can  not  sell  his  own  promises  to  pay,  because  such  an  obligation  is  not  the  sub- 
ject of  sale.  So  long  as  it  remains  in  his  own  possession  it  is  payable  to  no  one, 
and  binds  no  one."    See  Com'rs  of  Craven  Co.  v.  A.  &  N.  C.  R.R.,  "Jl  N.  C,  295 

'  Starin  v.  Town  of  Genoa,  23  N.  Y.,  440 ;  City  of  Atchison  v.  Butcher,  3 
Kans.,  104. 

"  See  City  of  Lynchburg  v.  Norvell,  20  Grat.,  601. 

"  See  chapter  xxil,  on  Transfer  by  Assignment,  §§  732  et  scq.,  vol.  I  ;  Young 
v.  Cole,  3  Bing.  N.  C,  724.  See  as  to  when  amount  paid  may  be  recovered  of 
the  Corporation,  §  1491^. 

•  Town  of  Danville  v.  Sutherlin,  20  Grat.,  555  ;  Staples,  J.,  with  w^hom  Chris- 
tian, J.,  concurred  ;  Moncure,  P.,  dissented  ;  Anderson  and  Joynes,  JJ.,  not  sit- 
ting.   See  also  City  of  Lynchburg  v.  Norvell,  20  Grat.,  601. 


544  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1 535- 

at  maturity  in  the  carrency  receivable  for  taxes  by  the  State 
wherein  they  were  issued.*  But  there  is  to  our  mind  great 
force  in  the  view  that  if  the  currency  of  payment  be  not 
gold,  but  such  as  may  be  in  circulation  at  time  of  payment, 
there  is  no  usury  in  the  transaction,  as  there  is  no  certainty 
that  the  payee  will  receive  back  his  principal  amount.^ 

§  1535.  Submission  to  popular  vote. — In  submitting  to 
popular  vote  the  question  of  subscription  to  a  public  im- 
provement, the  corporate  authorities  must  proceed  in  con- 
formity with  the  statute  authorizing  such  vote  to  be  taken, 
and  not  in  such  a  manner  as  to  confuse  or  confound  the 
question  presented  with  another.^  If  the  statute  requires 
the  subscription  vote  to  "  specify  the  amount,"  it  will  not 
suffice  to  submit  the  question  to  the  people  calling  on  them 
to  vote  for  or  against  an  amount  "  not  exceeding  "  a  sum 
named.*  And  if  it  require  the  grand  jury  to  specify  the 
amount,  it  will  not  suffice  for  them  to  simply  limit  the 
amount.^  But  all  such  irregularities  may  be  cured  by  legis- 
lative ratification.^  And  mere  informalities — as,  for  instance, 
making  the  bonds  payable  "  to  the  railroad  company  or 
bearer,"  where  the  statute  provided  they  should  be  payable 
"  to  the  president  and  directors  of  the  railroad  company, 
and  their  successors  and  assigns" — would  be  immaterial.''^ 

'  City  of  Lynchburg  v.  Norvell,  20  Grat.,  601  ;  Staples,  J.,  with  whom  Chris- 
tian, J.,  concurred  ;  Moncure,  P.,  dissented. 

^  See  Bracken  v.  Griffin,  3  Call,  433  ;  and  Boulware  v.  Newton,  18  Grat.,  708, 
where  this  view  is  illustrated. 

=  Peoria  &  O.  R.R.  Co.  v.  County  of  Tazewell,  22  111.,  156.  Walker,  J.,  "  In 
the  case  of  Fulton  County  v.  The  Wabash  and  Mississippi  Railroad  Co.,  21  III., 
338,  this  court  held,  that  the  law  did  not  authorize  the  submission  of  a  proposi- 
tion for  subscription  of  a  gross  sum  to  two  roads,  in  the  same  submission,  in 
such  a  manner  that  the  voter  had  no  option  to  vote  for  the  one  and  against  the 
other.  This  submission  was  made  in  that  manner.  It  is  proposed  to  sub- 
scribe one  hundred  thousand  dollars,  one-fourth  to  this  and  three-fourths  to 
another  road,  and  the  voter,  however  much  in  favor  of  subscription  to  one,  and 
opposed  to  the  other,  was  compelled  to  vote  either  for  or  against  the  entire  sub- 
scription." 

*  State  V.  Saline  County,  45  Mo.,  242. 

^  Mercer  County  v.  Pittsburgh,  etc.,  R.R.,  27  Penn.  St.,  389. 

*  McMillen  v.  County  Judge,  6  Iowa,  393. 

''  Woodward  v.  Supervisors  of  Calhoun  County,  U  S.  Dist.  Ct.,  Cent.  L.  J„ 
June  18,  1875,  p.  396. 


§   1535^-  EXPRESS  AND  IMPLIED  POWERS.  545 

If  bonds  be  issued  by  corporate  authorities  before  the 
law  authorizing  their  issue  is  pubhshed  and  takes  effect,  they 
will  be  void,^  though  subject  to  subsequent  ratification. 

§  1535^'  Cases  171  zvhicJi  a  majoi'ity  of  legal  or  qualified 
votes  is  necessary. — Sometimes  the  constitution  of  a  State, 
or  the  act  of  the  legislature,  requires  as  a  condition  prece- 
dent to  subscriptions,  and  the  consequent  issue  of  bonds 
by  counties,  cities,  or  towns,  that  "  a  majority  (or  two-thirds 
or  some  other  proportion)  of  the  legal  (or  qualified)  voters  " 
shall  have  given  their  assent  thereto  at  an  election.  "  It  is 
insisted,"  said  Clifford,  J.,  in  a  case  before  the  U.  S.  Su- 
preme Court,  "that  the  legislature,  in  adopting  the  phrase 
'  a  majority  of  the  legal  voters  of  the  township,'  intended 
to  require  only  a  majority  of  the  legal  voters  of  the  town- 
ship voting  at  an  election,  notified  and  held  to  ascertain 
whether  the  proposition  to  subscribe  for  the  stock  of  the 
company  should  be  accepted  or  rejected  ;  and  the  court  is 
of  opinion  that  such  is  the  true  meaning  of  the  enactment, 
as  the  question  would  necessarily  be  ascertained  by  a  count 
of  the  ballot."^  "All  qualified  voters,"  says  Chief-Justice 
Waite  in  another  case,  "who  absent  themselves  from  an 
election  duly  called,  are  presumed  to  assent  to  the  expressed 
will  of  the  majority  of  those  voting,  unless  the  law  pro- 
viding for  the  election  otherwise  declares.  Any  other  rule 
would  be  productive  of  the  greatest  inconvenience,  and 
ought  not  to  be  adopted,  unless  the  legislative  will  to  that 
effect  is  clearly  expressed."^  These  views  have  not  pre- 
vailed without  dissent  in  the  U.  S.  Supreme  Court ;  ^  and 

■  Phelps  V.  Alfred  Bank,  13  Wise,  432;  Berliner  v.  Town  of  Waterloo,  14 
Wise,  378. 

^  St.  Joseph  Township  v.  Rogers,  16  Wall.,  644. 

'  County  of  Cass  v.  Johnston,  95  U.  S.  (5  Otto),  369,  citing  Louisville,  etc., 
R.R.  V.  County  Court  of  Davidson,  i  Sneed,  638  ;  Taylor  v.  Taylor,  10  Minn., 
107  ;  People  v.  Warfield,  20  111.,  159;  People  v.  Garner,  47  111.,  246;  People  v. 
Weant,  48  111.,  263.  See  also  County  of  Cass  v.  Jordan,  95  U.  S.  (5  Otto),  372 ; 
Douglass  V,  County  of  Pike  (11  Otto),  loi  U.  S.,  685. 

*  See  Harshman  v.  Bates  County,  92  U.  S.  (2  Otto),  569,  and  opinion  of  Brad- 
ley, J.,  in  County  of  Cass  v.  Johnson,  95  U.  S.  (5  Otto),  370. 

Vol.  IL— 35 


546  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   ^53^- 

the  opposing  views  have  much  to  commend  them  to  favor.* 
In  our  judgment  they  are  more  consistent  with  popular 
rio-ht  which  should  be  the  touchstone  of  construction  in  all 
matters  touching  the  purse  of  the  people.  It  has  been  well 
said  :  "  The  people  who  are  to  pay  the  taxes  and  ought  not 
to  be  subjected  to  that  burden  unless  the  requisite  majority 
of  the  class  named,  that  is,  the  qualified  voters,  can  be  in- 
duced to  give  their  assent  to  it.  In  the  one  case,  as  in  the 
other,  absence  and  failure  to  vote  is  equivalent  to  a  dis- 
sent." 2 

§  1535(5.  A  constitutional  prohibition,  contained  also  in 
legislative  enactment,  forbidding  municipal  officers  to  loan 
municipal  credit,  or  donate  or  subscribe  stock  to  railroad 
or  other  corporations  without  previous  assent  of  two-thirds 
of  the  qualified  voters,  is  merely  prohibitory,  and  confers 
no  authority  when  such  assent  is  given.^ 

§  1536.  It  has  been  held  that,  if  a  majority  of  the  electors 
of  a  municipal  corporation  vote  in  favor  of  a  proposition 
for  the  corporation  to  subscribe  to  the  capital  stock  of  a 
railroad  company,  under  a  law  directing  such  subscription 
to  be  made  if  such  majority's  vote  is  obtained,  the  munici- 
pal authorities,  on  proceedings  to  compel  them  to  make 
such  subscription,  have  a  right  to  allege  and  show  that  the 
election  was  not  fairly  conducted,  but  was  influenced  by 
bribery  and  corruption,  practiced  and  perpetrated  by  the 
railroad  company  and  its  employes.*  It  has  been  held  by 
the  U.  S.  Supreme  Court  that  under  an  Illinois  statute  au- 
thorizing a  township  subscription  to  a  railroad  company  not 
exceeding  $250,000,  provided  the  ^people  so  voted,  the 
power  of  the  township  was  not  exhausted  by  a  subscription 


'  See  State  v.  Wenkelmeier,  35  Mo.,  103  ;  State  v.  Sutterfield,  45  Mo.,  391. 
'  Dissenting  opinion  of  Bradley,  J.,  in  County  of  Cass  v.  Johnson,   95  U.  S. 
(5  Otto),  371. 

=  Jarrolt  v.  Moberly,  103  U.  S.  (13  Otto),  581. 
*  People  V.  Supervisors,  27  Cal.,  655. 


§   1537-  POWER  OF  A  MUNICIPAL  OFFICER  TO  BIND.  547 

of  a  portion  of  the  sum  limited/  and  that  a  consoHdation 
of  the  railroad  company  with  another,  and  assumption  of  a 
different  name  prior  to  the  subscription,  did  not  vitiate  it.^ 

§  1536^.  Right  of  tax-payers  to  injunction. — The  tax- 
payers of  the  municipality  may  also  enjoin  the  proceedings 
of  the  corporate  authorities  to  carry  out  the  subscription 
on  the  ground  of  fraud,  bribery,  non-fulfilment  of  pre-ex- 
isting conditions,  or  other  sufficient  cause  ;  but  they  must 
do  so,  if  at  all,  in  apt  time,  and  before  the  rights  of  bona 
fide  third  parties  have  accrued.* 


SECTION   III. 

POWER  OF  A  MUNICIPAL  OFFICER  OR  AGENT  TO  BIND  THE 
MUNICIPALITY;  VIEWS  OF  THE  UNITED  STATES  SUPREME 
COURT. 

§  1537-  The  Supreme  Court  of  the  United  States  has 
enunciated  the  following  doctrines  on  this  subject  as  appli- 
cable to  corporations,  private  and  public,  w^hich  we  shall 
divide  into  two  series.     The  first  series  are  as  foUow^  s : 

First :  Where  a  party  deals  with  a  corporation  in  good 
faith,  the  transaction  is  not  ultra  vires,  and  he  is  unaware 
of  any  defect  of  authority,  or  other  irregularity  on  the  part 
of  those  acting  for  the  corporation,  and  there  is  nothing  to 
excite  suspicion  of  such  defect  or  irregularity,  the  corpora- 
tion is  bound  by  the  contract,  although  such  defect  or  irreg- 
ularity in  fact  exists.^ 

Second :  When  a  corporation  has  power,  under  any  cir- 

*  Empire  v.  Darlington,  loi  U.  S.  (11  Otto),  87;  see  People  v.  Wajnesville, 
88  III,  469. 

'  Empire  v.  Darlington,  loi  U.  S.  (11  Otto),  87  ;  see  ante,  §  1523(7. 
'  Butler  V.  Dunham,  27  111.,  477,  478;  Prettyman  v.  Supervisors,  19  111.,  406 
Steines  v.  Franklin  County,  48  Mo.,  176  ;  see  §  1522^;. 

*  Merchants'  Bank  v.  State  Bank,  10  Wall,  644. 


548  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §1537- 

cumstances,  to  issue  negotiable  securities,  the  bojia  fide 
holder  has  a  right  to  presume  they  were  issued  under  the 
circumstances  which  give  the  requisite  authority,  and  they 
are  no  more  liable  to  be  impeached  for  any  infirmity  in  the 
hands  of  such  a  holder  than  any  other  commercial  paper.^ 

Third:  That,  where  negotiable  bonds  or  securities  on 
their  face  import  by  recitals  a  compliance  with  the  law 
under  which  they  were  issued,  the  purchaser  is  not  bound 
to  look  further  for  evidence  of  compliance  with  the  condi- 
tions annexed  to  the  grant  of  power  to  issue  them.^ 

Fourth :  That,  if  it  appears  to  have  been  the  sole  prov- 
ince of  the  officers  who  execute  and  issue  the  bonds  or  se- 
curities to  decide  whether  or  not  there  has  been  antecedent 
compliance  with  the  regulation,  condition,  or  qualification 
prescribed  to  their  authority,  their  determination  that  there 
has  been  such  compliance  and  declaration  to  that  effect  is 
sufficient,  and  can  not  be  impugned  as  against  a  bona  fide 
holder.^ 


'  Gelpcke  v.  City  of  Dubuque,  i  Wall.,  203  ;  Moran  v.  Miami  County,  2  Black, 
725  ;  Supervisors  v.  Schenck,  5  Wall.,  784 ;  The  Mayor  v.  Lord,  9  Wall.,  414 ; 
City  of  Lexington  v.  Butler,  14  Wall.,  296.  See  also  San  Antonio  v.  Lane,  32 
Tex.,  414  ;  County  of  Henry  v.  Nicolay,  95  U.  S.  (5  Otto),  626. 

■^  Mercer  County  v.  Hacket,  i  Wall,  93  ;  Commissioners  of  Knox  County  v. 
Aspinwall,  21  How.,  545  ;  St.  Joseph  Township  v.  Rog-ers,  16  Wall.,  659;  Pen- 
dleton County  V.  Amy,  13  Wall.,  305  ;  Bissell  v.  Jeffersonville,  24  How.,  287 ; 
Moran  v.  Miami  County,  2  Black,  722  ;  Grand  Chute  v.  Winegar,  15  Wall.,  372  ; 
Larned  v.  Burlington,  4  Wall.,  276,  277  ;  Lynde  v.  County,  16  Wall.,  6  ;  Kenni- 
cott  V.  Supervisors,  16  Wall.,  464;  County  of  Warren  v.  Marcy,  97  U.  S.  (7 
Otto),  96  ;  Menasha  V.  Hazard,  102  U.  S.  (12  Otto),  81  ;  San  Antonio  v.  M'eharty, 
96  U.  S.  (6  Otto),  313  ;  Township  of  Rock  Creek  v.  Strong,  96  U.  S.  (6  Otto), 
227  ;  Commissioners  v.  BoUes,  94  U.  S.,  202  ;  Commissioners  v.  January,  94  U. 
S.  (4  Otto),  202  ;  Pompton  v.  Cooper  Union,  loi  U.  S.  (11  Otto),  204 ;  Clay  Co. 
V.  Society  for  Savings,  Morrison's  Transcript,  vol.  3,  No.  3,  p.  654. 

=  Town  of  Coloma  v.  Eaves,  92  U.  S.  (2  Otto),  491  ;  Town  of  Venice  v.  Mur- 
dock,  2  Otto  (92  U.  S.),  496;  Town  of  Genoa  v.  Woodruff,  2  Otto  (92  U.  S.),  502  ; 
County  of  Moultrie  v.  Savings  Bank,  92  U.  S.  (2  Otto),  631  ;  Marcy  v.  Township 
of  Oswego,  92  U.  S.  (2  Otto),  637  ;  Walnut  v.  Wade,  103  U.  S.  (13  Otto),  683  ; 
Commissioners  v.  Bolles,  4  Otto  (94  U.  S.),  104  ;  Buchanan  v.  Litchfield,  102  U. 
S.  (12  Otto),  291  ;  Bonham  v.  Needles,  103  U.  S.  (13  Otto),  648  ;  Orleans  v. 
Pratt,  99  U.  S.  (9  Otto),  676  ;  Lincoln  v.  Iron  Co.,  103  U.  S.  (13  Otto),  413  ; 
Moultrie  Co.  V.  Fairfield,  Morrison's  Transcript,  vol.  4,  No.  i,  p.  152  ;  Commis- 
sioners V.  Januar)-,  94  U.  S.  (4  Otto),  202  ;  St.  Joseph  Township  v.  Rogers,  16 
Wall.,  659,  Clifford,  J.  ;  Kennicott  v.  Supervisors,  16  Wall.,  464,  Hunt,  J. ;  Lynde 
V.  County,  16  Wall.,  13,  Swayne,  J. :  "  It  is  a  settled  rule  of  law  that,  where  _a 
particular  functionary  is  clothed  with  the  duty  of  deciding  such  a  question,  his 


§   153^.       POWER  OF  A  MUNICIPAL  OFFICER  TO  BIND.  549 

Fifth  :  That,  from  the  mere  fact  that  the  bonds  or  se- 
curities are  issued  and  subscribed  to  the  object  of  their 
issue,  the  purchaser  has  a  right  to  assume  that  the  condi- 
tions precedent  to  the  right  to  issue  have  been  fulfilled,^  and 
in  an  action  on  the  bonds  or  coupons  the  plaintiff  need  not 
aver  the  performance  of  such  conditions.^ 

Sixth:  That,  if  the  legal  authority  be  sufficiently  com- 
prehensive, a  bona  fide  holder  for  value  has  a  right  to  pre- 
sume that  all  precedent  requirements  have  been  complied 
with.^ 

Seventh :  That,  if  there  be  lawful  authority  for  the  cor- 
poration to  issue  the  bonds,  the  omission  of  formalities  and 
ceremonies,  or  the  existence  of  fraud  on  the  part  of  the 
agents  of  the  corporation  issuing  the  bonds,  can  not  be 
urged  against  a  bona  fide  holder  seeking  to  enforce  them.'* 

§  1538.  Qnalifications  of  doetrines  stated. — But  the 
effect  of  its  decisions  is  to  qualify  these  doctrines  by  a 
second  series  of  propositions,  as  follows  : 

decision,  in  the  absence  of  fraud  or  collusion,  is  final."  See  also  Bank  of  Rome 
V.  Villag^e  of  Rome,  19  N.  Y.,  20;  Commissioners  of  Knox  County  v.  Nichols, 
14  Ohio  St..  271.  In  Town  of  Coloma  v.  Eaves,  2  Otto  (92  U.  S.),  491.  Strong, 
J.,  quoting  Dillon  on  Municipal  Corporations,  §  419,  says  :  "  After  a  review  of 
the  decisions  of  this  court,  the  author  remarks,  '  If  upon  a  true  construction  of 
the  legislative  enactment  conferring  the  authority  (viz.,  to  issue  municipal  bonds 
upon  certain  conditions),  the  corporation,  or  certain  officers,  or  a  given  body  or 
tribunal,  are  invested  with  power  to  decide  whether  the  condition  precedent  has 
been  complied  with,  then  it  may  well  be  that  their  determination  of  a  matter  in 
pais,  which  they  are  authorized  to  decide,  will,  in  favor  of  a  bondholder  for 
value,  bind  the  corporation.'  This  is  a  very  cautious  statement  of  the  doctrine. 
It  may  be  restated  in  a  slightly  different  form.  When  legislative  authority  has 
been  given  to  a  municipality,  or  to  its  officers,  to  subscribe  for  the  stock  of  a 
railroad  company,  and  to  issue  municipal  bonds  in  payment,  but  only  on  some 
precedent  condition,  such  as  a  popular  vote  favoring  the  subscription,  and  where 
it  may  be  gathered  from  the  legislative  enactment  that  the  officers  of  the  munici- 
pality were  invested  with  power  to  decide  whether  the  condition  precedent  has 
been  complied  with,  their  recital  that  it  has  been,  made  in  the  bonds  issued  by 
them,  and  held  by  a  band  Jide  purchaser,  is  conclusive  of  the  fact,  and  binding 
upon  the  rnunicipality,  for  the  recital  is  itself  a  decision  of  the  fact  by  the  ap- 
pointed tribunal." 

1  Commissioners  of  Knox  County  v.  Aspinwall,  21  How.,  544  ;  Meyer  v.  Mus- 
catine, I  Wall.,  393  ;  Lincoln  v.  Iron  County,  103  U.  S.  (13  Otto),  412. 

""  Lincoln  v.  Iron  County,  103  U.  S.  (13  Otto),  413. 

"  Meyer  V.  Muscatine,  i  Wall.',  393;  Grand  Chute  v.  Winegar,  15  Wall,  373. 

*Kennicott  v.  Supervisors,  16  Wall.,  465  ;  Town  of  East  Lincoln  v.  Daven- 
port, 94  U.  S.  (4  Otto),  801. 


550  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   I  539- 

First:  That  where  the  power  on  the  part  of  the  corpora- 
tion officers  to  make  the  contract  for  the  corporation  never 
existed,  negotiable  securities  issued  by  them  are  invalid  in 
the  hands  of  all  persons,  even  innocent  purchasers.^  And 
such  power  must  appear  to  exist  in  express  terms,  or  by 
necessary  implication.^ 

Second :  That  there  can  be  no  ratification,  save  by  those 
who  are  capable  to  contract,  nor  of  contracts,  save  of  those 
which  it  is  competent  for  them  to  perform.^ 

§  1539.  Illustrations  of  the  doctrines  of  the  U.  S.  Su- 
preme Court.  Leading  case  of  Conwtissioners  of  Kjiox 
County  V.  Aspinwall. — Manifesting  a  stern  resolution  to 
sustain  the  rights  of  bona  fide  holders  of  corporate  securi- 
ties, that  tribunal  has  applied  the  first  series  of  propositions 
in  numerous  cases.  In  one  of  them  which  is  generally 
quoted  as  a  leading  case,*  suit  was  brought  by  a  bona  fide 
holder  for  value  of  coupons,  attached  to  bonds  of  Knox 
County,  Indiana,  which  had  been  given  in  subscription  to 
stock  of  a  railroad  company.  The  board  of  county  com- 
missioners had  been  authorized  by  act  of  Assembly  to  take 
stock  in  the  railroad,  payable  in  county  bonds,  "  provided 
a  majority  of  the  qualified  voters  of  said  county,  at  any 
annual  election,  shall  vote  for  the  same."  The  bonds 
recited  on  their  face,  that  they  were  issued  by  order  of  the 
commissioners  in  pursuance  of  the  act  of  Assembly  provid- 
ing for  their  issue ;  and  the  county  resisted  payment  on  the 
ground,  that  though  a  vote  had  been  cast  in  favor  of  their 

^  Anthony  v.  County  of  Jasper,  loi  U.  S.  (i  i  Otto),  693  ;  Wells  v.  Supervisors, 
102  U.  S.  (12  Otto),  625  ;  Town  of  South  Ottawa  v.  Perkins,  94  U.  S.  (4  Otto), 
260  ;  McClure  v.  Township  of  Oxford,  94  U.  S.  (4  Otto),  432  ;  Marsh  v.  Fulton 
County,  10  Wall.,  683,  See  also  Wilson  v.  City  of  Shreveport,  29  La.,  673  ; 
Tcvvn  of  Middleport  v.  yEtna  Life  Ins.  Co.,  82  111.,  562 ;  Township  of  East  Oak- 
land V.  Skinner,  94  U.  S.  (4  Otto),  257  ;  Williamson  v.  City  of  Keokuk,  44 
Iowa,  88, 

^  Wells  V.  Supervisors,  102  U.  S.  (12  Otto),  625. 

^  Marsh  v,  Fulton  County,  10  Wall.,  683  ;  Boom  v.  City  of  Utica,  2  Barb.,  103. 

*  Commissioners  of  Knox  County  v.  Aspinwall,  21  How.,  539;  approved  in 
De  Voss  V.  City  of  Richmond,  18  Grat.,  356,  357  ;  Steines  v.  Franklin  County 
48  Mo.,  179  ;  Town  of  South  Ottawa  v.  Perkins,  94  U.  S.  (4  Otto),  260. 


§1539-       POWER  OF  A  MUNICIPAL  OFFICER  TO  BIND.  55I 

issue,  at  a  popular  election,  the  bonds  were  invalid,  because 
the  preliminary  notices  for  the  election  prescribed  by 
statute  had  not  been  properly  given.  But  the  court 
declared  them  valid,  on  two  grounds,  and  Nelson,  J.,  said  : 
(i)  "This  view  would  seem  to  be  decisive  against  the 
authority,  on  the  part  of  the  board,  to  issue  the  bonds, 
were  it  not  for  a  question  that  underlies  it,  and  that  is,  who 
is  to  determine  whether  or  not  the  election  has  been 
properly  held  ?  The  right  of  the  board  to  act  in  execution 
of  the  authority  is  placed  upon  the  fact,  that  a  majority  of 
the  votes  had  been  cast  in  favor  of  the  subscription  ;  and 
to  have  acted  without  first  ascertaining  it  would  have  been 
a  clear  violation  of  duty  ;  and  the  ascertainment  of  the 
fact  was  necessarily  left  to  the  inquiry  and  judgment  of  the 
board  itself,  as  no  other  tribunal  was  provided  for  the  pur- 
pose. The  board  was  one,  from  its  organization  and  gen- 
eral duties,  fit  and  competent  to  be  the  depository  of  the 
trust  thus  confided  to  it."  (2)  "Another  answer,"  says  the 
court,  "  to  this  ground  of  defence,  is  that  the  purchaser  of 
the  bonds  had  a  right  to  assume  that  the  vote  of  the 
county,  which  was  made  a  condition  to  the  grant  of  the 
power,  had  been  obtained,  from  the  fact  of  the  subscription 
by  the  board  to  the  stock  of  the  railroad  company,  and  the 
issuing  of  the  bonds.  The  bonds  on  their  face  import  a 
compliance  with  the  law  under  which  they  were  issued. 
....  The  purchaser  v/as  not  bound  to  look  further  for 
evidence  of  a  compliance  with  the  conditions  to  the  grant 
of  the  power."  Again,  where  bonds  issued  by  county 
commissioners  recited  that  they  were  issued  by  virtue  of, 
and  in  accordance  with,  the  act  of  the  legislature,  and  in 
pursuance  of,  and  in  accordance  with,  the  vote  of  a  majority 
of  the  qualified  electors,  the  court  said  :  "  Behind  such  a 
recital,  as  we  have  seen,  a  bona  fide  holder  for  value  paid  is 
bound  to  look  for  nothing  except  legislative  authority  given 
for  the  issue  of  municipal  bonds  to  railroad  companies."* 

'  Commissioners  v.  Bolles,  94  U.  S.  (4  Otto),  109.     See  also  Commissioners  v. 
January,  94  U.  S.  (4  Otto),  202. 


552  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   I54O. 

§  1540.  Olhcr  cases  wherein  recitals  in  bonds  were 
deemed  concliLsive. — So  where  the  common  council  of 
Jeffersonville  City  were  authorized  to  issue  bonds 'for  stock 
in  a  railroad  company  on  the  petition  of  three-fourths  of 
the  legal  voters  of  the  city,  it  was  held  that  the  city  was 
precluded  by  the  recital  in  bonds  issued  by  the  council, 
that  such  petition  had  been  made,  from  showing  the  o.o'ix- 
trsiry  against  do7ia  Jide  holders  for  value.-^  The  like  view 
was  taken  where  authority  was  conferred  on  the  council  of 
Muscatine  to  borrow  money  upon  a  two-thirds  majority  in 
favor  of  the  loan  being  cast  at  an  election — but  in  this  case 
it  appears  that  such  majority  was  cast.^  So  where  a  statute 
required  the  grand  jury  of  a  county  to  fix  the  amount  of  a 
county  subscription  to  railroad  stock,  and  on  their  report 
being  filed  empowered  commissioners  to  make  the  sub- 
scription in  the  name  of  the  county,  it  was  held  that  where 
bonds  issued  by  such  com.missioners  were  sued  on  by  a 
bona  fide  holder,  it  was  not  necessary  for  him  to  show  that 
the  grand  jury  had  fixed  the  manner  and  terms  of  paying 
for  the  stock,  and  that  it  would  be  no  available  defence 
to  the  county  to  show  that  the  grand  jury  had  omitted  to 
do  so.^ 

§  1541.  In  another  case  where  the  action  was  on  coupons 
payable  to  bearer,  belonging  to  bonds  issued  by  commis- 
sioners of  Mercer  county,  it  appeared  that  commissioners 
were  empowered  to  subscribe  stock  to  a  railroad  company, 
and  issue  the  bonds  upon  the  following  "restrictions,  limi- 
tations, and  conditions,  and  in  no  other  manner  or  way 
whatever."  "  i.  After  and  not  before  the  amount  of  such 
subscription  shall  have  been  designated,  advised,  and  recom- 
mended by  a  grand  jury  of  the  county.     2.  Said  bonds 

'  Bissell  V.  Jeffersonville,  24  How.,  287  (i860).  Similar  view  taken  in  Van 
Hostrup  V.  Madison  City,  i  Wall,  297  (1863). 

^  Meyer  v.  City  of  Muscatine,  i  Wall,  393  (1863). 

^  Woods  V.  Lawrence  County,  i  Black,  386;  approved  in  Grand  Chute  v.  Win- 
egar,  15  Wall.,  372  (1872).  See  to  like  effect  Commissioners  of  Knox  Co.  v 
Nichols,  14  Ohio  St.,  260. 


§   1542.       POWER  OF  A  MUNICIPAL  OFFICER  TO  BIND.  553 

shall  in  no  case  be  sold  by  the  railroad  company  at  less  than 
pai.  3.  Acceptance  of  the  act  should  be  deemed  accept- 
ance of  another  fixing  the  gauges  of  railroads  in  the  county 
of  Erie."  The  county  resisted  payment  on  the  ground 
that  although  the  grand  jury  had  made  a  certain  recommen- 
dation, it  was  not  such  a  recommendation  as  the  law  re- 
quired, and  that  they  had  been  sold  below  par.  The  bonds 
recited  on  their  face  that  they  were  issued  under  authority 
of  the  act,  and  the  court  sustained  their  validity,  Grier,  J., 
saying:  "We  have  decided  that  where  the  bonds  on  their 
face  import  a  compliance  with  the  law  under  which  they 
were  issued,  the  purchaser  is  not  bound  to  look  further. 
The  decision  of  the  board  of  commissioners  may  not  be 
conclusive  in  a  direct  proceeding  to  inquire  into  the  facts 
before  the  rights  and  interests  of  other  parties  had  attached  ; 
but  after  the  authority  has  been  executed,  the  stock  sub- 
scribed, and  the  bonds  issued,  and  in  the  hands  of  innocent 
holders,  it  would  be  too  late,  even  in  a  direct  proceeding, 
to  call  it  in  question."  And  he  added,  "  x\lthough  we 
doubt  not  the  facts  stated  as  to  the  atrocious  frauds  which 
have  been  practiced  in  some  counties,  in  issuing  and  obtain- 
ing these  bonds,  we  can  not  agree  to  overrule  our  own  de- 
cisions, and  change  the  law  to  suit  hard  cases.  The  epi- 
demic insanity  of  the  people,  the  folly  of  county  officers, 
the  knavery  of  railroad  '  speculators,'  are  pleas  which  might 
have  just  weight  in  an  application  to  restrain  the  issue  or 
negotiation  of  these  bonds,  but  can  not  prevail  to  authorize 
their  repudiation  after  they  have  been  negotiated  and  have 
come  into  the  possession  of  bona  fide  holders."^ 

§  1542.  Again,  upon  a  mandamus  against  the  city  of 
Davenport  to  compel  a  tax  levy  to  pay  a  judgment  on  ne- 
gotiable bonds,  the  court  held  the  judgment  conclusive  as 
to  their  validity;  but,  in  answer  to  the  argument  of  counsel 
that  they  were  issued  without  the  prerequisite  popular  vote, 

'  Mercer  County  v.  Racket t,  i  Wall.,  96  (1863)  ;  approved  in  Grand  Chute  v 

Winegar,  15  Wall.,  372  (1872). 


554  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §    1542. 

the  court  declared  that,  as  against  an  innocent  purchaser,  the 
city  was  estopped  to  deny  compliance  with  the  statute.^ 
In  another  case,  where  the  city  of  Lexington,  Kentucky,  was 
authorized  to  subscribe  to  a  railroad  on  the  condition  of  a 
majority  vote,  it  appeared  that  the  vote  had  "been  cast,  but 
the  city  had  embodied  the  condition  in  the  proposition  sub- 
mitted that  $1,000,000  should  be  first  subscribed  by  other 
parties  before  its  officers  should  subscribe  to  the  stock  or 
execute  the  bonds.  The  city  refused  to  subscribe,  but  was 
directed  by  mandamtts  from  an  inferior  court  to  do  so.  It 
then  appealed,  and  the  Court  of  Appeals  of  Kentucky  re- 
versed the  decision  ;  but  meanwhile  the  bonds  were  issued, 
signed  by  the  mayor  and  clerk,  reciting  due  compliance 
with  the  act  of  Assembly,  and  came  into  the  hands  of  a 
bona  fide  holder.  And  the  court  sustained  their  validity  on 
the  like  grounds,  as  in  the  preceding  case  cited.^  In  an-, 
other  case,  in  an  action  brought  on  certain  coupons  of  bonds 
of  the  town  of  Coloma,  there  was  a  recital  on  the  bonds 
that  they  were  issued  in  accordance  with  a  vote  of  the  elect- 
ors of  said  township  of  Coloma,  signed  by  a  supervisor  and 
town  clerk,  and  recovery  was  resisted  mainly  upon  the 
alleged  ground  of  a  want  of  power  in  the  officers  of  the 
town  to  issue  the  bonds,  because  the  legal  voters  of  the 
town  had  not  been  notified  to  vote  upon  the  question  of 
the  subscription  for  which  the  bonds  were  issued.  It  was 
held  that  the  recital  estopped  the  town  from  the  defence 
offered  to  be  made.^     Again,  where  the  law  under  consid 

*  Mayor  v.  Lord,  9  Wall.,  414  (1869). 

•  City  of  Lexing-ton  v.  Butler,  14  Wall,  296  (1871).  Judge  Dillon  says  in  his 
Treatise  on  Municipal  Corporations,  vol.  i,  §  i,\ia,  p.  518  (2d  ed.)  :  "  The  sub- 
stance of  the  decision  of  the  United  States  Supreme  Court  in  this  case  would 
seem  to  be  that  a  bona  fide  purchaser  of  the  bonds  had  a  right  to  presume  that 
the  condition  annexed  by  the  city  as  to  the  $1,000,000  of  other  subscriptions  had 
been  complied  with,  and  thus  viewed,  the  judgment  of  the  court  rests  upon 
grounds  whose  soundness  can  not  admit  of  question.  It  is  not  an  authority 
upon  its  essential  facts  in  favor  of  the  proposition  that,  if  the  bonds  had  been 
issued  without  any  vote,  or  attempt  at  a  vote,  they  would  have  been  binding  in 
the  absence  of  estoppel  other  than  by  recitals  or  other  ground  of  liability." 

^  Town  of  Coloma  v.  Eaves,  2  Otto  (92  U.  S.),  484.  See  ante,  §  1537  and 
note. 


§   1543-       POWER  OF  A  MUNICIPAL  OFFICER  TO  BIND.  555 

eration  provided  that  the  amount  of  bonds  sold  by  any 
township  should  not  be  above  such  a  sum  as  would  require 
a  levy  of  more  than  one  per  cent,  per  annum  on  the  taxable 
property  of  the  township  to  pay  the  interest,  and  objection 
was  made  that  the  issue  of  the  bonds  in  controversy  was  in 
excess  of  this  amount,  the  court  said  that  the  extrinsic  facts 
were  referred  to  the  inquiry  and  determination  of  the  Board 
of  County  Commissioners,  and  were  determined  before  the 
bonds  came  into  the  plaintiff's  hands  ;  and  that  "  he  was 
therefore  not  bound  when  he  purchased,  to  look  beyond 
the  act  of  the  legislature,  and  the  recitals  which  the  bonds 
contained."  ^ 

§  1543.  So  it  has  been  held  that  it  was  no  defence  against 
bona  fide  holders  of  railroad  bonds  that  the  mortgage  given 
to  secure  them  was  executed  out  of  the  State,  instead  of  in 
it,  as  should  have  been  the  case.^  So  that,  wdiere  there  had 
been  a  popular  vote  in  favor  of  a  county  subscription,  the 
county  could  not  resist  payment  of  bonds  issued  in  pursu- 
ance thereof,  on  the  ground  that  the  election  had  been 
ordered  by  the  county  court  instead  of  by  the  board  of 
supervisors,  as  provided  by  law.^  So  that,  where  the  town 
of  Grand  Chute  had  been  authorized  to  subscribe  not  ex- 
ceeding $10,000  to  a  plank-road  company,  in  such  amounts 
"  as  may  be  declared  by  the  board  of  directors  of  said  com- 
pany necessary  to  the  completion  of  said  road  at  the  time 
of  such  subscription,"  it  could  not  resist  payment  of  bonds 
issued  by  the  supervisors,  on  the  ground  that  the  directors 
had  not  declared  the  amounts  necessary,  the  bonds  import- 
ing on  their  face  compliance  with  the  act."*  So  that  bonds 
signed  by  a  de  facto  judicial  officer  with  the  seal  of  the 
court  could  not  be  impeached  in  the  hands  of  an  innocent 

I  Marcy  v.  Township  of  Oswego,  2  Otto  (92  U.  S.),  641.  See  also  Humboldt 
Township  v.  Long,  2  Otto  (92  U.  S.),  645.  But  see  Mosher  v.  Ind.  School  Dis- 
trict, 44  Iowa,  122. 

»  Galveston  R.R.  v.  Cowdrey,  11  Wall,  47S  (1870). 

'  Supervisors  v.  Schenck,  5  Wall.,  773. 

*  Grand  Chute  v.  Winegar,  15  Wall.,  356  (1872). 


556  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1 544. 

holder  by  showing  that  the  officer  did  not  have  title  de  ju7'-e 
to  his  office  at  the  time  he  officiated  ;  nor  could  it  be  shown 
against  such  holder  that  the  company  to  whose  stock  the 
bonds  were  subscribed  was  not  organized  within  the  time 
specified  in  its  charter.-^ 

§  1544.  Cases  in  U.  S.  Supreme  Court  qualifying  the 
general  doctrines  before  stated. — Illustrating  the  seco7id 
series  of  propositions  :  It  appeared  that  the  legislature  of 
Illinois  had  authorized  a  county  subscription  to  be  made  to 
any  railroad  corporation  of  the  State,  provided  that  a  ma- 
jority of  the  qualified  voters  of  the  county  should  vote  for 
the  same,  and  required  that  the  notices  calling  for  the  elec- 
tion should  specify  the  company  in  which  stock  was  pro- 
posed to  be  subscribed.  The  powers  of  the  county  were 
only  to  be  exercised  by  the  board  of  supervisors,  or  by  reso- 
lution by  them  adopted.  The  voters  of  the  county  author- 
ized a  subscription  to  the  "  Mississippi  and  Wabash  R.R. 
Company,"  and  to  the  "  Petersburgh  and  Springfield  Com- 
pany," and  the  supervisors  authorized  their  clerk  to  issue 
the  bonds  to  the  first-named  corporation.  The  clerk  of  the 
county  court,  acting  as  their  clerk,  issued  bonds  to  "  The 
Central  Division  of  the  Mississippi  and  Wabash  R.R.  Com- 
pany," which  was  a  different  corporation  from  the  original 
company.  By  various  acts  the  supervisors  recognized  the 
validity  of  these  bonds  by  allowing  interest  on  them,  levy- 
ing a  tax  to  meet  it,  and  appointing  agents  to  represent  the 
stock  received  by  the  county  for  the  bonds  in  the  corporate 
meetings,  and  also  paid  two  of  the  bonds  in  full.  The  Su- 
preme Court  held  the  bonds  invalid  on  the  ground  that  the 
supervisors,  having  had  no  authority  to  issue  the  bonds  to 
the  corporation,  because  the  condition  precedent  of  a 
popular  vote  had  not  been  fulfilled,  could  not,  therefore, 
by  any  act  ratify  the  subscription  when  made  by  their 
clerk.^     In  another  case  where  the  Missouri  statute  declared 

'  Ralls  Co.  V.  Douglass,  4  Morrison's  Transcript,  No.  i,  p.  102, 
'  Marsh  v.  Fulton  County,  10  Wall..  683  (1870),  Field,  J.,  delivering  the  unani- 
mous opinion,  saying  :  "  But  it  is  earnestly  contended  that  the  plaintiff  was  an 


§   1544-       POWER  OF  A  MUNICIPAL  OFFICER  TO  BIND.  557 

that  before  a  municipal  bond  thereafter  issued  should  ob- 
tain validity  or  be  negotiated,  it  should  be  presented  to  the 
State  Auditor,  who  should  register  it,  and  certify  by  in- 
dorsement that  all  the  conditions  of  the  laws  and  of  the 
contract  under  which  it  was  authorized  to  be  issued  have 


innocent  purchaser  of  the  bonds  without  notice  of  their  invalidity.  If  such  were 
the  fact,  we  do  not  perceive  how  it  could  affect  the  liability  of  the  county  of  Ful- 
ton. This  is  not  a  case  where  the  party  executing  the  instruments  possessed  a 
general  capacity  to  contract,  and  where  the  instruments  might,  for  such  reason, 
be  taken  without  special  inquiry  into  their  validity.  It  is  a  case  where  the  power 
to  contract  never  existed — where  the  instruments  might,  with  equal  authority, 
have  been  issued  by  any  other  citizen  of  the  county.  It  is  a  case,  too,  where  the 
holder  was  bound  to  look  to  the  action  of  the  officers  of  the  county  and  ascertain 
whether  the  law  had  been  so  far  followed  by  them  as  to  justify  the  issue  of  the 
bonds.  The  authority  to  contract  must  exist  before  any  protection  as  an  inno- 
cent purchaser  can  be  claimed  by  the  holder.  This  is  the  law  even  as  respects 
commercial  paper,  alleged  to  have  been  issued  under  a  delegated  authority,  and 
is  stated  in  the  case  of  Floyd  Acceptances.  In  speaking  of  notes  and  bills  issued 
or  accepted  by  an  agent,  acting  under  a  general  or  special  power,  the  court  says  : 
•  In  each  case  the  person  dealing  with  the  agent,  knowing  that  he  acts  only  by 
virtue  of  a  delegated  power,  must,  at  his  peril,  see  that  the  paper  on  which  he 
relies  comes  within  the  power  under  which  the  agent  acts.  And  this  applies  to 
ever>'  person  who  takes  the  paper  afterward  ;  for  it  is  to  be  kept  in  mind  that 
the  protection  w^hich  commercial  usage  throws  around  negotiable  paper  can  not 
be  used  to  establish  the  authority  by  which  it  was  originally  issued.'  It  is  also 
contended  that  if  the  bonds  in  suit  were  issued  without  authority,  their  issue  was 
subsequently  ratified,  and  various  acts  of  the  supervisors  of  the  county  are  cited 
in  support  of  the  supposed  ratification.  These  acts  fall  very  far  short  of  showing 
any  attempted  ratification  even  by  the  supervisors.  But  the  answer  to  them  all 
is,  that  the  power  of  ratification  did  not  lie  with  the  supervisors.  A  ratification 
is,  in  its  effect  upon  the  act  of  an  agent,  equivalent  to  the  possession  by  him  of 
a  previous  authority.  It  operates  upon  the  act  ratified  in  the  same  maTiner  as 
though  the  authority  of  the  agent  to  do  the  act  existed  originally.  It  follows 
that  a  ratification  can  only  be  made  when  the  party  ratifying  possesses  the  power 
to  perform  the  act  ratified.  The  supennsors  possessed  no  authority  to  make  the 
subscription  or  issue  the  bonds  in  the  first  instance  without  the  previous  sanction 
of  the  qualified  voters  of  the  county.  The  supervisors,  in  that  particular,  were 
the  mere  agents  of  the  county.  They  could  not,  therefore,  ratify  a  subscription 
without  a  vote  of  the  county,  because  they  could  not  make  a  subscription  in  the 
first  instance  without  such  authorization.  It  would  be  absurd  to  say  that  they 
could,  without  such  vote,  by  simple  expressions  of  approval,  or  in  some  other 
indirect  way,  give  validity  to  acts  when  they  were  directly,  in  terms,  prohibited 
by  statute  from  doing  those  acts  until  after  such  vote  was  had.  That  would  be 
equivalent  to  saying  that  an  agent,  not  having  the  power  to  do  a  particular  act 
for  his  principal,  could  give  validity  to  such  act  by  its  indirect  recognition.  We 
do  not  mean  to  intimate  that  liabilities  may  not  be  incurred  by  counties  inde- 
pendent of  the  statute.  Undoubtedly  they  may  be.  The  obligation  to  do  jus- 
tice rests  upon  all  persons,  natural  and  artificial,  and  if  a  county  obtains  the 
money  or  property  of  otiiers  without  authority,  the  law,  independent  of  any 
statute,  w-ill  compel  restitution  or  compensation.  But  this  is  a  very  difierent 
thing  from  enforcing  an  obligation  attempted  to  be  created  in  one  way,  when  the 
statute  declares  that  it  shall  onlv  be  created  in  another  and  ditferent  way."  See 
also  Bissell  v.  City  of  Kankakee,  64  111.,  249  ;  McClure  v.  Township  of  Oxford, 
94  U.  S.  (4  Otto),  432, 


558  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1544^. 

been  complied  with,  the  Supreme  Court  of  the  United 
States  held  that  unless  the  bonds  were  so  indorsed,  the 
holder  could  not  maintain  an  action  upon  them  ;  and, 
further,  that  no  antedating  of  the  bonds,  so  as  to  give  them 
the  appearance  of  having  been  executed  before  the  statu- 
tory requirement  went  into  effect,  could  cure  the  infirmity.^ 
The  fact  that  the  act  under  which  bonds  are  issued  is  erro- 
neously referred  to  in  their  recital,  will  not  render  them 
void.^ 

§  1544^.  Power  of  townships. — A  township  has  no  inher- 
ent power  to  contract  debts,  and  issue  coupon  bonds,  and 
a  statute  declaring  it  "  lawful  for  the  agent  of  any  corpo- 
rate body  "  to  subscribe  to  a  railroad  will  not  create  such  a 
power  in  such  a  municipal  organization.  Such  a  provision, 
it  has  been  held,  manifestly  referred  to  private  corpora- 
tions.^ 


SECTION    IV. 

HOW   INVALIDITY  OF  THE    BOND   IS    CURED    BY    ACQUIESCENCE 
OR   RATIFICATION   OF  THE   MUNICIPALITY. 

§  1545.  There  are  four  ways,  according  to  the  decisions  of 
the  United  States  Supreme  Court  and  of  some  of  the  State 
courts,  in  which  a  municipal  corporation  may  estop  itself 
from  objecting  to  the  validity  of  corporate  securities  : 

(i)  By  its  members  failing  to  interfere  and  enjoin  their 
issue  when  they  are  about  to  be  executed,  and  thereby 
acquiescing.'* 

*  Anthony  v.  County  of  Jasper,  loi  U.  S.  (11  Otto),  693.  The  case  of  Town 
of  Weganwega  v.  Ayling,  99  U.  S.  (9  Otto),  112,  is  distinguished. 

"^  Commissioners,  etc.,  v.  January,  94  U.  S.  (4  Otto),  202. 

3  Township  of  East  Oakland  v.  Skinner,  94  U.  S.  (4  Otto),  257. 

^Supervisors  v.  Schenck,  5  Wall.,  581.  In  Kentucky  it  has  been  held  that 
parties  are  estopped  from  denying  the  constitutionality  of  a  statute  by  participat- 
ing in  procuring  its  passage,  acquiescing  or  approving  of  it,  or  by  receiving  bene- 
fit's under  it ;  although  others  may  impeach  its  validity.  Ferguson  v.  Landram, 
5  Bush  (Ky.),  231. 


§   1546-        HOW  INVALIDITY  OF  THE  EOND  IS  CURED.  559 

(2)  By  their  submitting  to  taxation  to  pay  them.* 

(3)  By  their  voting  for  or  submitting  to  the  payment  of 
principal  or  interest  by  the  corporate  officers.^ 

(4)  By  receiving  and  keeping  the  proceeds  or  benefits 
of  thcm.^ 

§  1546.  Where  county  bonds  had  been  issued  for  rail- 
road stock,  but  their  validity  was  objected  to,  because  the 
election,  at  which  the  popular  vote  was  in  their  favor,  had 
been  ordered  by  the  wrong  authority ;  but  taxes  had  been 
levied  and  interest  paid  on  them  for  nine  years,  the  court 
said,  per  Clifford,  J.  : 

"  Preliminary  proceedings  looking  to  such  a  subscription 
by  a  municipal  corporation  may  often  be  enjoined  for  de- 
fects or  irregularities  before  the  contract  is  perfected,  in 
cases  where  the  corporation  will  be  held  to  be  forever  con- 
cluded, if  they  remain  silent  and  suffer  the  shares  to  be  pur- 
chased, the  bonds  to  be  issued,  and  the  securities  to  be  ex- 
changed. Nothing  of  this  kind  was  attempted  in  this  case, 
and  the  defendants  have  never  rescinded,  or  attempted  to 
rescind,  the  contract ;  and  have  never  returned,  or  offered 
to  return,  the  evidences  of  their  ownership  of  the  shares  m 
the  stock  of  the  company,  but  have  annually  acknowledged 
the  validity  of  the  bonds,  by  voting  taxes  for  the  payment 
of  the  accruing  interest,  and  have  actually  paid  the  same  to 
the  amount  of  six  thousand  dollars." 

And  the  principle  is  stated  to  be,  that  "  where  the  offi- 
cers of  the  corporation  openly  exercise  powers  affecting  the 
interests  of  third  persons,  which  presupposes  a  delegated 

'State  V.  Van  Home,  7  Ohio  St.,  331  ;  Shoemaker  v.  Goshen  Township,  14 
Ohio  St.,  587. 

'^  Supervisors  v.  Schenck,  5  Wall.,  581.  To  same  effect,  see  Mercer  County  v. 
Hubbard,  45  111.,  142;  Keithsburg  v.  Frick,  34  111.,  421,  Breese,  J.  ;  Shoemaker 
V.  Goshen  Township,  14  Ohio  St.,  587  ;  Hannibal,  etc.,  R.R.  Co.  v.  Marion 
County,  36  Mo.,  295 ;  County  of  Ray  v.  Vansycle,  96  U.  S.  (6  Otto),  687  ;  Clay 
County  V.  Society  for  Savings,  Morrison's  Transcript,  vol.  3,  No.  3,  p.  654. 

^Super\nsors  v.  Schenck,  5  Wall.,  581;  Pendleton  County  v.  Amy,  13  Wall., 
305.  To  same  effect,  see  State  v.  Trustees  of  Union  Township,  8  Ohio  St.,  403  ; 
State  V.  Van  Home,  7  Ohio  St.,  331  ;  Barrett  v.  County  Court,  44  Mo.,  199, 
See  also  County  of  Ray  v.  Vansycle,  96  U.  S.  (6  Otto),  687. 


560  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §1547 

authority  for  the  purpose,  and  other  corporate  acts  subse- 
quently performed  show  that  the  corporation  must  have 
contemplated  the  legal  existence  of  such  authority,  the  acts 
of  such  officers  will  be  deemed  rightful,  and  the  delegated 
authority  will  be  presumed."^ 

§  1547.  So  where  a  county  received,  and  retained  for 
seventeen  years,  stock  in  a  railroad  company,  the  court  said, 
it  thereby  estopped  itself  from  asserting  that  it  was  issued 
by  officers  in  disregard  of  conditions  precedent  to  their  au- 
thority.^   And  the  doctrines  here  stated  have  been  adopted 

'Supervisors  v.  Schenck,  5  Wall,  781. 

^  Pendleton  County  v.  Amy,  14  Wall.,  305,  306,  Strong,  J.,  saying  :  "Without 
leo-islative  authority  a  municipal  corporation,  like  a  county,  may  not  subscribe  to 
th'e  capital  stock  of  a  railroad  company,  and  bind  itself  to  pay  its  subscription, 
or  issue  its  bonds  in  payment ;  and  if  it  does,  the  purchase  of  such  bonds  is 
affected  by  the  want  of  authority  to  make  them.  But  it  does  not  follow  from 
this  that,  when  the  legislature  has  given  its  sanction  to  the  issue  of  bonds,  pro- 
vided that  before  their  issue  certain  things  shall  be  done  by  the  officers  or  the 
people  of  the  county,  the  bonds  can  always  be  avoided  in  the  hands  of  an  inno- 
cent purchaser,  by  proof  that  the  county  officers  or  the  people  have  not  done,  or 
have  insufficiently  done,  the  things  which  the  legislature  required  to  de  done, 
before  the  authority  to  subscribe  or  to  issue  bonds  should  be  exercised.  A  pur- 
chaser is  not  always  bound  to  look  further  than  to  discover  that  the  power  has 
been  conferred,  even  though  it  be  coupled  with  conditions  precedent.  li  the 
rio-ht  to  subscribe  be  made  dependent  upon  the  result  of  a  popular  vote,  the  offi- 
cers of  the  county  must  first  determine  whether  the  vote  has  been  taken  as 
directed  by  law,  and  what  the  vote  was.  When,  therefore,  they  make  a  sub- 
scription, and  issue  county  bonds  in  payment,  it  may  fairly  be  presumed,  in  favor 
of  an  innocent  purchaser  of  the  bonds,  that  the  condition  which  the  law  attached 
to  the  exercise  of  the  power  has  been  fulfilled.  To  issue  the  bonds  without  the 
fulfilment  of  the  precedent  conditions  would  be  a  misdemeanor ;  and  it  is  to  be 
presumed  that  public  officers  act  rightly.  We  do  not  say  this  is  a  conclusive 
presumption  in  all  cases ;  but  it  has  more  than  once  been  decided  that  a  county 
may  be  estopped  against  asserting  that  the  conditions  attached  to  a  grant  of 
power  were  not  fulfilled.  The  estoppel  in  these  cases  was  either  by  recitals  in  the 
bonds  that  the  conditions  precedent  had  been  complied  with,  or  by  the  fact  that 
the  county  had  subsequently  levied  taxes  to  pay  interest  on  the  bonds.  In  the 
present  case,  it  does  not  appear  in  the  pleadings  whether  or  not  the  bonds  con- 
tained any  such  recitals,  nor  whether  the  officers  of  the  county  have  levied  taxes 
to  pay  interest  on  them,  or  whether  any  interest  has  been  paid.  These  grounds 
of  estoppel  do  not  exist.  But  if  such  acts  and  such  recitals  are  sufficient  to  pro- 
tect bona  fide  purchasers  against  an  attempt  to  set  up  non-compliance  with  the 
condition  attached  to  the  grant  of  power  to  issue  the  bonds,  it  is  not  easy  to 
see  why  the  pleadings  do  not  show  an  estoppel  m  this  case.  The  county  re- 
ceived in  exchange  for  the  bonds  a  certificate  for  the  stock  of  the  railroad  com- 
pany which  it  held  about  seventeen  years  before  the  present  suit  was  brought, 
and  which  it  still  holds.  Having  exchanged  the  bonds  for  the  stock,  can  it  re- 
tain the  proceeds  of  the  exchange,  and  assert  against  a  purchaser  of  the  bonds 
for  value,  that  though  the  legislature  empowered  it  to  make  them,  and  put  them 
upon  the  market,  upon  certain  conditions,  they  were  issued  in  disregard  ot  the 
conditions  ?  W^e  think  they  can  not,  and,  therefore,  that  the  third  plea  can  not 
be  sustained." 


§   I54S.        HOW  INVALIDITY  OF  THE  BOND  IS  CURED.  56 1 

in  Other  cases.*  But  these  doctrines  are  subject  to  this  gen- 
eral limitation,  or  qualification  :  that  in  order  to  be  capable 
of  ratification,  the  bonds  must  be  such  as  come  within  the 
constitutionally  conferred  powers  of  the  municipality  issuing 
them  ;  and  if  the  powers  assumed  to  be  conferred  by  the 
legislature  were  not  such  as  it  had  the  right  to  confer ;  for 
instance,  if  they  were  to  be  exercised  in  aid  of  a  private  in- 
stead of  a  public  object,  the  bonds  given  to  carry  them 
out  would  be  totally  void  and  incapable  of  ratification  by 
payment  of  interest  by  the  municipality  participating  in 
stockholders'  meetings  upon  the  stock  acquired  by  them,  or 
even  by  a  vote  of  the  majority  of  the  suffragans.^ 

§  1548.  In  Ohio,  where  the  tax-payers  of  a  township 
made  no  objection  to  the  validity  of  a  subscription  to  a  rail- 
road corporation  until  three  or  four  years  had  elapsed  there- 
after, and  during  that  period  submitted  to  taxation  and  the 
payment  of  interest  on  the  bonds  issued  under  it,  it  was  held 
that  they  could  not  then  object  to  the  validity  of  the  bonds 
which  had  passed  into  the  hands  of  bona  fide  holders.^     So 


'Rogers  v.  Burlington,  3  Wall.,  667;  r^Ieyer  v.  Muscatine,  i  Wall.,  392; 
Commissioners  v.  January,  94  U.  S.  (4  Otto),  206. 

"^  Weismer  v.  Village  of  Douglas,  ri  N.  Y.  S.  C.  (4  Hun),  202. 

•State  V.  Van  Home,  7  Ohio  St.,  331,  Swan,  J. :  "  If  the  location  of  the  road 
should  have  been  first  made,  any  tax-payer  of  the  township,  for  himself  and  all 
others  interested,  could,  at  any  time  before  the  issuing  or  negotiation  of  the 
bonds,  have  intervened  and  enjoined  their  issue  as  unauthorized,  on  account  of 
the  road  not  having  been  located.  They,  however,  either  intentionally  or  from 
neglect  to  assert  their  legal  rights,  and  without  protest  or  interference,  suffered 
the  election  to  take  place,  their  public  agents,  the  trustees,  to  subscribe  for  stock, 
to  issue  the  bonds  and  receive  the  proceeds.  They  also  afterward,  and  for  the 
period  of  three  or  four  years,  paid  the  interest  by  taxation,  and  thus  gave  credit 
to  the  bonds  of  the  township.  They  now  desire  to  retain  the  money  of  the  orig- 
inal bondholders,  refuse  to  pay  interest,  deny  their  obligations  to  pay  back  the 
principal,  disafiirm  the  acts  of  their  public  agents,  who,  under  the  forms  of  law 
and  by  their  direct  instigation  through  the  ballot-box,  issued  and  negotiated 
these  bonds.  They  had  an  opportunity,  before  innocent  third  persons  could  be 
injured  or  committed  to  the  acts  of  their  public  agents,  to  enjoin  their  proceed- 
ings, and  protect  themselves ;  they  did  not  seek  that  protection  ;  but  now,  when 
they  have  received  all  the  fruits  of  the  contracts  of  their  agents  from  third  per- 
sons who  have  acted  upon  their  recognition  of  the  authority  of  their  agents,  they 
ask  the  privilege  of  denying  this  recognition,  and  thus  escape  from  their  obliga- 
tions. It  is  too  late  for  them  to  do  so,  as  against  innocent  third  persons.  They 
are  concluded,  not  simply  by  the  acts  of  their  public  agents,  but  by  their  own. 
It  is  true,  that  when  public  officers  exceed  the  powers  vested  in  them  by  general 

Vol.  II.— 36 


562  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §1548. 

in  Missouri,  where  a  county  voted  for  twelve  years  on  stock 
subscribed  for  in  a  railroad  company,  it  was  held  it  could 
not  object  to  the  validity  of  bonds  issued  therefor.*  So  in 
Kansas,  where  the  failure  of  a  railroad  company  to  com- 
plete a  specified  number  of  miles  of  its^  work,  within  a 
given  time,  was  set  up  to  defeat  bonds  issued  in  aid  of  it, 
by  commissioners  of  a  county  who  waived  the  matter  of 
time,  the  bonds  were  held  valid,  the  public  having  had 
notice  and  acquiescing,  and  interest  having  been  paid  for 
two  years.^  Where  a  county  in  Illinois  subscribed  to  stock 
in  a  railroad  company,  and  agreed  to  extend  the  time  for 
completing  the  road  from  that  originally  fixed,  to  a  par- 
ticular date,  and  before  that  date,  by  its  proper  officers,  de- 
clared the  road  completed  to  its  satisfaction,  delivered  its 

laws,  their  acts  are  no  longer  official,  but  void  ;  and  this  principle  would  be  ap- 
plicable to  the  case  before  us,  if  the  trustees  had  derived  their  sole  authority  to 
make  the  contract  under  consideration  from  the  law,  without  any  interposition, 
sanction,  or  authority  from  the  tax-payers  of  the  township.  But,  in  the  case  be- 
fore us,  the  trustees  derived  their  authority  to  subscribe  for  the  stock  of  the  rail- 
road, and  to  issue  the  bonds,  specifically,  from  their  constituency,  the  tax-payers 
of  the  township.  The  trustees,  unless  authorized  by  the  tax-payers,  derived  no 
authority  to  act  from  the  laws  under  consideration.  In  fact,  the  whole  transac- 
tion under  the  legislation  was  for  the  purpose  of  consummating  an  agreement, 
having  all  the  substantial  elements  of  a  private  contract,  between  the  tax-payers 
as  principals,  who  by  vote  made  the  trustees  their  agents  to  contract  for  them, 
on  one  side,  and  the  railroad  and  bondholders  on  the  other.  The  rules  of  law 
applied  to  individuals,  and  founded  upon  the  clearest  principles  of  justice  and 
sound  morals,  should  be  equally  applicable  to  these  parties.  The  tax-payers,  as 
principals,  and  by  their  votes,  in  the  forms  of  law,  set  their  agents  in  motion, 
professed  to  clothe  them  with  special  authority  to  make  a  special  contract  with 
third  persons  for  their  benefit ;  by  voting,  instigated  those  agents  to  make  the 
subscription  and  issue  the  bonds  ;  and  thus  induced,  on  the  faith  of  this  recog- 
nition, innocent  third  persons  to  part  with  their  money  and  receive,  in  lieu 
thereof,  these  bonds.  If  the  trustees  of  the  township  and  the  tax-payers  sup- 
posed, until  very  recently,  as  they  probably  did,  that  the  subsequent  permanent 
establishment  and  location  of  the  railroad  through  the  township  was  sufficient  to 
authorize  the  issuing  of  the  bonds,  whether  that  location  was  made  before  or 
after  the  election,  it  is  equally  just  to  presume  that  the  bondholders,  who  parted 
with  their  money,  entertained  the  same  belief.  The  one  were  certainly  as  much 
bound  to  know  as  the  other ;  and  if  both  were  mistaken,  no  principle  of  law  or 
justice  would  demand  that  the  tax-payers  should  retain  the  fruits  of  the  mistake, 
and,  at  the  same  time,  repudiate  those  very  acts  of  their  own  which  misled  the 
bondholders,  and  induced  them  to  part  with  their  money  ;  in  truth,  blowing  hot 
to  get  the  bondholders'  money,  and  blowing  cold  to  rid  themselves  of  the  obh- 
gation  to  refund  it." 

'  Barrett  v.  County  Court,  44  Mo.,  201  ;  Hannibal,  etc.,  R.R.  Co.  v.  Marion 
Co.,  36  Id.,  294;  Steines  v.  Franklin  County,  48  Id.,  185. 

^  Leavenworth,  etc.,  R.R.  v.  Commissioners  of  Douglas  Co.,  18  Kansas,  170. 


§   I550-  LIABILITY  OF  MUNICIPAL  CORPORATIONS.  563 

bonds,  and  received  the  stock  subscribed  for,  the  Supreme 
Court  of  the  United  States  held  that  its  action  consti- 
tuted a  waiver  and  estoppel,  which  prevented  it  from 
raising  the  objection  that  the  contract  was  not  peformed  in 
time.^ 

§  1549.  An  examination  of  the  authorities  which  have 
been  cited  shows  that  the  doctrines  which  they  announce 
have  met  with  very  general  acceptation,  and  that  equi- 
table estoppel  is  applied  very  freely  to  the  enforcement  of 
municipal  obligations.  It  would  seem  to  us  that  it  should 
appear  in  all  cases  where  it  is  appealed  to,  to  silence  any 
citizen  of  the  municipality  in  his  plea  that  the  security  was 
illegally  issued,  that  he  had  a  faii;  opportunity  to  know  the 
facts,  and  had  willingly  neglected  to  assert  his  rights.  In 
other  words,  his  acquiescence  or  ratification  should  be 
made,  under  all  the  circumstances,  essential  to  the  validity 
of  the  ratification  by  a  principal  of  the  act  of  his  agent,  as 
elsewhere  expounded.^  Clearly  no  ratification  could  vali- 
date an  unconstitutional  act.^ 


SECTION  V. 

CORRECT     PRINCIPLES     AS    TO    THE    LIABILITY     OF     MUNICIPAL 
CORPORATIONS   UPON   NEGOTIABLE   BONDS. 

§  1550.  The  principles  respecting  the  liability  of  mu- 
nicipal corporations,  which  seem  to  us  to  be  sustained  by 
precedent  and  by  reason,  are  these  : 

(i)  That  mere  informalities  or  irregularities  in  the  ful- 
filment of  a   condition  precedent  to  a  grant  of  power  to 


*  County  of  Randolph  v.  Post,  3  Otto  (93  U.  S.),  502. 
'  See  chapter  X,  section  v,  pp.  259  et  seq.,  vol.  i. 

*  Sherrard  v.  Lafayette  Co.,  U.  S.  Dist.  Ct.,  Dillon,  J.,  Cent.  L.  J.,  May  28> 
1875,  p.  347.     See  ante,  §  1547. 


564  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   ^SSO* 

an  agent  or  officer,  or  in  the  exercise  of  that  power  when 
granted  by  the  agent  or  officer,  are  immaterial.^ 

(2)  That  if  a  person  is  only  to  become  the  agent  or 
officer  of  a  municipal  corporation,  to  do  certain  acts  when 
a  condition  precedent  has  been  fulfilled,  "such  condition 
must  be  fulfilled  in  all  substantial  and  material  respects 
before  such  acts  on  his  part  will  be  binding  on  the  cor- 
poration.^ 

(3)  That  no  assumption  or  declaration  by  him  that  such 
condition  has  been  fulfilled  will  have  any  effect  when,  in 
fact,  it  has  not  been  fulfilled.^ 

(4)  That  if,  however,  the  agent  or  officer  is  fully 
empowered  to  do  certain  acts  by  the  corporation,  but  his 
instructions  are  not  to  exercise  that  power  save  in  certain 
contingencies,  the  corporation  will  be  bound,  though  he 
violate  such  instructions,  unless  the  fact  that  the  contin- 
gency has  not  transpired  be  a  matter  of  public  record.* 

(5)  And  (as  it  seems  from  the  authorities)  if  it  be  the 

'  This  principle  is  universally  admitted,  and  upon  it  some  of  the  decisions  of 
the  U.  S.  Supreme  Court  are  maintainable.  Mercer  County  v.  Hubbard,  45  111., 
142  •  Smead  v.  Trustees  Union  Township,  8  Ohio  St.,  394  ;  Steines  v.  Franklm 
County,  48  Mo.,  179;  Town  of  East  Lincoln  v.  Davenport,  94  U.  S.  (4 
Otto),  801. 

^  Lewis  V.  Commissioners  of  Bourbon  County,  Kansas  (1873),  Cent.  Law  Jour., 
Jan.  8,  1874,  Brewer,  J.:  "Issuing  bonds  without  a  vote  is  no  more  ultra  vires 
than  issuing  them  against  a  vote  of  the  majority."  In  Cooley  on  Const.  Ltm., 
215,  it  is  said  :  "  While  mere  irregularities  of  action,  not  going  to  the  essentials 
of  the  power,  would  prevent  parties  who  had  acted  in  reliance  upon  the  securi- 
ties enforcing  them,  yet  as  the  doings  of  these  corporations  are  matters  of  pub- 
lic record,  and  they  have  no  general  power  to  issue  negotiable  securities,  any 
one  who  becomes  holder  of  such  securities,  even  though  they  be  negotia.ble  in 
form,  will  take  them  with  constructive  notice  of  any  want  of  power  in  the 
corporation  to  issue  them,  and  can  not  enforce  them  when  their  issue  was  un- 
authorized." 

'  Gould  V.  Town  of  Sterling,  23  N.  Y.,  463;  Clark  v.  Des  Moines,  19  Iowa, 
201  ;  Treadwell  v.  Commissioners,  11  Ohio  St.,  183  ;  Veeder  v.  Lima,  19  Wise., 
298;  Wallace  v.  Mayor  of  San  Jose,  29  Cal.,  188;  Cooley  Const.  Lim.,  196. 
But  see  Bank  of  Rome  v.  Rome,  19  N.  Y.,  24. 

"  In  such  cases  the  officer  stands  on  the  footing  of  an  agent  who  violates 
private  instructions.  The  determination  of  a  condition  subsequent  to  an  agency 
is  very  different  from  the  determination  of  a  condition  precedent,  for  unless  the 
condition  precedent  be  fulfilled,  the  party  is  still  a  stranger,  not  an  agent.  City 
of  Lexington  v.  Butler,  14  Wall.,  296.  See  infra,  §  1552  ;  Cooley  Const.  Lini., 
218,  note.  In  De  Voss  v.  City  of  Richmond,  18  Grat.,  338,  it  appeared  that  the 
city  council  directed  its  officers  to  issue  a  bond  to  the  receiver  ot  the  Confederate 
States  court,  in  lieu  of  one  that  had  been  confiscated,  and  provided  in  its  reso- 
lution that  in  the  books  of  its  auditor  it  should  be  entered,  and  upon  the  face  oi 


J   1550-  LIABILITY  OF  MUNICIPAL  CORPORATIONS.  565 

sole  province  of  the  officer  or  agent  to  ascertain  whether  or 
not  the  condition  precedent  to  his  authority  has  been  ful- 
filled, or  power  is  vested  in  him  to  exercise  his  own  discre- 
tion, his  decision  becomes  sole  arbiter  of  the  act,  and  can 
not  be  reviewed  or  disputed.* 

(6)  That  if  the  instrument  refers  on  its  face  to  a  stat- 
utory power,  every  holder  is  made  chargeable  thereby  with 
notice  of  such  statute  and  its  limitations.^ 

(7)  That  if  the  right  of  the  officer  or  agent  to  bind  the 
corporation  is  a  matter  which  may  be  ascertained  by  an  in- 
spection of  public  records,  the  holc^er  of  any  instrument 
issued  by  him  is  chargeable  with  notice  of  all  facts  which 
appear  on  such  records,^  and  those  records  can  not  be  dis- 
puted as  against  a  bona  fide  purchaser  of  bonds  issued 
pursuant  to  their  import.'* 

the  bond  it  should  be  shown  that  it  was  issued  instead  of  the  confiscated  bond. 
The  auditor  issued  a  new  bond,  which  did  not  contain  upon  its  face  the  required 
statement,  and  it  was  passed  to  a  bona  fide  holder  for  value  and  without  notice. 
It  was  held  that  the  city  was  bound  upon  it,  althoug-h  the  Confederacy  having 
fallen,  it  was  bound  also  to  pay  the  original  bond  which  had  been  confiscated  to 
its  true  owner.  Joynes,  J.,  said  :  "There  was  nothing  to  excite  the  holder's 
suspicion,  or  to  put  him  upon  inquiry.  All  that  can  be  said  is,  that  he  might 
have  ascertained  the  facts,  if  he  had  gone  to  the  auditor's  office  and  traced  the 
bond  back  to  its  source.  But  that  is  not  enough  to  charge  him  with  constructive 
notice  of  what  he  might  have  ascertained,  in  the  absence  of  anything  to  put  him 
on  inquiry."  It  will  be  seen,  on  examining  the  text  of  the  case,  that  the  power 
of  the  city  to  borrow  money  was  very  broad.  The  gist  of  the  particular  case 
has  been  considered  to  be  simply  that  the  purchaser  of  the  bond  was  not  obliged 
to  take  notice  of  the  entries  in  the  auditor's  books,  because  they  were  private 
records  "  to  which  the  public  had  no  access."  [See  article  in  Southern  Law 
Review,  vol.  i,  23,  Jan.,  1872,  by  Chancellor  Cooper,  of  Tennessee.]  If  they  had 
been  public  records,  the  implication  is  that  the  purchaser  would  have  been  found 
to  take  notice  of  them. 

'  Commissioners  of  Knox  County  v.  Nichols,  14  Ohio  St.,  260  ;  Bank  of  Rome 
v.  Rome,  19  N.  Y.,  24;  Commissioners  of  Knox  County  v.  Aspinwali,  21  How., 
539,  Nelson,  J.;  Lynde  v.  County,  16  Wall.,  13  ;  St.  Joseph  Township  v.  Rogers, 
16  Wall.,  659  ;  Kennicott  v.  Supervisors,  16  Wall.,  464;  Pompton  v.  Cooper 
Union,  loi  U.  S.  (11  Otto),  204. 

"Fisk  v.  City  of  Kenosha,  26  Wis.,  29  ;  City  of  Aurora  v.  West,  22  Ind.,  89; 
Louisiana  State  Bank  v.  Orleans  Nav.  Co.,  3  La.  An.,  295  ;  McClure  v.  Town- 
ship of  Oxford,  94  U.  S.  (4  Otto),  429  ;  Silliman  v.  Fredericksburg,  etc.,  R.R.,  27 
Grat.,  119. 

'Bissell  v.  City  of  Kankakee,  64  III.,  249;  Clark  v.  Des  Moines,  19  Iowa,  201  ; 
De  Voss  V.  Richmond,  18  Grat.,  338  ;  Gould  v.  Sterling,  23  N.  Y.,  463  ;  Duanes- 
burg  v.  Jenkins,  40  Barb.,  579;  Veeder  v  Lima,  19  Wis.,  298;  Backman  v. 
Charlestown,  42  N.  H.,  125  ;  Lewis  v.  Commissioners  of  Bourbon  County, 
Kansas  (Cent.  Law  Jour.,  8  Jan.,  1874)  ;  Cooley  Const.  Lim.,  215. 

*Harter  v.  Kemochan,  103  U.  S.  (13  Otto),  563. 


566  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1 55 1. 

(8)  That  the  powers  of  municipal  corporations,  which 
are  special  governmental  agencies,  and  of  their  officers, 
who  are  their  special  agents,  are  to  be  strictly  construed.^ 

§  1 55 1.  Illustrations. — Conforming  to  the  doctrines  of 
the  text,  it  has  been  decided  that  where  an  election  was 
made  a  condition  precedent  to  the  right  of  a  county  to 
issue  bonds — and  no  election  was  held — the  bonds  issued 
were  void.^  So  where  it  was  provided  "  that  no  subscrip- 
tion or  purchase  of  stock  should  be  made,  or  bonds  issued 
by  any  county  or  city,  unless  a  majority  of  the  qualified 
voters  of  the  county  or  city  shall  vote  for  the  same," 
it  was  held  that  bonds  issued  without  an  election,  or 
where  the  election  was  called  by  the  wrong  authority, 
were  absolutely  void  in  whosesoever  hands  they  might 
fall,  and  were  not  validated  by  the  levy  of  taxes,  and 
the  payment  of  interest  thereon.^  So  where  the  common 
council  were  empowered  by  the  legislature  to  create  a  debt 
only  when  "  there  should  be  sufficient  moneys  to  meet  the 
same  after  paying  the  expenses  of  the  government,  and  all 
other  demands  legally  due,"  it  was  held  that  unless  such 
conditions  were  actually  fulfilled,  the  contract  of  the  coun- 
cil to  pay  a  certain  amount  in  future  was  void.^  So  where 
county  commissioners  were  authorized  to  borrow  money, 


*Veeder  v.  Lima,  19  Wis.,  291;  Treadwell  v.  Commissioners,  etc.,  11  Ohio 
St.,  190. 

■"  Steines  v.  Franklin  Co.,  48  Mo.,  167  ;  Flagg  v.  Palmyra,  33  Mo.,  40,  is  quali- 
fied  and  explained. 

'  Marshall  Co.  v.  Cook,  38  111.,  44.  See  Town  of  Eagle  v.  Kohn,  84  111.,  292, 
where  it  is  held  that  if  conditions  precedent  be  subsequently  complied  with^ 
bonds  issued  are  valid. 

*  Wallace  v.  Mayor  of  San  Jose,  29  Cal.,  188,  the  court  saying:  "The  com- 
mon council  were  the  agents  of  the  corporation,  and  their  authority  was  special 
and  their  power  distinctly  circumscribed.  The  corporation  could  iiol  become 
bound  by  the  contract  unless  it  was  made  by  the  mayor  and  council  in  the  ex- 
ercise of  the  power  delegated  by  the  act  of  incorporation,  and  within  its  limits. 
In  dealing  with  these  officers  the  plaintiff  was  bound  to  know  the  extent  of  their 
power,  and  to  see  that  the  condition,  on  which  alone  it  could  arise  and  subsist, 
had  existence.  The  fact  that  these  officers  assumed  to  make  the  contract, 
and  thus  bind  the  corporation,  did  not  create  the  presumption  that  they  possessed 
the  power  which  they  attempted  to  exercise,  for  no  officer  can  acquire  power  or 
jurisdiction  by  the  mere  assertion  of  it." 


§   1 55--  LIABILITY  OF  MUNICIPAL  CORPORATIONS.  567 

issue  bonds,  and  to  subscribe  to  a  railroad  company  running 
through  or  in  the  county,  it  was  held  in  an  action  on  the 
bonds  it  was  a  valid  defence  to  show  that  the  railroad  was 
so  located  as  not  to  touch  the  county.^  So  where  a  county 
had  authority  to  issue  bonds  provided  that  sanction  w^as 
given  at  a  previous  election  upon  thirty  days'  notice,  it  was 
held  that  although  there  was  an  election,  the  issue  of  the 
bonds  might  be  enjoined  because  due  notice  was  not  giv^n."^ 
So  if  the  election  be  held  before  the  act  of  the  legislature 
authorizing  it  takes  effect,  it  has  been  held  premature,  and 
the  bonds  issued  under  the  act  void  f  and  so  if  the  vote  be 
taken  merely  voluntarily,  and  not  in  conformity  with  the 
statute."* 

§  1552.  A^ew  York  decisions. — In  New  York,  where  a 
town  was  authorized  to  borrow  money  to  subscribe  for 
stock  in  a  railroad  corporation,  provided  the  written  assent 
of  the  resident  tax-payers  were  obtained,  it  was  held  that 
bonds  issued  without  such  condition  being  fulfilled  would 
be  void  ;  that  it  was  incumbent  on  the  holder  to  show 
that  such  condition  was  fulfilled ;  and  that  the  statement  of 
the  town  officers  that  it  was  fulfilled,  operated  no  estoppel 
against  the  town,  their  own  authority  being  dependent  on 
its  fulfilment.**      The  two  cases  in  which  these  views  are 


'  Treadwell  v.  Commissioners,  11  Ohio  St.,  183. 

'  Harding  v.  Rockford,  etc.,  R.R.  Co, ;  see  Dillon  on  Corporations,  §  108,  p. 
229,  vol,  I  ;  see  also  Portland,  etc.,  R.R.  Co.  v.  Hartford,  58  Me.,  23. 

•  State  of  Arkansas  v.  Little  Rock,  etc.,  R.R.,  31  Ark.,  701, 
Barnes  v.  Town  of  Lacon,  84  111.,  461. 

*  Starin  v.  Town  of  Genoa,  23  N.  Y.,  440  ;  Gould  v.  Sterling,  23  N.  Y.,  456. 
In  the  latter  case,  p.  463,  Selden,  J.,  said  :  "  The  estoppel  contended  lor  is  sup- 
posed to  result  from  that  rule  of  the  law  of  principal  and  agent  in  accordance 
with  which  it  is  held  that,  where  a  power  is  conferred,  if  the  agent  does  an  act 
which  is  apparently  within  the  terms  of  the  power,  the  principal  is  bound  by  the 
representation  of  the  agent  as  to  the  existence  of  any  extrinsic  facts  essential  to 
the  proner  exercise  of  the  power,  where  such  facts  from  their  nature  rest  pecul- 
iarly wi'thin  the  knowledge  of  the  agent.  This  is  the  doctrine  asserted  in  the 
case  of  Farmers'  &  Mechanics'  Bank  v.  Butchers'  &  Drovers'  Bank  (16  N,  Y., 
125).  No  representation  of  the  agent  as  to  the  fact  of  his  agency,  or  as  to  the 
extent  of  his  power,  is  of  any  force  to  charge  the  principal.  But,  it  being  shown 
by  other  evidence  that  the  agency  existed,  and  that  the  act  done  was  within  the 
general  scope  of  the  power,  the  principal  is  bound  by  the  representation  of  the 
agent  as  to  any  essential  facts  known  to  the  agent,  but  which  the  party  dealing 


568  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1553* 

expressed  admirably  expound  the  law  of  the  subject,  and 
have  been  quoted  with  deserved  approval  in  other  cases. "^ 

§  1553-    When  certificate  of  public  officer  is  deemed  con- 
clusive.— But  if  the  certificate  of  the  municipal  ofiicers  or 

with  him  had  no  certain  means  of  ascertaining-."     "The  reason  upon  which 
this  rule  is  founded  is  that  given  by  Lord  Holt,  in  Hern  v.  Nichols  (i  Salk.,  289), 
viz.,  that,  where  one  of  two  innocent  parties  must  suffer  through  the  misconduct 
of  another,  it  is  reasonable  that  he  who  has  employed  the  delinquent  party,  and 
thus  held  him  out  to  the  world  as  worthy  of  confidence,  should  be  the   loser. 
This  reason  can,  of  course,  only  apply  to  a  case  where  the  principal  has  himself 
employed  the  agent,  and  voluntarily  conferred  upon  him  power  to  do  the  act. 
This  clearly  is  not  such  a  case.     The  agents  here  were  designated,  not  by  the 
town,  but  by  the  legislature  ;  and  no  power  whatever  was  conferred  by  the 
town,  unless  the  assent  of  the  tax-payers  was  obtained.     Any  representation, 
therefore,  by  the  supervisor  and  commissioners  in  respect  to  such  assent  would 
be  a  representation  as  to  the  very  existence  of  their  power.     Such  represen- 
tations, as  we  have  seen,  are  never  binding  upon  the  principal.     It  is  obvious, 
therefore,  that  the  doctrine  of  the  case  of  The  Fanners'  &  Mechanics'  Bank 
V.  The  Butchers'  &   Drovers'  Bank   has   no   application   to  the   present   case." 
"It  is  also  inapplicable  for  another  reason.     Knowledge  of  the  facts  in  regard 
to  the  assent  of  the  tax-payers  was  in  no  manner  peculiar  to  the  supervisor  and 
commissioners,  but  was  equally  accessible  to  the  parties  receiving  the  bonds. 
The  statute,  of  which  they  were  bound,  of  course,  to  take  notice,  apprised  them 
that  the  bonds  could  not  be  legally  issued  until   the  requisite   assent  was  ob- 
tained, and  also  that  the  assent,  when  obtained,  would  be  placed  upon  the  files 
of  the  county.     The  case  is  not,  therefore,  at  all  like  that  of  the  Butchers'  & 
Drovers'  Bank,  where  the  extrinsic  fact  related  to  the  state  of  the  accounts  of 
the  bank  with  one  of  its  customers,  which  could  only  be  known  to  the  teller  and 
other  officers  of  the  bank.     Here  the  parties  who  received  the  bonds  had  the 
means  of  ascertaining,  and  were  bound  to  inquire  as  to  the  existence  ol  the 
facts  upon  which,  as  they  knew,  the  validity  of  the  bonds  depended.".    "The 
neo-otiability  of  the  bonds  in  no  manner  aids  the  plaintiff.     It  is  true  they  are 
negotiable, 'and  have  in  this  respect  most,  if  not  all,  the  attributes  of  commer- 
cial paper.     But  one  who  takes  a  negotiable  promissory  note  or  bill  of  exchange 
purporting  to  be  made  by  an  agent,  is  bound  to  inquire  as  to  the  power  of  the 
agent.     Where  the  agent  is  appointed  and  the  power  conferred,  but  the  right  to 
exercise  the  power  has  been  made  to  depend  upon  the  existence  of  facts,  of 
which  the  agent  may  naturally  be  supposed  to  be  in  an  especial  manner  cognizant, 
the  bona  fide  holder  is  protected,  because  he  is  presumed  to  have  taken  the  paper 
upon  the  faith  of  the  representation  of  the  agent  as  to  those  facts.     The  mere 
act  of  executing  the  note  or  bill  amounts,  of  itself,  in  such  a  case,  to  a  represen- 
tation by  the  agent  to  every  person  who  may  take  the  paper  that  the  requisite 
facts  exist.     But  the  holder  has  no  such  protection  in  regard  to  the  existence  of 
the  power  itself.     In  that  respect  the  subsequent  bona  fide  holder  is  in  no  better 
situation  than  the  payee,  except  in  so  far  as  the  latter  would  appear  of  necessity 
to  have  had  cognizance  of  facts  which  the  other  can  not  be  presumed  to  have 
known."     The  Supreme  Court  of  the  United  States  dissents  from  the  views 
taken  in  New  York.     See  Town  of  Venice  v.  Murdock,  2  Otto  (92  U.  S.),  496  ; 
Town  of  Genoa  v.  Woodruff,  2  Otto  (92  U.  S.),  502,  and  ajiie,  §  1537  and  note. 
But  the  U.  S.  Supreme  Court  recognizes  the  New  York  decisions  as  setthng  the 
law  of  that  State.     Scipio  v.  Wright,  loi   U.  S.  (11   Otto),  665  ;  Thompson  v. 
Perrine,  103  U.  S.  (13  Otto),  806. 

'  Veeder  v.  Lima,  19  Wise,  280  ;  Duanesburg  v.  Jenkins,  40  Barb.,  579  ;  The 
People  V.  Mead,  24  N.  Y.,  115  ;  36  N.  Y.,  229;  Lewis  v.  Comm'rs  of  Bourbon 
Co.  (Kan.),  Cent.  Law  Jour.,  Jan.  8.,  1874. 


§    1555-  LIABILITY  OF  MUNICIPAL  CORPORATIONS.  569 

agents  were  made  by  statute  conclusive  evidence  of  the  facts 
stated  therein,  and  were  required  by  statute  to  be  filed,  as 
a  matter  of  public  record,  it  seems  that  it  would  then 
operate  as  conclusive  evidence,  in  any  suit  upon  a  bond  or 
other  security  issued  in  conformity  with  it,  as  to  the  facts 
which  it  verifies.  In  such  a  case  the  municipality  and  all 
its  citizens  are  given  notice  by  the  statute  that  such  certifi- 
cate when  filed  will  be  taken  as  conclusive  evidence  against 
them.  And  it  becomes  accordingly  their  duty  to  watch 
for  its  appearance,  and  to  take  steps  to  prevent  the  issue  of 
the  securities  based  upon  it.  If  they  remain  quiescent  they 
are  estopped,  after  the  securities  have  been  issued,  and  the 
rights  of  bona  fide  holders  have  accrued,  from  making 
objection.^ 

§  1554.  Various  cases  as  to  the  validity  of  bojids. — In 
Ohio,  where  it  was  provided  that  the  county  com.missioners 
should  not  deliver  the  bonds  subscribed  "  until  a  sufficient 
sum  shall  be  provided  by  other  subscriptions  or  otherwise, 
to  insure  a  continuous  railroad  connection  from  Mt.  Vernon 
to  Pittsburg,"  it  was  held  that  whether  or  not  such  sum 
was  provided,  was  a  matter  left  entirely  to  the  judgment 
of  the  commissioners  to  determine ;  and  that  having  isfjued 
the  bonds  it  was  absurd  to  suppose  that  their  legality  could 
turn  upon  a  subsequent  inquiry  into  that  question.^ 

§  1555.  In  Wisconsin  it  appeared  that  the  supervisors 
of  a  town  were  authorized  to  subscribe  to  a  railroad  com- 
pany, but  the  question  was  first  to  be  submitted  to  popular 
vote  upon  written  application  of  ten  or  more  electors,  and 
after  certain  prescribed  notice.  The  affidavit  of  the  super- 
visors of  the  posting  of  notice  was  to  be  deposited  and  re- 
corded, with  the  application  aforesard,  in   the  office  of  the 

'  Bank  of  Rome  v.  Village  of  Rome,  19  N.  Y.,  23  (1S59)  ;  Veeder  v.  Lima,  19 
Wise,  299;  see  Commissioners  of  Knox  County  v.  Aspinwall,  21  How.,  539; 
Hueciekoper  v.  Buchanan  County  (U.  S.  C.  C),  Cent.  Law  Jour.,  April  9,  1874, 
p.  177- 

"^  Commissioners  of  Knox  County  v.  Nichols,  14  Ohio  St.,  271. 


570  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1555^. 

town  clerk,  and  they  or  certified  copies  were  to  be  received 
in  the  courts  of  the  State  as  conclusive  evidence  of  the  facts 
stated.  In  an  action  on  bonds  issued,  which  recited  upon 
their  face  that  the  voters  of  the  town  had  authorized  the 
subscription,  it  further  appeared  that  notice  .was  not  given, 
nor  the  election  held  in  conformity  with  law,  nor  was  the 
application  and  the  affidavit  above  mentioned  on  record  as 
provided.  It  was  held  that  the  absence  from  the  office  of 
the  town  clerk  of  these  evidences  of  the  validity  of  the 
bonds,  put  all  holders  upon  inquiry  ;  and  that  the  town 
was  not  bound  upon  the  bonds.  And  the  principle  was 
declared  that  "when  the  appointment  and  limitation  of  the 
agent's  authority  is  duly  recorded,  a  party  dealing  with  him 
must  be  deemed  to  have  constructive  notice  of  such 
limitation."^ 

In  Louisiana,  where  suit  was  brought  against  the  city 
of  New  Orleans  upon  its  indorsement  of  a  negotiable  bond, 
it  was  held  that  the  words  "in  conformity  with  resolutions 
of  the  council  of  said  municipality,  bearing  date  the  29th 
July  and  5th  August  last,"  written  in  the  body  of  the  bond, 
charged  all  parties  with  notice  of  the  authority  granted  by 
such  resolutions ;  and  as  the  bond  was  indorsed  in  excess 
of  such  authority,  it  was  void.^  In  New  York  a  case  arose 
in  which  it  appeared  that  a  railroad  company  issued  bonds 
designated  as  "  consolidated  first  mortgage  gold  bonds," 
referring  to  the  mortgage  which  showed  that  they  were  in- 
tended for  certain  purposes,  and  it  was  held  that  the  quoted 
words  put  a  purchaser  on  inquiry  as  to  the  statements  of 
the  mortgage.^ 

§  iSSS'^-  Statutory  course  must  be  pursued. — Where  a 
statute  points  out  a  particular  course  to  be  pursued,  it  must 
be  followed  ;  and  if  the  statute  authorize  levy  of  a  special 

'  Veeder  v.  Town  of  Lima,  19  Wise,  291  ;  Backman  v.  Charlestown,  42  N 
H.,  125. 

*  Louisiana  State  Bank  v.  Orleans  Nav.  Co.,  3  La  Ann.,  297. 
«  Cuylas  V.  N.  Y.  &  S.  R.R.,  17  N.  Y.  S.  C.  (10  Hun),  295. 


§   ISSS*^-        LIABILITY  OF  MUNICIPAL  CORPORATIONS.  57I 

tax  to  liquidate  a  debt,  it  will  not  be  construed  to  authorize 
issue  of  interest-bearing  obligations,^  But  substantial  com- 
pliance with  the  statute  is  all  that  is  needful.^  If  the  legis- 
lature authorize  a  municipal  corporation  to  borrow  money 
and  pay  it  over  to  a  railroad  company  in  subscription  to  its 
stock,  it  has  been  held,  and,  as  we  think,  correctly,  that  this 
will  not  authorize  the  municipality  to  exchange  its  bonds 
with  the  railroad  company  for  its  stock,^  although  such 
bonds  would  be  valid  in  the  hands  of  a  bona  fide  holder 
without  notice.** 

§  1555^.  An  interesting  case  arose  in  Illinois,  where  a 
municipal  corporation,  without  express  authority  to  do  so, 
issued  bonds  simply  as  a  donation  to  the  Douglas  Linen 
Company.  They  were  sued  on  by  a  bona  fide  holder  for 
value.  The  Supreme  Court  of  that  State  held  that  the  city 
of  Kankakee,  the  defendant  municipality,  was  not  bound, 
Scott,  J.,  saying  :  "  The  authority  of  a  municipal  corpora- 
tion to  issue  bonds  is  derived  from  public  laws,  and  the 
avenues  to  information  in  regard  to  the  law  and  ordinances 
of  such  corporations  being  open  to  public  inspection,  the 
holder  of  such  securities  will  be  presumed  to  have  examined 
them,  and  to  have  known  whether  the  corporation  had  the 
requisite  power  to  issue  the  bonds.  He  has  no  such  oppor- 
tunity in  regard  to  private  corporations.  Their  by-laws  are 
not  open  to  inspection  by  those  who  deal  in  securities 
issued  by  them,  and  hence  the  reason  for  the  distinction 
that  has  been  taken.  The  holder  of  the  bonds  involved  in 
this  action  had  every  opportunity  to  know  whether  the  city 
had  any  lawful  right  to  issue  them,  for  the  reason  that  its 
authority,  if  any  existed,  was  to  be  found  in  public  statutes, 
and  if  they  did  not  in  fact  examine,  as  it  was  their  privilege 

'  County  of  Hardin  v.  McFarlan,  82  111.,  138. 

*  People  V.  Holden,  82  111.,  93. 

*  Starin  v.  Town  of  Genoa,  23  N.  Y.,  439  ;  Gould  v.  Town  of  Sterlinc:^,  23  N. 
Y.,  456  ;  People  v.  Mead,  24  N,  Y.,  114.  See  Scipio  v.  Wright,  loi  U.  S.  (n 
Otto),  665  ;  and  ante,  §  1552,  and  note. 

*  People  V.  Mead,  24  N.  Y.,  114. 


572  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   155^. 

to  do  before  buying,  they  will  be  presumed  to  have  done 
so,  and  to  have  known  that  they  v^ere  issued  without  au- 
thority of  law,  and  therefore  void  in  the  hands  of  any 
holder,  either  with  or  without  notice."  ^ 


SECTION  VI. 

LEGISLATIVE   CONTROL   OVER   MUNICIPAL   OBLIGATIONS. 

§  1556.  In  the  first  place  :  may  the  legislature  compel  ct 
municipal  corporation  to  discharge  an  ijidebtedness  zvhich  it 
did  not  contract? — The  affirmative  of  this  proposition  is  sus- 
tained by  numerous  cases  which  assert  the  legislative  author- 
ity to  exist  in  its  right  to  apportion,  assess,  and  levy  taxes 
for  the  purposes  of  government.  Their  theory  is  this  :  tax- 
ation exacts  money  or  services  from  individuals  as  and  for 
their  respective  shares  of  contribution  to  any  public  burden. 
Private  property  taken  for  public  use  under  the  right  of 
eminent  domain,  is  not  taken  as  the  owner's  contributive 
share  of  a  public  burden,  but  as  so  much  beyond  and  above 
that  share,  and  therefore  can  not  be  taken  without  just  com- 
pensation. It  belongs  to  the  legislature  to  apportion  the 
taxes  necessary  to  defray  a  public  expenditure,  amongst 
those  who  derive  benefit  from  it ;  and  if  a  public  improve- 
ment benefit  a  particular  locality,  that  locality,  whether  in- 
corporated or  not,  may  be  made  to  bear  the  burden  of  pay- 
mg  for  it.^  Thus,  in  Illinois,  it  has  been  held  that  the  legis- 
lature may  appoint  a  board  of  commissioners  and  authorize 
them  to  levy  a  tax  upon  all  taxable  property  in  a  certain 
precinct,  "  for  the  purpose  of  maintaining  the  bridge  across 

*  Bissell  V.  City  of  Kankakee,  64  111.,  249. 

'  Langhorne  v.  Robinson,  20  Grat.,  661  ;  People  v.  Lawrence,  41  N.  Y.,  137  ; 
36  Barb.,  177;  Blanding  v.  Burr,  13  Cal.,  343.  See  County  Judge  v.  Shelby 
R.R.  Co.,  5  Bush,  225. 


5   1556.  LEGISLATIVE    CONTROL.  573 

Rock  river,  at  Rockford,  and  to  defray  the  debt  incurred 
in  its  erection  and  repair."  ^  Caton,  J.,  said  :  "  It  will  hard- 
ly be  denied  that  the  legislature  has  a  right  to  impose  a 
local  tax  upon  a  city  or  town,  a  precinct  or  county,  for 
some  local  improvement,  as  the  erection  of  a  bridge  or  the 
repair  of  a  road.  In  doing  this,  to  be  sure,  it  can  not  say 
that  one  man  shall  pay  all  and  the  others  none,  or  that  one 
shall  pay  one  dollar  and  another  ten,  for  the  tax  must  still 
be  uniform,  and  upon  the  value  of  the  property  which  each 
one  has,  so  that  the  burden  presses  alike  upon  the  whole 
community.  But  the  legislature  must  necessarily  have  the 
right  to  say  how  large  that  community  thus  subject  to  the 
tax  shall  be,  whether  a  city  or  one  of  its  wards,  or  a  pre- 
cinct, a  county,  or  the  whole  State.  If  the  legislature  had 
the  right  to  impose  this  tax  to  build  a  bridge,  it  would  be 
equally  lawful  to  purchase  one,  or  pay  for  one  already  con- 
structed for  the  public  accommodation."  So  it  has  been 
held  in  New  York,  that  where  certain  citizens  of  Utica 
had  executed  a  bond  to  the  State  for  $38,615,  to  defray  the 
extra  expenses  of  terminating  the  Chenango  canal  at  that 
place,  the  legislature  might  impose  a  tax  on  the  city  of 
Utica  to  pay  it.^  So  in  Pennsylvania,  that  the  legislature 
may  compel  a  municipal  corporation  to  build  a  bridge  over 
a  stream,  or  may  itself  appoint  agents  of  its  own  to  build 
it,  and  to  borrow  money  for  that  purpose,  payable  by  the 
corporation.^  (But  in  a  previous  case,  the  right  of  the  leg- 
islature to  require  a  township  to  refund  money  voluntarily 
paid  by  a  bounty  association  was  denied.)*  There  are  nu- 
merous other  cases  holding  that  the  legislature  may,  under 
its  taxing  power,  require  municipalities  to  pay  debts  which 


'  Shaw  V.  Dennis,  5  Gilm.  (Ill),  416. 

"  Thomas  v.  Leland,  24  Wend.,  65  (1840).  Qudge  Cooley  thinks  this  case  ex- 
treme. Cooley  Const.  Lim.,  380,  note) ;  approved  in  Philadelphia  v.  Field,  58 
Penn.  St.,  320. 

'  Philadelphia  v.  Field,  58  Penn.  St.,  320  (1868),  Thompson,  C.  J.,  and  Shars- 
wood,  J.,  dissenting. 

*  Tyson  v.  School  Directors,  51  Penn.  St.,  21  (1865),  Thompson,  C,  J. 


574  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1557- 

in  its  judgment  are  morally  chargeable  upon  them.^  But 
it  has  been  held  that  the  legislature  can  not  compel  a  mu- 
nicipal corporation  to  make  a  contract,  or  to  assume  a  con- 
tract already  made.^ 

§  1557-  -^'^  ^^^  second  place :  can  the  legislature  author- 
ize the  officers  of  a  jnttnicipal  corporation  to  contract  a  cor- 
porate debt  without  a  popular  vote  in  its  favor  ? — There 
are  many  cases  which  declare^  and  determine^  that  the  leg- 
islature possesses  this  power.  "  The  legislature  of  a  State," 
says  Davis,  J.,  delivering  the  opinion  of  the  United  States 
Supreme  Court,  "  unless  restrained  by  the  organic  law,  has 
the  right  to  authorize  a  municipal  corporation  to  take  stock 
in  a  railroad  or  other  work  of  internal  improvement,  to 
borrow  money  to  pay  for  it,  and  to  levy  a  tax  to  repay  the 
loan.  And  this  authority  can  be  conferred  in  such  a  man- 
ner that  the  objects  can  be  attained  either  with  or  without 
the  sanction  of  the  popular  vote."^  It  has  also  been  held 
that  the  legislature  may  confer  authority  to  levy  a  tax  upon 
the  people  and  property  of  a  municipal  corporation  for  a 
public  purpose,    without  a  popular  vote,  upon  school  or 

*  Guilford  v.  Supervisors  of  Chenango  Co.,  3  Kern  (13  N.  Y.),  143;  Blanding 
V.  Burr,  13  Cal.,  343  ;  Brewster  v.  Syracuse,  19  N.  Y.,  116 ;  Lycoming  v.  Union, 
15  Penn.  St.,  166. 

-  Hasbrouck  v.  Milwaukee,  13  Wise,  38,  explained  in  Mills  v.  Charleston,  29 
Wise,  37.  In  Town  of  Queensbury  v.  Culver,  19  Wall.,  91,  Strong,  J.,  said 
"  It  may  be  that  a  mandatory  statute  requiring  a  municipal  corporation  to  sub 
scribe  for  stock  in  a  railroad  company,  or  to  contribute  to  the  construction  o. 
the  railroad  of  such  a  company,  is  not  a  legitimate  exercise  of  legislative  power 
and  that  it  is  not  even  an  act  of  legislation.  This  was  decided  by  the  Court  o. 
Appeals  of  New  York  in  the  case  of  the  People  ex  rel.  v.  Batchellor,  8  Albany 
Law  Journal,  120."  In  People  v.  Batchellor,  reported  in  53  N.  Y.,  128  (1873), 
it  was  held  that  municipal  corporations  maybe  compelled  to  enter  into  contracts 
for  an  exclusively  public  purpose,  but  not  into  those  partially  or  wholly  of  a  pri- 
vate nature. 

=  Thomson  v.  Lee  County,  3  Wall.,  327-330  ;  Aurora  City  v.  West,  22  Ind., 
89;  St.  Joseph  Township  v.  Rogers,  16  Wall.,  664. 

"  First  Municipality  v.  Orleans  Theatre  Co.,  2  Rob.  (La.),  209  ;  Thompson  v. 
Perrine,  103  U.  S.  (13  Otto),  812  ;  People  v.  Mitchell,  35  N.  Y.,  551  ;  Williams 
V.  Duanesbaugh,  66  N.  Y.,  129;  Keithsburg  v.  Frick,  34  111.,  405.  In  Marshall 
V.  Silliman,  64  III,  218,  the  Supreme  Court  of  Illinois  held  that  the  legislature  could 
confer  the  power  on  corporate  authorities  of  a  town,  but  that  the  supervisor  and 
town  clerk  were  not  such  authorities  in  the  meaning  of  the  constitution  of  thaf 
State.     See  Roberts  v.  Balles,  loi  U.  S.  (ir  Otto),  126. 

'  Thomson  v.  Lee  County,  3  Wall.,  330  (1865). 


§   155^'  LEGISLATIVE    CONTROL.  575 

Other  commissioners  appointed  for  that  purpose  ;*  upon  the 
county  court,  though  it  be  not  elected  by  the  people  ; ' 
upon  a  common  council ;  ^  -or  upon  any  local  authorities  or 
individuals  that  the  legislature  may  select.^ 

§  1558.  The  foregoing  decisions  rest  upon  the  power  of 
the   legislature    to    distribute    the    burdens    of    taxation 

'  Bull  V.  Read,  13  Grat.,  78;  Shaw  v.  Dennis,  5  Gilm.  (111.),  416;  People  v. 
Lawrence,  41  N.  Y.,  137  ;  Langhorne  v.  Robinson,  20  Grat.,  666. 

"Case  of  Levy,  5  Call,  139;  Harrison  County  Justices  v.  Holland,  3  Grat., 
247;  Langhorne  &  Scott  v.  Robinson,  20  Grat.,  661.  See  Foster  v.  Callaway 
County  (LI,  S.  C.  C),  Cent.  Law  Journal,  May  28,  1874,  p.  263. 

2  Langhorne  v.  Robinson,  20  Grat.,  661. 

*  Shaw  V.  Dennis,  5  Gilm.  (111.),  416;  Langhorne  v.  Robinson,  20  Grat.,  664, 
Joynes,  J.,  delivering  the  opinion  of  the  court  (in  which  Moncurc,  P.,  Christian 
and  Anderson,  JJ.,  concurred ;  Staples,  J.,  dissenting),  wherein  he  said  :  "The 
legislature  is  vested  by  the  constitution  with  all  legislative  power,  except  so  far 
as  the  exercise  of  any  such  power  is  prohibited  or  restrained  h)  that  constitu- 
tion, or  by  the  constitution  of  the  United  States.  It  may  authorize  the  authori- 
ties of  a  county  or  city  to  impose  a  tax  for  a  purpose  of  special  interest  to  their 
people,  though  it  is  likewise  of  such  general  and  public  interest  as  to  authorize  a 
tax  on  the  people  of  the  whole  State.  Goddin  v.  Crump,  8  Leigh,  120.  A  power 
which  it  might  thus  delegate  it  might  exercise  itself.  The  whole  power  of  taxa- 
tion belonged,  under  the  constitution,  to  the  legislature  ;  a  city  or  county  had 
none,  except  such  as  the  legislature  might  choose  to  give  it.  From  considera- 
tions of  policy  and  convenience,  the  power  of  local  taxation  has  usually  been 
conferred  upon  those  municipal  bodies  or  their  officers.  Where  the  power  of 
laying  a  tax  has  been  delegated  to  such  local  authorities,  they  may,  in  strictness 
of  language,  be  said  to  be  '  representatives  '  of  the  people,  by  whom  the  tax  is 
imposed  within  the  language  of  the  bill  of  rights,  provided  they  are  eligible  by 
the  people.  And  yet,  in  a  legal  sense,  the  tax  in  any  such  case  is  imposed  by 
the  representatives  of  the  people  in  the  legislature,  the  power,  which  belongs  to 
them  alone  under  the  constitution,  being  exercised  pro  hac  vice  by  those  to 
whom  they  have  seen  fit  to  delegate  it.  The  tax  being  thus  imposed  by  the 
power  and  authority  of  the  legislature  alone,  it  follows  that  it  might  as  well  be 
delegated  to  local  authorities  v^ho  do  not  represent  the  people,  as  having  been 
elected  by  them  ;  that  it  might  be  delegated  to  the  county  court,  whose  members, 
under  the  constitution  of  1776  and  1830,  were  not  elected  by  the  people  or  re- 
sponsible to  them  in  any  way.  Case  of  Levy,  5  Call,  139  ;  Harrison  Co.  Justices 
V.  Holland,  3  Grat.,  247.  So  the  power  might  be  delegated  to  the  school  com- 
missioners of  a  particular  district,  who  are  not  the  general  municipal  authorities 
of  the  county.  Bull  et  al.  v.  Read,  etc.,  13  Grat.,  78.  When  the  power  to  im- 
pose a  tax  is  thus  delegated  to  local  authorities,  they  do  not  exercise  their  power 
under  the  authority  which  belongs  to  tliem  as  local  oHicers.  They  exercise  only 
the  special  authority  delegated  to  them  by  the  legislature  in  the  particular  case 
and  for  the  particular  purpose.  On  principle,  I  can  imagine  no  reason  why  the 
power  might  not  as  well  be  delegated  to  any  other  person,  in  the  discretion  of 
the  legislature.  The  members  of  the  legislature  are  the  representatives  of  the 
people  referred  to  in  the  bill  of  rights,  section  6.  Otherwise  the  cases  cited 
from  5  Call  and  3  Grat.  were  not  well  decided.  Such,  too,  is  the  plain  meaning 
of  the  language.  And  it  seems  plain  from  the  language  that  this  provision  of  the 
bill  of  rights  was  not  intended  as  a  restraint  upon  the  legislature  in  exercising 
the  power  of  taxation,  but  was  only  intended  to  affirm,  in  general  terms,  a  funda- 
mental  principle  of  free  government." 


576  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   I559« 

amongst  those  to  be,  in  its  judgment,  benefited  by  it.  But 
it  may  be  urged  with  great  force,  that  while  the  legislature 
may  exercise  this  power  in  apportioning  taxes,  to  be  col- 
lected and  paid  as  taxes,  it  can  not  go  further  and  authorize 
the  officers  or  agents  of  a  municipal  corporation  to  bind  it 
by  negotiable  bonds  or  other  contracts  without  a  popular 
vote.  The  legislature  is  the  representative  body  of  the 
State.  It  may  contract  for  the  State  in  its  sovereign  char- 
acter. But  it  does  not  follow  that  it  may  contract  for  a 
lesser  portion  of  the  people  than  the  whole  community,  or 
confer  that  power  upon  others  without  the  consent  of  a 
majority  of  the  people  of  the  lesser  community.  And  if 
the  question  as  to  legislative  power  were  opened  de  novo, 
this  is  the  view  wiiich  it  would  seem  to  us  should  be 
adopted  by  the  courts  ;  as  it  is  that  which  we  humbly  think 
sound  judgment  and  safe  policy  enjoins.  If  the  legislature 
may  authorize  a  commissioner  or  other  person  selected  by 
it,  to  bind  a  community  included  in  a  mile  square,  or  other 
geographical  space,  it  follows  that  it  might  only  in- 
clude the  estate  of  a  single  individual  as  the  subject  of  the 
burden,  and  fix  upon  the  owner  alone  a  contracted  liability 
which  he  himself  has  no  power  to  Hmit  or  prevent.  And 
such  an  act,  which  may  amount  to  actual  confiscation, 
does  not  seem  to  us  to  come  within  the  sphere  of  legisla- 
tion at  all.  Still,  it 'is  replied  that  the  legislature  is  the 
representative  of  the  people  as  a  whole,  and  in  all  their  con- 
stituent parts  ;  that  the  evil  inherent  in  the  injudicious  ex- 
ercise of  the  legislative  power  is  no  argument  against  the 
existence  of  the  power  ;  and  the  decided  cases  do  not,  as  a 
general  rule,  observe  or  apply  the  distinction  between  the 
power  to  levy  a  tax,  and  the  power  to  create  a  liability  by 
contract,  which  is  above  made.^ 

§  1559.   It  will  not  be  presumed  that  a  legislature  con- 

'See  opinion  of  Joynes,  J„  in  Langhorne  v.  Scott,  20  Grat.,  661.  See  also  opin- 
ion of  King-man,  C.  J.,  in  Commissioners  of  Shawnee  County  v.  Carter,  2  Kans., 
134,  quoted  infra,  §  1563,  note  4. 


§   1560.  LEGISLATIVE    CONTROL.  57/ 

ferring  authority  on  a  municipal  corporation  to  subscribe  to 
a  public  work,  intended  it  to  be  exercised  without  a  prece- 
dent popular  vote,  where  it  does  not  plainly  appear  ;  and  if 
the  statute  authorizing  the  subscription  provide  that  the 
county  court  "may,"  for  information,  cause  an  election  to 
be  held  to  ascertain  the  sense  of  the  tax-payers  on  the  sub- 
ject, "  may"  will  be  construed  as  "  shall,"  in  so  far  as  to  re- 
quire a  vote  to  be  taken  as  a  condition  precedent  to  the 
validity  of  the  subscription,  and  bonds  issued  in  pursuance 
of  it.i 

§  1560.  In  the  third  place :  may  the  legislature  validate 
miniicipal  securities  invalid  when  issued? — Many  interest- 
ing cases  have  arisen  involving  the  power  of  legislative 
bodies  to  pass  curative  acts  confirming  and  declaring  valid 
the  securities  of  municipal  corporations  which  were,  when 
issued,  not  binding  upon  them,  because  of  defect  of 
authority,  or  irregularity  in  the  steps  taken.  There  is  no 
doubt,  we  think,  that  it  has  been  decided  in  a  number  of 
cases,  that  where  there  has  been  a  popular  vote  in  favor  of 
subscriptions  to  public  purposes,  and  bonds  have  been  issued 
in  order  to  effectuate  the  popular  will,  but  were  wanting  in 
validity,  because  of  non-compliance  with  statutory  law,  or 
defect  of  authority  in  the  corporation  to  make  the  sub- 
scription, the  legislature  may  ratify  and  confirm  them.  Its 
sanction  to  the  subscription,  or  to  the  form  of  proceeding, 
being  the  only  element  lacking  to  its  validity,  it  may  be 
supplied  retrospectively,  and  having  all  the  effect  of  a 
ratification,  it  operates  the  same  as  a  previous  authority.^ 

'  Leavenworth,  etc.,  R.R.  Co.  v.  County  Court,  42  Miss.,  175  ;  Steines  v. 
Franklin  County,  48  Id.,  169.     See  also  St.  Louis  v.  Alexander,  23  Miss.,  483. 

""  Knapp  V.  Grant,  27  Wise,  151  ;  Bass  v.  Columbus,  30  Ga.,  848;  McMillen 
V.  County  Judge,  6  Iowa,  393;  but  see  State  of  Iowa  v.  County  of  Wapello,  13 
Iowa,  388;  Steines  V.  Franklin  County,  48  Miss.,  187,  188;  Barton  County  v. 
Walker,  47  Id.,  202  ;  Hannibal,  etc.,  R.R.  Co.  v.  Marion  Co.,  36  Id.,  294  ;  Camp- 
bell  V.  Kenosha,  5  Wall.,  194;  Citv  v.  Lamson,  9  Id.,  477  ;  Thomson  v.  Lee 
County,  3  Id.,  331  ;  Gelpcke  v.  Dubuque,  i  Id.,  229;  St.  Joseph  Township  v. 
Rogers,  16  Id.,  663.  See  also  Schenley  v.  Commonwealth,  36  Penn.  St.,  29; 
Cooley  on  Const.  Limitations,  370,  381.  In  Beloit  v.  Morgan,  7  Wall.,  619,  it 
appeared  that  the  legislature  of  Wisconsin  created  the  city  of  Beloit,  carving  it 

Vol.  II. — zi 


578  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   1 56 1. 

§  1 56 1.  In  conformity  with  this  doctrine  it  has  been  held 
in  Wisconsin,  that  where  a  city  bond  was  executed  without 
legislative  authority,  merely  because  the  act  authorizing  its 
issue  had  not  been  published  at  the  time  so  as  to  take  effect, 
but  there  had  been  a  popular  vote  in  favor  .of  the  issue  of 
the  bond,  the  legislature  might,  with  consent  of  the  city  au- 
thorities, ratify  the  issue,  and  give  validity  to  the  bond.^  On 
the  same  principle  it  was  held  in  Illinois,  that  where  a  school 
tax  had  been  voted  by  the  people  of  a  school  district,  but 
it  was  invalid  under  the  law,  because  it  was  not  certified  tQ 
the  county  clerk  on  the  day  designated  by  law,  the  legislat- 
ure had  power  to  pass  an  act  remedying  the  defect  and 
validating  the  tax,  while  it  yet  remained  uncollected.^  So 
it  has  been  held  by  the  United  States  Supreme  Court,  that 
a  legislature  may  pass  a  curative  act  validating  bonds  issued 
by  a  municipal  corporation,  where  the  defect  consisted  in 
the  fact  that  the  submission  of  the  question  as  to  whether 
or  not  they  should  be  issued,  was  under  the  wrong  act ;  ^ 
and  where  the  vote  was  taken  upon  the  wrong  day,  and 
there  were  informalities  in  respect  to  keeping  the  records 
and  filing  the  certificates  of  election  ;  *  and  where  there  were 
other  circumstances  of  irregularity.^ 

§  1562.  It  has  also  been  held  that  the  legislature  may 
vahdate  securities  issued  without  a  popular  vote.  Thus, 
where  the  co.uncil  of  municipality  No.  i  issued  bonds  to  a 
theatre  company,  as  a  subscription  thereto,  without  legisla- 
tive authority,  and  without  a  popular  vote,  an  act  validating 

out  of  territory  formerly  constituting  the  town  of  Beloit,  and  in  the  city  charter 
provided  that :  "  All  principal  and  interest  upon  all  bonds  which  have  heretofore 
been  issued  by  the  town  of  Beloit  for  railroad  stock  and  other  purposes,  when 
the  same  or  any  part  thereof  shall  fall  due,  shall  be  paid  by  the  city  and  town  of 
Beloit,  in  the  same  proportion  as  if  said  town  and  city  were  not  dissolved." 
This  provision  was  held  by  the  court  to  invalidate  all  bonds  which  had  been 
irre^larly  issued  by  the  town  of  Beloit,  and  to  cure  all  such  irregularities. 

'  Knapp  v.  Grant,  27  Wise,  147.  "  Cowgill  v.  Long,  15  111.,  203. 

^  Campbell  v.  City  of  Kenosha,  5  Wall.,  194.  The  court  said  :  "  This  is  not  in 
terms  a  curative  act,  but  it  has  that  effect  by  fair  implication." 

*  St.  Joseph  Township  v.  Rogers,  16  Wall.,  663. 

'  Thomson  v,  Lee  County,  3  Wall.,  327 


^   1563.  LEGISLATIVE    CONTROL.  579 

them  was  sustained.''  The  United  States  Supreme  Court 
has  said,  Fields,  J.,  giving  its  unanimous  opinion  :  "  A  law 
requiring  a  municipal  corporation  to  pay  a  demand  which 
is  without  legal  obligation,  but  which  is  equitable  and  just 
in  itself,  being  founded  upon  a  valuable  consideration  re- 
covered by  the  corporation  is  not  a  retroactive  law — no 
more  so  than  an  appropriation  act  providing  for  the  pay- 
ment of  a  preceding  claim";  and  such  an  act  of  the  leg- 
islature of  Louisiana,  imposing  upon  a  city  the  payment 
of  such  a  claim,  evidenced  by  coupon  bonds,  was  sus- 
tained.^ And  acts  of  legislation  dispensing  with  prece- 
dent conditions  to  the  validity  of  municipal  bonds,  and 
curinor  irresfularities  in  their  issue,  are  considered  constitu- 
tional  and  legal  by  that  tribunal.^ 

§  1563.  On  the  contrary,  it  has  been  held  that  an  act  of 
the  legislature  which  declared  valid  and  binding  bonds 
which  had  been  issued  by  county  officers  on  account  of  the 
county  court-house,  and  which  bonds  were  not  enforceable 
against  the  county  because  differing  in  form  and  substance 
from  the  warrants  authorized  by  pre-existing  statute,  was  in 
excess  of  legislative  authority  and  void,  it  being  thought 
that  it  was  a  judicial  rather  than  a  legislative  act.^    "  Courts," 

1  First  Municipality  v.  Orleans  Theatre  Company,  2  Rob.  (La.),  209. 

« New  Orleans  v.  Clark,  95  U.  S.,  5  Otto,  645. 

'Thompson  v.  Perrine,  103  U.  S.  (13  Otto),  S13;  disapproving  Horton  v. 
Town  of  Thompson,  71  N.  Y.,  513. 

'Commissioners  of  Shawnee  County  v.  Carter,  2  Kans.,  134,  135  ;  Kingman, 
J.:  "The  act  differs  from  those  retrospective  laws,  which  are  frequently  passed, 
supplying  defects  and  curing  informalities  in  the  proceedings  of  officers  and  tri- 
bunals acting  within  the  scope  of  their  authority.  The  county  commissioners 
were  not  acting  within  the  scope  of  their  authority  in  issuing  these  bonds. 
They  did  not  conform  to  the  law  only  in  an  irregular  way,  but  they  broke  down 
the  barriers  which  the  law  had  raised  in  a  very  regular  way,  and  tlieir  acts  in  the 
premises  were  void,  not  for  want  of  any  formality  or  regularity  or  mistake  as  to 
time  or  otherwise,  but  for  want  of  power  under  the  law."  "The  defendant  had 
his  rights.  The  law  pointed  them  out.  He  was  entitled  (if  to  anything)  to  his 
warrants,  and  must  bide  his  time  for  their  payment  under  the  limited  power  of 
taxation  conferred  on  the  board.  He  preferred  bonds  with  a  higher  rate  of  in- 
terest, trusting  to  the  healing  power  of  subsequent  legislation.  He  had  as  much 
right  and  power  to  bind  the  county  in  the  execution  of  these  bonds  as  the  board 
had.  If  he  had  made  these  bonds,  the  legislature  would  have  had  as  much 
power  to  make  them  valid  by  an  act  declaring  them  binding  upon  the  county  as 


580  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   I  5^4. 

said  Kingman,  J.,  "  are  estopped  from  an  inquiry  into  the 
facts  by  the  act  itself."  So  it  has  been  held  in  Wisconsin, 
that  the  legislature  had  no  right  to  declare  valid  a  contract 
of  the  common  council  of  Milwaukee,  made  in  excess  of 
authority,  without  assent  of  the  city,^  though,  as  explained 
in  a  subsequent  case,  the  legislature  may  cause  a  retrospect- 
ive tax  to  be  levied  on  a  municipal  corporation  for  a  pub- 
lic purpose.^  These  cases  seem  to  us  to  strike  the  true  line 
of  demarcation  of  legislative  power. 

§  1564.  In  the  fourth  place:  may  the  legislature  att- 
thorize  municipal  officers  to  ratify  invalid  securities 
witJiout  a  popular  vote? — Where  there  has  been  a  pop- 
ular vote  in  favor  of  a  subscription  to  a  public  work, 
and  the  securities  have  been  issued  by  an  unauthor- 
ized ofhcer  or  agent,  the  legislature  has  power  to  con- 
fer upon  the  officer  or  agent  who  was  empowered  to 
issue  them,  the  power  to  ratify  them,  and  thus  effect- 
uate the  popular  will.^  So  it  has  been  held  that  the 
legislature  may  authorize  a  city  council  to  ratify  securities 

it  had  in  the  present  case.  Let  such  a  power  be  once  recognized,  and  within 
what  bounds  will  the  exercise  of  it  be  limited  ?  The  legislature  undertook  to 
make  a  law  for  this  case,  affecting  and  changing  rights  and  imposing  burdens 
contrary  to  previously  established  law,  so  that  the  act,  if  valid,  has  all  the  fcrce 
of  a  judgment,  though  in  violation  of  the  principles  upon  which  judgments  are 
rendered.  If  the  act  is  a  law,  there  is  no  evading  it,  even  could  it  be  proven 
that  none  of  the  work  had  been  done,  or  that  it  had  been  previously  paid  tor,  or 
that  the  contract  had  been  procured  by  fraudulent  collusion  between  the  officers 
makino-  it  and  the  contractor.  Courts  are  estopped  from  an  inquiry  into  the 
facts  b^'y  the  act  itself,  if  it  have  any  force  in  this  case.  We  cite  these  results 
from  the  act,  not  as  having  any  existence  in  this  case,  but  to  show  the  conse- 
quences which  would  result  from  upholding  the  power  of  a  legislature  to  exer- 
cise such  authority."     See  Mosher  v.  Ind.  School  Dist.,  44  Iowa,  122. 

'Hasbrouck  v.  Milwaukee,  13  Wis.,  38. 

>*  Mills  V.  Charleston,  29  Wise,  37  ;  see  also  Ginn  v.  Weissenberg,  57  Penn. 
St.,  433  ;  Musselman  v.  Logansport,  29  Ind.,  533. 

'  Hannibal,  etc..  R.R.  Co.  v.  Marion  Co.,  36  Mo.,  294 ;  Barton  Co.  v.  Walker, 
47  Mo.,  202;  Steines  v.  Franklin  County,  48  Id.,  187,  188.  In  Hannibal,  etc., 
R  R  Co.  V.  Marion  County,  36  Mo.,  294,  it  appeared  that  doubts  existed  as  to 
the  validity  of  certain  county  securities,  because,  as  alleged,  they  were  issued  by 
an  a^^ent  of  the  countv  court  instead  of  by  the  county  court  itself,  as  the  statute 
requTred  ;  and  the  legislature  passed  a  curative  act.  Wagner,  J.,  said  :  "  But  if 
any  doubts  were  entertained  of  their  validity,  by  the  sixth  section  of  the  amend- 
ed charter  it  is  enacted  that  '  subscription  shall  be  held  valid  and  binding  upon 
such  counties,'  etc.,  '  if  aoproved  of  hereafter  by  the  said  county  court.'  Now, 
as  we  have  heretofore  seen,  the  county  court  did,  after  the  passage  of  this  act, 
approve  of  the  subscription,  and  ratify  it  so  far  as  they  had  power  by  virtue  of 


§   1564.  LEGISLATIVE    CONTROL.  58 1 

which  it  was  empowered  to  issue  upon  the  petition  of  three- 
fourths  of  the  legal  voters.^ 

In  all.  these  cases  mere  irregularities  were  corrected  by 
the  curative  acts.  It  is  obvious  that  the  question  whether 
or  not  the  legislature  may  go  beyond  this,  and  empower 
officers  to  ratify  instruments  utterly  lacking  in  elements  of 
validity,  is  the  same  as  that  heretofore  discussed,  to  wit, 
whether  it  might  authorize  such  officers  to  issue  such  in- 
struments without  a  popular  vote.  For,  of  course,  the 
legislature  could  only  confer  retrospective  power  upon 
those  who  could  receive  a  prospective  power.^ 

and  in  accordance  with  said  act.  But  it  contended  that  the  act  is  afflicted 
with  a  constitutional  infirmity,  and  that  it  is  necessarily  inoperative  as  a  confirm- 
atory act,  because,  if  the  proceedings  of  the  court  and  its  agents  were  void 
previous  to  tlie  passage  of  the  act,  by  want  of  authority,  they  could  not  be  ren- 
dered effectual  for  any  purpose  by  means  of  legislation.  Although  individuals 
may  not  have  the  power  to  make  good  ab  initio  that  which  was  originally  void 
by  subsequent  deed  or  acts  of  confirmation,  yet  that  principle  has  but  a  slight, 
if  any,  application  to  the  case.  The  act  of  the  legislature  does  not  purport  to 
confirm,  ratify,  and  make  unqualifiedly  valid  the  proceedmgs  of  the  county  court 
by  its  own  terms;  it  does  not  act  ex  propria  vigore,  but  delegates  authority  to 
those  who  had  prior  to  that  time  subscribed  for  stock  to  apjirove  of  and  confirm 
the  same.  It  left  the  matter  entirely  optional  with  the  county  court,  as  the  rep- 
resentative and  agent  of  the  county,  to  accept  or  reject  the  proffered  remedy. 
They  elected  to  ratify  and  affirm  the  subscription,  and  by  that  act  they  gave  just 
the  same  effect  to  the  contract  to  subscribe  the  stock,  and  to  all  the  proceedings 
had  by  the  county  court  in  reference  to  it,  as  if  they  had  had  full  authority  in 
the  first  instance.  Nor  has  the  county  any  just  cause  of  complaint  from  this 
concljsion,  as  it  is  obvious  that  the  contract  was  entered  into  in  good  faith,  and 
with  the  firm  belief  that  ample  power  for  the  act  existed ;  and  the  only  effect 
of  the  legislative  act,  and  the  approval  by  the  court,  was  to  execute  and  fully 
carry  out  precisely  what  was  intended,  but  which  they  found  was  not  accom- 
plished by  a  defect  in  their  authority.  The  notes  were  made  by  the  justices  in 
a  public  capacity  and  in  the  line  of  their  official  duty  ;  the  contract  inured  to 
the  benefit  of  the  county,  and  the  county  was  bound  by  the  obligation  thereby 
created.  Hodgson  v.  Dexter,  i  Cranch,  345  ;  Tutt  v.  Hobbs,  17  Mo.,  486.  Upon 
a  full  view  of  the  case,  it  appears  that  both  parties  acted  with  honesty  and  good 
faith  ;  the  county  made  the  subscription  to  plaintiff's  railroad,  and  received  cer- 
tificates of  stock  for  said  subscription,  like  all  other  shareholders ;  that  for  nine 
years  it  had  been  regularly  represented  at  the  meetings  of  the  stockholders  and 
of  the  board  of  directors,  and  that  during  that  period  of  time  the  interest  ac- 
cruing on  the  stock  notes  has  been  regularly  and  punctually  paid.  It  appears 
also  that  many  of  these  stock  notes,  or  obligations,  have  passed  into  the  hands 
of  bo7ia  fide  indorsers  and  innocent  purchasers  ;  their  rights  ought  not  to  be  im- 
paired without  good  and  substantial  j-easons." 

'  Bissel  V.  Jeffersonville,  24  How.,  295,  Clifford,  J. :  "  Mistakes  and  irregu- 
larities in  the  proceedings  of  municipal  corporations  are  of  frequent  occurrence, 
and  the  State  legislatures  have  often  had  occasion  to  pass  laws  to  obviate  such 
difficulties.  Such  laws,  when  they  do  not  impair  any  contract,  or  injuriously 
affect  the  rights  of  third  persons,  are  generally  regarded  as  unobjectionable, 
and  certainly  are  within  the  competency  of  the  legislative  authority." 

*See  ante,  §§  1557.  1558  et  se^. 


582  THE  VALIDITY  OF  MUNICIPAL  BONDS.  §   IS^S* 

§  1 565.  In  the  fifth  place  :  may  the  legislature  abolish  the 
rio-ht  of  the  municipality  to  plead  the  defence  of  illegality 
to  its  contract  ? — This  is  another  form  in  which  the  question 
of  the  right  of  the  legislature  to  validate  invalid  securities 
arises,  and  it  may  be  regarded  as  a  settled  principle  of  the 
jurisprudence  of  the  United  States  that  the  legislature  pos- 
sesses this  power.     Thus,  suppose  a  municipal  corporation 
issues  a  negotiable   bond,  and  disposes  of  it  in  a  usurious 
transaction,  which  renders  it  void  ab  initio,  and  in  all  hands, 
and  that  the  legislature  afterward  repeals  the  right  of  the 
corporation  to  plead  usury  as  a  defence.     In  such  a  case  the 
corporation  has  given  its  consent,  and  declared  its  intent  and 
will,  to  be  bound  by  the  bond.     The  body  of  the  contract 
has  been  created  by  its  own  act,  and  it  lacks  life  only  by 
reason  of  the  legislative  prohibition  and  refusal  to  recognize 
it  ;  and  w^hen  the  legislature   subsequently   abolishes   the 
right  to  plead  usury,  it  simply  withdraws  the  impediment  of 
its  prohibition,  concurs  in  the  pre-existing  assent  of  the  cor- 
poration to  the  contract,  recognizes  its  act,  and  breathes  life 
into  it.     These  views  have  been  held  to  apply  to  municipal 
contracts,*  as  well  as  to  those  of  private  corporations  and  indi- 
viduals,^ there  being,  as  is  conceived,  no  distinction  as  to 
the  character  of  the  parties  to  whom  they  are  applicable. 
There  can  be  no  valid  objection  to  the  doctrine  on  the 
ground  that  it  impairs  vested  rights,  for  a  party  "has  no 
vested  right  to  do  v/rong."  * 

Nor  can  it  be  objected  that  it  impairs  the  obligation  of  a 
contract,  for  it  is  in  furtherance  of  the  enforcement  of  con- 
tracts, and  of  equity  and  good  morals.^ 

1  Town  of  Danville  v.  Pace,  25  Grat.,  i  ;  Cooley  on  Constitutional  Limita- 
tions, 378. 

=  Lewis  V.  McElvain,  16  Ohio,  347  ;  Trustees  v.  McCaughy,  2  Ohio  N.  S.,  155  : 
Johnson  V.  Bentley,  16  Ohio,  97 ;  Syracuse  Bank  v.  Davis,  16  Barb.,  1S8;  Curtis 
V.   Leavitt,   17    Barb.,  309  ;    15   N.  Y.,  9  ;   Parmelee  v.  Lawrence,  48  I']- 33i 
Goshen  v.  Stonington,  4   Conn.,  209 ;  Woodruff  v.  Scruggs,  27  Ark.,  26 ;  An- 
drews V.  Russell,  7  Black,  474  ;  Bangher  v.  Nelson,  9  Gill,  299. 

=  Satterlee  v.  Mathewson,  16  Sergt.  &  R.,  191.  Duncan,  J. ;  Town  of  Danville 
v.  Pace,  25  Grat.,  15,  Staples,  J.  ;  Foster  v.  Essex  Bank,  16  Mass.,  245,  Parker 
C.  J. ;  Cooley  on  Constitutional  Limitations,  378. 

*  Lewis  V.  McElvain,  16  Ohio.  347  ;  Cooley  on  Const.  Lira.,  374. 


CHAPTER  XLIX. 

C  II  E  C  K  S. 


SECTION  I. 

WHAT    IS    A    CHECK? 

§  1566.  A  check  is  (i)  a  draft  or  order  (2)  upon  a  bank 
or  banking  house,  (3)  purporting  to  be  drawn  upon  a  de- 
posit of  funds  (4)  for  the  payment  at  all  events  of  a  certain 
sum  of  money,  (5)  to  a  certain  person  therein  named,  or 
to  him  or  his  order,  or  to  bearer,  and  (6)  payable  instantly 
on  demand.     This  definition  has  been  approvingly  quoted.^ 

Any  instrument  fulfilling  the  above  description  may,  we 
think,  be  safely  denominated  a  bank  check,  and  the  defini- 
tion given  is  sustained  by  many  authorities,  though  not  in 
the  language  of  the  text.  Writers  upon  negotiable  instru- 
vTients  have  differed  in  their  definitions  of  this  species  of 
commercial  paper,  some  falling  short  of  giving  all  its  dis- 
tinguishing qualities,  and  some  ascribing  to  it  qualities 
which  it  is  not  absolutely  necessary  that  it  should  possess. 
And  there  is  none  which  can  be  safely  relied  on  as  a  guide 
in  answering  the  question  :  Is  this  paper  a  check  ?^ 

'  Blair  &  Hoge  v.  Wilson,  28  Grat.,  170  (1877),  Burks,  J. 

"  We  cite  the  definitions  and  descriptions  of  checks  which  the  text  writers 
give.  Their  insufficiency  will  be  readily  observed  by  the  attentive  professional 
reader  :  "  A  check  is  a  brief  draft  or  order  on  a  bank  or  banking  house,  direct- 
ing it  to  pay  a  certain  sum  of  money,"  says  Parsons,  vol.  2,  N.  &  B.,  57. — "  A 
check  drawn  on  a  bank  is  a  bill  of  exchange  payable  on  demand."  Edwards 
on  Bills,  396. — "  A  check  on  a  banker  is,  in  legal  effect,  an  inland  bill  of  ex- 
change drawn  on  a  banker,  payable  to  bearer  on  demand."  Byles  on  Bills 
(Sharswood's  ed.)  [*I3],  84. — "A  check  is  a  written  order  or  request  addressed 
to  a  bank,  or  to  persons  carrj'ing  on  the  business  of  bankers,  by  a  party  having 
money  in  their  hands,  requesting  them  to  pay  on  presentment  to  another  person, 
or  to  him  or  bearer,  or  to  him  or  order,  a  certain  sum  of  money  specified  in  the 
instrument."  Stor}'  on  Promissory  Notes,  §  487.  Chitty's  definition  is  substan- 
tially the  same  as  Story's.     Chitty  on  Bills  (13  Am.  ed.)  [*5ii].  578. 

(583) 


584  CHECKS.  §§  1567,  1568. 

§  1567.  In  the  first  place,  a  check  is  a  draft  or  order. — 
A  bill  is  also  a  draft  or  order ;  and  it  is  often  said  that  a 
check  is,  in  legal  effect,  a  bill  of  exchange  drawn  on  a  bank 
or  banking  house,  with  some  peculiarities.^  In  some  cases 
it  is  called  a  bill  payable  on  demand,^  and  in  others  an  in- 
land bill,  or  in  the  nature  of  an  inland  bill,  payable  on  de- 
mand ;^  and  the  expression  that  a  check  is  "  like  a  bill"  has 
been  criticised  on  the  ground  that  "  7iihil  simile  est  idon" 
whereas  "  checks  are  bills,  or  rather  bill  is  the  genus,  and 
check  is  a  species."*  In  form  a  check  is  a  bill  on  a  bank- 
ing house  (payable  on  demand,  as  we  conceive)  ;  and  it  is 
perfectly  correct  to  say  that  it  is  a  bill  with  some  peculiari- 
ties, or  a  species  of  a  bill  Sir  G.  Jessel,  Master  of  the 
Rolls,  calls  it  "a  bill  of  exchange  payable  at  a  banker's."^ 
But  this  is  not  a  definition.  It  comes  within  the  general 
designation  of  a  bill  so  far  that  a  statute  authorizing  the 
protest  of  inland  bills  would  include  inland  checks  ;  ^  but  it 
is  erroneous  to  ascribe  to  a  check  a  necessary  inland  charac- 
ter. A  draft  drawn  in  one  State,  on  a  bank  in  another,  is 
nevertheless  a  check  ;  and,  in  point  of  fact,  checks  are 
very  much  used  in  the  United  States  in  transmitting  money 
from  one  State  to  another. "^ 

§  1568.  Secondly,  it  is  absolutely  necessary  that  the  draft, 
in  order  to  be  a  check,  should  be  drawn  upon  a  bank  or 

>  Billgerry  v.  Branch.  19  Grat.,  418;  Matter  of  Brown,  2  Story,  502  ;  Cruger  v. 
Armstrong-,  3  Johns'  Cas.,  5  ;  Boehm  v.  Sterling,  7  T.  R.,  423 ;  Keene  v.  Beard, 
8  C.  B.  N.  S.,  372  (98  E.  C.  L.  R.) ;  Blair  &  Hoge  v.  Wilson,  28  Grat.,  170  (1877). 
"  It  is  sometimes  inaccurately  described,"  says  Burks,  J.,  "  as  a  bill  of  exchange 
payable  on  demand,"  or  "  as  in  leral  effect  an  inland  bill  of  exchange  drawn  on 
a  banker  payable  to  bearer  on  demand.  While  it  has  many  of  the  properties  of 
bills,  it  has  several  peculiar  characteristics." 

"  Harker  v.  Anderson,  21  Wend.,  372;  Edwards  on  Bills,  396. 

2  Byleson  Bills  (Sharswood  ed.)  [*I3],  84;  Keene  v.  Beard,  8  Com.  B.  N.  S., 
373  ;  Merchants'  Bank  v.  Spicer,  6  Wend.,  445  ;  Cruger  v.  Armstrong,  3  Johns' 
Cas.,  8 ;  Purcell  v.  Allemong,  22  Grat.,  742,  Anderson,  J. 

*  Matter  of  Brown,  2  Story,  502. 

"  Hopkinson  v.  Forstei,  18  Eq.  Cas.  L.  R.,  74  (1874). 

'  Moses  V.  Franklin  Bank,  34  Md.,  574. 

'  Planters'  Bank  v.  Kesee,  7  Heisk.,  200  (1871)  ;  Herring  v.  Kesee,  Southern 
Law  Rev.,  Oct.,  1872.  613;  Roberts  v.  Austin,  26  Iowa,  315  ;  2  Parsons  N.  & 
B.,  59. 


^    1569.  WHAT    IS    A    CHECK?  585 

banker. — Upon  this  point  the  authorities  are  agreed.^  A 
bill  may  also  be  drawn  upon  a  banker;'  and,  therefore, 
while  it  is  necessary  that  a  check  should  be  so  drawn,  thai 
alone  does  not  distinguish  it.  It  does  not  seem  necessary 
that  the  drawee,  when  an  individual,  should  be  described  as 
a  banker ;  and  an  order  addressed  simply  to  "  Messrs.  A.  & 
B."  has  been  held  a  check,  it  being  proved  that  they  were 
bankers.'  Between  the  original  parties,  the  payee  knowing 
them  to  be  bankers,  such  an  order  might  be  regarded  as  a 
check  with  reason,  although  we  think  it  would  be  better  to 
require  that  the  instrument  should  not  be  so  considered,  un- 
less its  face  showed  that  it  was  drawn  on  a  banking  house. 
But  when  transferred  to  a  bona  fide  holder  without  notice, 
it  is  clear  that  it  should  be  regarded  as  a  bill,  if  it  would 
operate  any  advantage  to  him  to  do  so. 

§  1569.  Thirdly  :  A  check  purports  to  be  drawn  upon  a 
deposit. — It  is  frequently  said  that  a  check  is  drawn  upon  a 
deposit  in  the  banker's  hands  ;^  and  the  fact  that  it  is  so 
drawn  has  been  held  necessary  to  constitute  the  draft  a 


'  See  Definitions,  ante,  §  1566,  note;  Espy  v.  Bank  of  Cincinnati,  18  Wall., 
620;  Bowen  v.  Newell,  8  N.  Y.,  195  ;  Deener  v.  Brown,  i  MacArthur,  350.  In 
Morrison  v.  Bailey,  5  Ohio  St.,  13,  this  point  seems  to  have  escaped  notice. 

"  Georg-ia  National  Bank  v.  Henderson,  46  Ga.,  495  (1872),  Warner,  C.  J.,  say- 
ing :  "  A  chartered  bank  is  an  artificial  person,  and  a  bill  of  exchange  may  as 
well  be  drawn  upon  and  made  payable  to  an  artificial  person  as  to  a  natural  per- 
son ;  the  three  days  of  grace  are  allowed  as  well  on  bills  drawn  upon  and  pay- 
able to  artificial  persons  as  to  natural  persons.  There  is  no  distinction  as  to  the 
time  when  a  bill  of  exchange  becomes  due  between  one  drawn  upon  and  payable 
at  a  bank,  and  one  payable  to  a  natural  person  ;  both  become  due  on  the  last 
day  of  grace,  unless,  under  our  code,  the  bill  is  payable  at  a  bank  on  sight  or 
on  demand.  Why  should  there  ever  have  been  any  difference  as  to  the  allow- 
ance of  days  of  grace  between  a  bill  drawn  upon  and  payable  to  a  chartered 
bank  and  one  drawn  upon  and  payable  to  a  natural  person  }  The  truth  is,  the 
same  principles  of  commercial  law  apply  to  both,  so  far  as  the  allowance  of  days 
of  grace  are  concerned ;  and  did,  when  this  bill  of  exchange  was  placed  in  the 
defendant's  hands  for  collection,  except  checks  drawn  on  a  bank  payable  at  sight 
or  on  demand."     See  cases  cited  in  notes. 

'  Planters'  Bank  v.  Kesee,  7  Heisk.,  200  (1871)  ;  Herring  v.  Kesee,  Southern 
Law  Review,  Oct.,  1872,  p.  613. 

*  Morrison  v.  Bailey,  5  Ohio  St.,  13,  where  it  is  said  :  "A  check  is  drawn  on 
an  existing  fund."  Espy  v.  Bank  of  Cincinnati,  18  Wall.,  620,  Miller,  J. :  "A 
check  is  drawn  against  funds  on  deposit  with  the  banker." 


586  CHECKS.  §  I57<^ 

check.^  But  this  can  not  be  the  true  criterion.  It  is  not 
the  fact  that  the  order  is  actually  drawn  on  a  deposit,  but 
the  fact  that  it  purports  to  be  so  drawn,  which  constitutes 
it  a  check ;  and  it  is  more  accurate  to  say  that  it  is  upon 
its  face  a  draft  upon  a  deposit.^  To  hold  otherwise  would 
authorize  the  construction  of  a  written  contract  by  the  light 
of  an  extraneous  fact  of  which  the  holder  had  no  notice. 
If  there  were  no  deposit,  it  would  be  a  fraudulent  check — 
but  a  check,  nevertheless — and  we  can  not  conceive  of  a 
wider  departure  from  principle  than  to  hold  that  the  fraud 
varied  the  nature  of  the  instrument  itself. 

§  1570.  FotLvthly  :  A  check  viust  be  for  the  payment  at 
all  events  of  a  ce^^tain  sum  of  money. — In  this  respect  it 
does  not  differ  from  other  negoriable  instruments  ;  and 
though,  perhaps,  it  might  still  be  termed  a  check  although 
not  payable  in  money,  by  which  is  meant  the  legal  tender 
currency  of  the  country,  it  would  certainly  not  be  negotia- 
ble if  expressed  to  be  payable  "  in  bank  bills"  or  "  in  cur- 
rency," ^  or  if  it  lacked  words  of  negotiability,^^  or  were  defi- 
cient in  any  of  the  characteristics  in  respect  to  certainty  in 
fact  and  time  of  payment  and  party  to  whom  payment  is 
to  be  made. 

§  1 5  71.  Fifthly :  A  check  rnay  be  made  payable  to  a  cei^- 
tain  person  thereifi  named,  or  to  him  or  his  order,  or  to 
him  or  bearer,  or  simply  to  bearer,  in  like  manner  as  a  bill 
of  exchange,  and  may  be  transferred  by  indorsement  or 
assignment,  as  the  .case  may  be,  in  like  manner  and  to  the 

'  Planters'  Bank  v.  Kesee,  7  Heisk.,  200.  Nicholson,  J.,  said  :  "  As  it  is 
drawn  upon  a  deposit  in  bank,  it  falls  directly  within  that  class  of  bills  of  ex- 
change known  in  the  commercial  world  as  checks."  In  Herring  v.  Kesee, 
McFarland,  J.,  referring  to  Brown  v.  Lusk,  4  Yerg.,  210,  said  in  that  case  "  the 
drawer  had  no  funds  in  the  bank  upon  which  to  draw,  and  this  was  prcbab  y 
the  distinguishing  feature."  See  Southern  Law  Review,  October,  1872,  article 
on  Checks. 

""  See  Champion  v.  Gordon,  70  Penn.  St.,  476  ;  Deener  v.  Brown,  i  MacArthur, 
350  ;  Newman  v.  Kaufman,  28  La.  Ann.,  865. 

'  Bank  of  Mobile  v.  Brunn,  42  Ala.,  108  ;  Little  v.  Phcenix  Bank,  2  Hill  (N. 
Y.),  425. 

*  Partridge  v.  Bank  of  England,  9  Q.  B.,  396. 


5   1571^-  WHAT    IS    A    CHECK?  587 

like  effect  as  a  bill  of  exchange.  Certainty  as  to  the  payee 
is  as  requisite  in  a  check  as  in  a  bill  of  exchange,  and  if  no 
payee  be  named  or  indicated,  it  will  be  fatally  defective.* 
Therefore  an  order  drawn  "pay  to  the  order  of  on  sight" 
is  not  a  check,  but  would  indicate  that  the  drawer  meant  to 
draw  a  check,  but  left  out  the  payee's  name,  and  omitted 
any  expression  to  show  that  it  should  be  paid  to  bearer.* 
But  a  blank  space  may  be  left  for  the  payee's  name,  which 
would  indicate  authority  to  any  bona  fide  holder  to  insert 
his  name  as  payee.^  And  checks  may  be  drawn  payable  to 
an  impersonal  payee  as  "  to  the  order  of  bills  payable,"  or 
to  the  order  of  a  certain  number,  or  with  some  such  phrase, 
to  indicate  the  intention  to  express  that  negotiability  which 
only  exists  in  connection  with  the  word  order,  or  bearer. 
Such  a  check  can  not  be  indorsed  in  the  usual  way  by  any 
party  to  it,  and  is  construed  to  be  payable  to  bearer.'*  The 
bank,  it  is  conceived,  would  be  entitled  to  a  reasonable 
time  to  ascertain  the  genuineness  of  the  indorser's  signature 
before  paying  a  check  drawn  payable  to  a  certain  person  or 
order.^ 

§  1571^.  Check  may  be  payable  to  bearer. — There  is  no 
common  law  obligation,  according  to  the  English  author- 
ities, upon  a  bank  to  pay  checks  other  than  those  payable 
to  bearer,  it  being  considered  that  the  bank  has  a  right  to 
require  that  it  should  not  run  the  risk  of  mistaking  the  sig- 
nature of  the  party  to  whose  order  it  is  payable,  and  thus 
becoming  responsible  in  the  event  of  its  turning  out  to  be 
a  forgery  ;  ^  and  this  has  led  some  text  writers  and  judges 

'  Rillgerr>-,  V.  Branch,  19  Grat.,  418  ;  Matter  of  Brown,  2  Stor)',  502  ;  Cruger 
V.  Armstronjj,  3  Johns'  Cases,  5  ;  Elting  v.  Brinkerhoff.  2  Hall,  459;  Munn  v. 
Burch,  25  111.,  35  ;  Stor>'  on  Notes,  §  488.  In  First  N.  B.  v.  Hams,  108  Mass., 
514.  it  was  held  that  a  national  bank  has  authority  to  buy  checks  on  other 
banks,  whether  they  be  payable  to  bearer  or  order. 

"  Mcintosh  V.  Lytic,  23  Minn.,  336  ;  see  vol.  I,  §§  99  et  seq. 

'  Mcintosh  V.  Lytle,  23  Minn.,  336. 

*  Mcintosh  V.  Lytle,  23  Minn.,  336;  Willets  v.  Phoenix  Bank,  2  Duer,  \^X 
Mechanics'  Bank  v.  Stratton,  2  Keyes,  365. 

"  Robarts  v.  Tucker,  4  E.  L.  &  Eq.,  236,  §1618. 

°  Bellamy  v.  Majoribanks,  8  E.  L.  &  Eq.,  519. 


588  CHECKS.  §  1571^. 

to  declare  that  a  check  must  be  payable  to  bearer.^  It  is 
certainly  not  deemed  requisite  to  its  character  and  validity 
as  a  check  that  it  should  be  so  payable.  And  now  the  cus- 
tom of  banks  to  pay  checks  drawn  payable  to  order  is  so 
universally  and  notoriously  recognized  and  followed,  that 
it  would  doubtless  be  regarded  as  binding  on  the  bank  in 
all  cases  where  nothing  is  said  on  the  subject.^  As  to  the 
law  in  the  United  States  it  has  been  properly  said  that  the 
opposite  doctrine  "  is  unsupported  either  by  reason  or  au- 
thority." ^ 

In  England,  an  instrument  in  form  a  check,  but  payable 
to  order,  was  for  a  long  time  by  statute  made  an  inland 
bill,  and  required  to  be  stamped  as  such.  Parliament  requir- 
ing that  all  checks  should  be  made  payable  to  "  bearer"  or 
to  "  A.  or  bearer."  But  by  more  recent  enactment,  checks 
payable  to  order  have  been  legalized  as  checks ;  but  the 
same  enactment  has  provided  that :  "  Any  draft  or  order 
drawn  upon  a  banker  for  a  sum  of  money  payable  to  order 
on  demand,  which  shall,  when  presented  for  payment,  pur- 
port to  be  indorsed  by  the  person  to  whom  the  same  shall  be 
drawn  payable,  shall  be  a  sufficient  authority  to  such  banker  to 
pay  the  amount  of  such  draft  or  order  to  the  bearer  thereof, 
and  it  shall  not  be  incumbent  on  such  banker  to  prove  that 
such  indorsement,  or  any  subsequent  indorsement,  was 
made  by  or  under  the  direction  or  authority  of  the  person 
to  whom  the  said  draft  or  order  was  or  is  made  payable, 
either  by  the  drawer  or  any  indorser  thereof."^  An  indorse- 
ment on  a  check  payable  to  order,  purporting  to  be  made 
by  the  agent  of  the  payee,  has  been  held  to  come  within 
the  statute,  and  a  payment  of  it  by  the  bank  to  be  good.^ 

»  Byles  on  Bills  (Sharswood's  ed.),  [*I3],  84;  Chitty  (13  Am.  ed.),  [*5ii], 
578  ;  Woodruff  V.  Merchants'  Bank,  25  Wend.,  672. 

^  Morse  on  Banking,  306 ;  Mcintosh  v.  Lytic,  23  Minn.,  336  ;  Bowen  v. 
Newell,  4  Selden,  190. 

'  Dodg-e  V.  National  Exchange  Bank,  30  Ohio  St.,  8. 

*  16&17  Vict.,  ch.  59,  §  19;  2  Parsons  N.  &B.,  596 ;  Morse  on  Banking,  306. 

'  Charles  v.  Blackwell,  2  Com.  PI.  Div.  H.  C.  J.,  151  (1877)  ;  20  Moaks'  E. 
R.,  426. 


§   1572.  WHAT    IS    A    CHECK  ?  589 

§  1572.  Sixthly,  a  check  is  payable  instantly  on  demand, 
— This  is,  as  we  conceive,  the  touchstone  by  which  a  check 
IS  tested.  Usually,  no  time  of  payment  is  expressed  upon 
its  face,  but  all  commercial  instruments  in  which  no  time 
of  payment  is  expressed  are  understood  to  be,  and  im- 
pliedly are,  payable  on  demand  ;  and  when  so  payable  by 
implication,  or  in  express  terms,  they  are  payable  instantly, 
without  the  allowance  of  grace,  which  pertains  to  those  pay- 
able on  a  particular  day.^  The  whole  theory  and  use  of  a 
check  points  to  its  immediate  payability  as  its  distinguishing 
feature,  and  its  name  imports  it.  A  person  deposits  money 
with  his  bank  or  banker  where  it  is  subject  at  any  time  to 
his  order.  By  an  order  he  appropriates  so  much  of  it  to 
another  person,  and  the  bank  or  banker,  in  consideration 
of  its  temporary  use  of  the  money,  agrees  to  pay  it  in 
whole,  or  in  parcels,  to  the  depositor's  order  when  demanded. 
But  he  does  not  agree  to  contract  to  pay  at  a  future  day  by 
acceptance,  and  the  depositor  can  not  require  it. 

§  1573-  Whether  or  not  a  draft  on  a  bank  payable  at  a 
future  day  is  a  check  ? — If  a  draft  upon  a  bank  or  banker 
be  dated  on  a  certain  day,  say  the  first  of  December,  and 
be  payable  on  a  future  day  named,  say  the  tenth  of  De- 
cember, it  has  been  considered  by  some  authorities  to  be  a 
check  payable  on  the  precise  day  named  without  grace  ; 

»  See  Days  of  Grace,  chapter  xx,  vol.  i,  §  617  ;  Morse  on  Banking,  242.  In 
the  case  of  the  Merchants'  Bank  v.  State  Bank,  10  Wall.,  647,  the  Supreme  Court 
of  the  United  States  says  :  "  Bank  checks  are  not  inland  bills  of  exchange,  but 
have  many  of  the  properties  of  such  commercial  paper,  and  many  of  the  rules  of 
the  law  merchant  are  alike  applicable  to  both.  Each  is  for  a  specific  sum,  payable 
in  money.  In  both  cases  there  is  a  drawer,  drawee,  and  payee.  Without  ac- 
ceptance no  action  can  be  maintained  by  the  holder  upon  either,  against  the 
drawee.  The  chief  points  of  difference  are  that  (i)  a  check  is  always  drawn 
on  a  bank  or  banker.  (2.)  No  days  of  grace  are  allowed.  (3)  The  drawer  is  not 
discharged  by  the  laches  of  the  holder  in  presentment  for  payment,  unless  he 
can  show  that  he  has  sustained  some  injury  by  the  default.  (4)  It  is  not  due  un- 
til payment  is  demanded,  and  the  statute  of  limitations  runs  only  from  that  time. 
(5)  It' is  by  its  face  the  appropriation  of  so  much  money  of  the  drawer  in  the 
hands  of  the  drawee  to  the  payment  of  an  admitted  liability  of  the  drawer.  (6) 
It  is  not  necessary  that  the  drawer  of  a  bill  should  have  funds  in  the  hands  of 
the  drawee.  A  check  in  such  case  would  be  a  fraud."  See  Blair  &  Hoge  v. 
Wilson,  28  Grat.,  170;  Deener  v.  Brown,  i  McArthur,  350. 


590 


CHECKS.  §   157: 


and  the  high  authority  of  Story  and  Sharswood  sustains 
this  view.^  Such  an  instrument  payable  at  so  many  days 
after  sight,^  and  at  so  many  days  after  date,^  has  also  been 

1  Matter  of  Brown,  2  Stoiy,  502.     The  draft  was  as  follows  r 
"  Granite  Bank,  $703-5o.  "  Boston,  April  iSth,  1841. 

"  Pay  to  Curtis  &  Co.,  i8th  May,  or  bearer,  seven  hundred  three  dollars  and 
fifty  cents.  ^  „ 

"  To  cashier.  Ephraim  Brown. 

In  Champion  v.  Gordon,  70  Penn.  St.,  474  (1872),  the  draft  was  as  follows  : 

"  Philadelphia,  November  22d,  1869. 
"The  Commonwealth  National  Bank  pay  to  H.  Yerkes  or  order  one  hundred 
and  fifty  (December  3d,  1869)  dollars.  JOHN  B.  Champion." 

Champion  v.  Gordon,  70  Penn.  St.,  475   (1S72),  Sharswood,  J.,  saymg :  "  The 
ordinary  commercial  form  of  a  bill  of  exchange  payable  at  a  future  day  is  at  so 
many  days'  or  months'  notice  after  date  or  sight.     An  order  so  drawn,  whether 
upon  a  banker  or  any  other  person,  ought  to  be  regarded  as  a  bill,  with  all  the 
privileges  and  liabilities  which  by  the  law  merchant  are  incident  to  a  bill.     The 
drawer,  by  adopting  this  usual  form,  must  be  held  so  to  intend.     So  if  an  order 
be  drawn  on  a  merchant  or  other  person  not  a  banker,  with  whom  the  drawer 
keeps  money  on  deposit  subject  to  draft,  payable  at  a  future  day  named,  there 
exists  no  reason  why  the  same  rule  should  not  apply.     But  there  is  a  good  rea- 
son why  there  should  be  a  difference  between  an  order  so  drawn  upon  a  banker, 
which  certainly  must  be  presumed  to  be  by  a  person  who  keeps  money  on  deposit 
with  such  banker,  subject  to  draft,  and  an  order  on  a  merchant  or  other  person. 
If  such  an  order,  drawn  upon  a  bank  payable  at  a  future  day  named  in  it,  must 
be  considered  as  an  inland  bill  of  exchange,  and  not  a  check,  then  the  payee  or 
holder  has  the  right  to  present  it  at  once  for  acceptance,  protest  it  at  once  for 
non-acceptance,  and  sue  the  drawer  immediately.     Should  it  be  accepted,  how- 
ever, the  funds  of  the  drawer  in  the  bank  would  necessarily  b^  thereby  tied  up 
until  the  day  of  payment.     All  the  objects  of  directing  payment  at  a  future  day 
would  thus  be  frustrated.     What  the  drawer  undertakes  is,  that  on  a  day  named 
he  will  have  the  amount  of  the  check  to  his  credit  in  the  bank.     In  the  niean- 
time  he  wants  the  full  and  free  use  of  his  entire  deposit.     It  is  not  denied  that  a 
post-dated  check  can  not  be  presented  for  acceptance.     That  is  by  implication 
payable  on  a  future  day.     Why,  then,  is  a  check  expressly  so  made  payable  to 
stand  on  different  ground  ?     In  the  case  before  us,  an  ordinary  printed  torm  ol  a 
bank  check  was  evidently  used,  and  the  day  of  presentment  written  in  one  of  the 
blanks      This  is  the  most  convenient  form,  for  it  calls  the  attention  of  the 
cashier  or  paying  teller  to  the  fact,  which  he  would  be  likely  to  overlook  if  it 
were  expressed  only  by  the  date.     Nothing,  I  am  told,  is  more  common  tnan 
such  mistakes  in  the  payment  of  post-dated  checks,  and  depositors  often  thus 
find  their  accounts  overdrawn,  very  much  to  their  embarrassment.     If  we  de- 
termine that  an  order  hke  that  before  us  is  not  presentable  for  acceptance  before 
maturity,  we  settle  the  question.     It  is  a  check,  and  not  a  bill  of  exchange.       In 
Bowen  v  Newell,  5  Sand.,  326,  the  court  held  that  an  order  on  a  bank  payable  at 
a  future  day  was  a  check,  and  not  entitled  to  grace.     This  decision  was  follovyed 
in  the  same  case  reported  in  5  Duer,  584.     But  in  4  Seld.,  190,  the  contrar)'  view 
was  taken.     And  finally,  in  3  Kern,  290  (the  case  having  been  four  times  htiga- 
ted)   the  court  came  to  the  conclusion  that  by  the  principles  of  the  law  merchant 
the  instrument  was  entitled  to  grace,  but  permitted  local  usage  to  control  to 
the  contrary. 

2  Herring  v.  Kesee,  Southern  Law  Review,  October,  1872,  article  on  Checks. 
The  order  was  upon  a  firm  not  described  as  bankers,  and  payable  ten  days  after 
Eight.     It  was  accepted  by  the  drawees  and  held  a  check. 

«  Westminster  Bank,  4  R.  I.,  30.  Instrument  payable  "ninety  days  after 
date  "  was  deemed  a  check. 


§   1574-  WHAT    IS    A    CHECK.  59 1 

deemed  a  check  payable  at  the  expiration  of  the  number 
of  days  named,  without  grace.  There  is  more  reason  for 
considering  a  draft  payable  on  a  precise  day  named  a  check 
than  for  so  considering  it  when  payable  at  a  certain  time 
after  sight,  or  after  date.  For  it  is  not  usual  to  frame  bills 
of  exchange  payable  on  a  precise  day,  while  "  after  date  " 
and  "after  sight"  are  phrases  of  constant  use  in  drawing 
them. 

Nor  can  we  perceive  any  commercial  utility  in  regarding 
it  as  a  check.  If  the  draw^er  wishes  to  give  the  draft  paya- 
ble in  future  the  characteristics  of  a  check,  he  can  do  so  by 
post-dating  it ;  and  then  it  could  not  be  presented  for  ac- 
ceptance, because  it  would  not  be  operative  until  the  day 
of  its  post-date  arrived.^  Or,  if  he  desired  it  to  have  the 
effect  of  a  bill,  and  yet  not  have  grace,  he  could  express 
"  without  grace  "  on  its  face  ;  ^  and  if  he  did  not  wish  to 
have  it  presented  for  acceptance,  he  could  express  it  in  like 
manner  "without  acceptance."^  Thus  the  various  uses  and 
objects  of  the  different  instruments  could  be  subserved  ; 
but  otherwise  they  become  confused  and  difficult  to  attain. 

§  1 5  74.  Draft  071  bank  not  payable  immediately  is  a  bill 
of  exchange. — But  every  draft  upon  a  bank  or  banker 
which  is  not  payable  immediately,  possesses,  as  we  think, 
all  the  qualities  of  a  bill  of  exchange  ;  and  the  preponder- 
ance of  authority  sustains  this  view,  whether  the  instrument 
be  payable  on  a  precise  day  named  or  at  so  many  days  after 
date  or  sight. 

In  Missouri  the  paper  in  question  was  dated  12th  Octo- 
ber, i860,  was  addressed  to  "The  Southern  Bank  of  St. 
Louis,"  and  ran  :  "  Pay  to  M.  C.  Jackson  &  Co.,  or  order, 
five  hundred  dollars,  on  2 2d  October."  The  bank  receiv- 
ing the  draft  for  collection  presented  it  on  October  2 2d, 

*  S&e.  post,  §  1578,  and  section  iv. 

'  See  chapter  XX,  §633,  vol.  i. 

»  See  chapter  xvii,  §454,  and  chapter  xviii,  §481,  vol.  r.     . 


592 


CHECKS.  §   ^575' 


and  payment  being-  refused,  it  was  held  liable  for  negligence 
for  not  presenting  it  on  the  25th,  allowing  grace.  The 
court  said  :  "  This  bill  is  neither  payable  at  sight  nor  on  de- 
mand, but  on  a  day  certain  ;  and  it  was,  ther-efore,  entitled 
to  grace,  and  it  was  negligence  to  present  it  before  grace 
had  expired."^ 

So  in  Georgia  the  following  instrument  was  held  to  be  a 
bill  of  exchange  entitled  to  grace,  and  not  a  check  :  "  At- 
lanta, Georgia,  August  4th,  1866.  Georgia  National  Bank 
of  Atlanta,  Georgia.  Ninety  days  after  date,  pay  to  F.  R. 
Bell,  or  order,  one  thousand  dollars.  (Signed)  Massey  & 
Herty."  ^  And  the  like  view  has  been  taken  in  Ohio,^  Cal- 
ifornia,* and  other  States. 

§  1575.  Checks  not  entitled  to  grace. — It  follows,  as  mat- 
ter of  course,  from  what  has  been  already  said,  that  a  check 
is  not  entitled  to  grace.  The  very  idea  of  the  instrument 
is  its  immediate  payability.  And  the  question  which  is 
often  discussed,  whether  or  not  a  check  drawn  payable  at  a 
future  day  is  entitled  to  grace,  in  itself  confounds  the  dis- 
tinction between  a  check  and  a  bill.  For  if  payable  at  a 
future  day,  it  is  not  a  check,  but  a  bill,  and  as  such  entitled 
to  grace,  like  any  other  bill  payable  in  the  future.^ 

'  Ivory  V.  Bank  of  the  State,  36  Mo.,  475. 

=  Henderson  v.  Pope,  39  Ga.,  361,  reaffirmed  in  Georgia  National  Bank  v. 
Henderson,  46  Ga.,  496  (1872). 

'  In  Morrison  v.  Bailey,  5  Ohio  St.,  13,  the  instrument  was  dated  June  30th, 
and  was  payable  "  on  the  13th  July."  It  was  held  not  a  check,  but  a  bill  entitled 
to  grace.  In  a  later  case  the  question  was  held  to  turn  on  the  intention  of  the 
parties.     Andrew  v.  Blackley,  1 1  Ohio  St.,  89. 

*  In  Mintumv.  Fisher,  4  Cal.,  36  (1854),  the  instrument  was  dated  "San 
Francisco,  June  9th,  1853,"  and  was  addressed  to  P.  B.  &  Co.,  bankers,  request- 
ing them  to  pay  $3,890.18  "  on  the  fifteenth  (15th)  inst."  It  was  held  a  bill,  and 
not  a  check,  and  entitled  to  grace,  and  demand  on  the  15th  was  premature. 
Work  V.  Tatman,  2  Houst.  (Del.),  304 ;  Bradley  v.  Harrington,  5  Harring.,  305  ; 
2  Parsons  N.  &  B.,  68,  69. 

^  In  Morse  on  Banking,  p.  243,  it  is  said :  "  Often  an  instrument,  in  its  form 
substantially  like  a  check,  is  made  payable  at  a  day  subsequent  to  that  both  of 
its  date  and  of  its  issue,  either  by  naming  such  a  date  in  the  body  of  the  instru- 
ment, or  by  making  it  payable  so  many  days  after  date.  In  such  cases  it  is  often 
a  question  whether  or  not  grace  is  to  be  allowed.  But  though  this  is  the  ques- 
tion, it  does  not  take  the  form  of  whether  or  not  grace  is  to  be  allowed  on  such 
a  check,  but  whether  or  not  such  an  instrument  is  a  check  at  all.     For  if  it  is  a 


<$   I57S.       FORMAL  PARTS  AND  VARIETIES  OF  CHECKS.  593 

§  1576.  Effect  of  2isage. — Whether  or  not  the  usage  of 
banks  in  any  particular  place,  and  of  business  men  to  re- 
gard drafts  on  banks  payable  at  a  future  day  after  date  as 
checks,  and  not  entitled  to  grace,  is  admissible  in  evidence 
to  control  the  general  law  merchant,  is  a  question  upon 
which  the  authorities  are  divided.  Some  cases  hold  such 
evidence  inadmissible  ;  ^  but  others  take  the  ground  that 
the  common  understanding  of  the  business  community 
ought  to  be  carried  out,  and  admit  such  evidence  to 
effectuate  it.^ 


SECTION  II. 

FORMAL    PARTS     AND    VARIETIES    OF     CHECKS. — BUSINESS    AND 
MEMORANDUM    CHECKS. 

§  1577.  As  to  the  date:  A  check  should  be  dated. — It 
may  bear  its  actual  date,  or  be  ante-dated  or  post-dated. 
"  But  it  would  seem,"  says  Morse  in  his  excellent  treatise, 
"  that  if  a  check  is  not  dated  at  all,  and  contains  no  state- 
ment of  a  date  when  it  is  to  be  paid,  it  is  never  payable."^ 
There  is  no  adjudication  to  this  effect.  And  while  it  may 
be  that  a  bank  would  be  warranted  in  refusing  to  pay  an 
undated  check  (and  this  is  doubtful),  it  would  not  be  un- 
reasonable for  it  to  assume  a  contemporaneous  date,  and  to 
pay  it  accordingly. 

§  1578.  Checkmay  be  post-dated,  or  ante-dated. — It  makes 
no    difference    (independent  of  any  statutory  regulation) 

check,  that  simple  fact  is  conclusive  of  the  fact  that  it  is  payable  immediately  on 
demand  on  the  day  named,  without  grace.  A  check  is  and  must  always  be  so 
payable.  But  if  it  be  not  a  check,  then  it  will  probably  have  the  customary 
grace  of  the  place  where  it  is  made  payable,  and  will  be  called  a  bill  of  ex- 
change."    See  2  Parsons  N.  &  B.,  68,  69. 

'  Morrison  v.  Bailey,  5  Ohio  St.,  13  ;  Minturn  v.  Fisher,  4  Cal.,  35. 

*  Bowen  v.  Newell,  3  Kern,  290 ;  Champion  v.  Gordon,  70  Penn.  St.,  476 
(1872)  ;  Morse  on  Banking,  247. 

'  Morse  on  Banking,  238. 

Vol.  II.— 38 


594  CHECKS.  §  1579. 

whether  a  check  be  post-dated  or  ante-dated,  and  it  is  still 
payable  according  to  its  express  terms.  The  drawing  of 
post-dated  checks  is  an  every-day  occurrence  in  the  com- 
mercial cities  ;  and  the  uniform  understanding  of  parties  is 
that  when  the  check  is  post-dated — say  as  of  the  14th  of 
January,  when  actually  drawn  on  the  ist — that  it  is  payable 
on  the  day  it  purports  to  be,  without  any  days  of  grace, 
even  though  it  be  negotiated  beforehand.-^ 

If  the  check  be  post-dated  so  that  it  falls  due  on  Sunday, 
that  is,  bears  date  as  of  a  coming  Sunday,  payment  can  not 
be  demanded  until  the  Monday  afterward ;  and  if  the  bank 
pay  it  before  that  Monday  it  acts  at  its  peril. ^ 

§  1579.  As  to  the  language  of  the  check. — There  must, 
of  course,  be  words  expressing  an  order  that  the  bank  shall 
pay  the  amount.  They  need  be  in  no  particular  form. 
And  sometimes  they  are  accompanied  with  the  words  "  for 
value  received,"  or  a  statement  of  the  consideration.  This 
slight  addition  is  immaterial.^ 

§  1580.  As  to  the  sum  payable. — The  sum  should  be  dis- 
tinctly and  carefully  expressed  in  figures  and  in  words  to 
avoid  any  question.  But  either  words  or  figures  are  suffi- 
cient. The  amount  should  be  named  in  the  currency  of  the 
country  (in  the  United  States  simply  in  dollars)  ;  and  the 
bank  might  properly  refuse  payment  of  a  check  expressed 
in  sovereigns,  francs,  or  any  other  foreign  currency.*  In 
the  United  States  the  mark  "  $  "  is  alone  sufficient  to  ex- 
press   "dollars,"^    as    in    England    ''  £   s.    d."    expresses 

^  Taylor  V.  Sip,  i  Vroom,  284  ;  Mohawk  Bank  v.  Broderick,  10  Wend.,  304  ;  S.C. 
13  Wend.,  133  ;  Matter  of  Brown,  2  Stor}',  502  ;  Salter  v.  Burt,  20  Wend.,  205. 
Independent  of  the  stamp  act,  the  rule  is  likewise  in  England.  Story  on  Prom. 
Notes,  490  ;  Whister  v.  Foster,  32  L.  J.  C.  P.,  161  ;  14  C.  B.  N.  S.,  238  (108 
E.  C.  L.  R.)  ;  Austin  v.  Bunyard,  34  L.  J.,  217 ;  Allen  v.  Keeves,  i  East.,  435. 
In  England  the  stamp  act  has  led  to  much  controversy  as  to  post-dated  checks, 
which  it  is  unnecessary  to  discuss  here.  See  2  Parsons  N.  &  B.,  69,  71  ;  Byles 
on  Bills  [*I5],  87,  et  seq.,  and  numerous  cases  referred  to.  . 

"  Salter  v.  Burt,  20  Wend.,  205.  *  Wells  v.  Brigham,  6  Cush.,  6. 

*Rastell  V.  Draper,  Yelv.,  80;  Moore,  775  ;  Cro.  Jac,  88;  Morse  on  Banking, 
236  ;  Grant  on  Banking,  16. 

'Corgan  v.  Frew,  39  111.,  31. 


§   1582.       FORMAL  PARTS  AND  VARIETIES  OF  CHECKS.  595 

pounds,  shillings,  and  pence.^  And  it  has  been  held  that 
the  figures  "  37.89,"  divided  by  a  period  as  indicated,  and 
without  even  the  dollar  mark,  "  $,"  were  sufficient  to  raise 
the  inference  that  dollars  was  intended.* 

Where  the  marginal  figures  differ  from  the  written 
words,  the  words  should  be  attended  to  and  not  the  figures. 
And  a  change  of  the  figures,  so  as  to  conform  them  to  the 
words,  made  by  the  holder,  without  the  knowledge  or  con- 
sent of  the  drawer,  has  been  held  not  a  material  alteration 
or  forgery,  as  tHe  figures  served  only  as  an  index,  for  con- 
venience of  reference,  and  constituted  no  part  of  the  bill.^ 

§  1 58 1.  As  to  the  address. — The  name  of  the  bank  on 
which  the  check  is  drawn  is  usually  printed  in  large  charac- 
ters on  the  top  of  the  check,  and  frequently  in  the  lower 
left-hand  corner  are  the  words  "  To  the  cashier,"  or  "  To 
the  cashier  of  — ."*  It  has  never  been  decided,  that  we  are 
aware  of,  whether  or  not  these  latter  words  are  necessary. 
And  it  has  been  said  to  be  "  very  doubtful,"  with  the  inti- 
mation that  it  is  decidedly  safer  to  consider  the  address 
"  to  the  cashier  "  as  essential.^  But  very  many  checks  have 
only  the  name  of  the  bank  upon  it.  It  is  the  bank  to 
whom  it  is  really  addressed,  and  which  is  to  pay  it,  and  we 
can  not  see  that  more  is  needful. 

§  1582.  As  to  delivery. — A  check,  like  any  other  instru- 
ment, must  be  issued  before  it  is  binding  ;  and  it  is  consid- 
ered as  issued  as  soon  as  it  is  in  the  hands  of  any  party  who 
can  demand  its  payment.^  If  it  be  lost  or  stolen  before 
being  issued,  the  thief  or  finder  can  not  enforce  it  against 
the  drawer.      But,  nevertheless,  if  presented   at  the  bank 

'  Kearney  v.  King,  2  Barn.  &  Aid.,  301. 

*  Northrop  v.  Sanborn,  22  Vt.,  433. 

"Smith  V.  Smith,  i  R.  I.,  398  ;  see  ante,  chapter  III,  §  86,  note  5,  vol.  i.  and 
vol.  2,  §  1499a. 

*  Matter  of  Brown,  2  Stor>',  502  ;  Allen  v.  Sea  Fire,  etc.,  Ins.  Co.,  M.  G.  &  S. 
573  ;  Ellison  v.  Callingridge,  Id.,  570. 

'  Morse  on  Banking,  238. 
Grant  on  Banking,  14;  Morse  on  Banking,  239. 


59^  CHECKS.  §   1583. 

and  payable  to  bearer,  the  bank  would  be  protected  in 
paying  it.  And  a  bona  fide  holder  without  notice  that  it 
had  never  been  issued,  would  be  protected  to  the  full 
extent,  as  would  the  holder  of  any  other  negotiable  instru- 
ment. 

§  1583.  Memorandum  checks. — There  is  a  class  of  checks 
which  has  recently  sprung  up  in  our  commercial  communi- 
ties, of  a  peculiar  character,  and  known  as  memorandum 
checks.  In  their  form  they  do  not  differ  from  ordinary 
checks,  and  as  to  third  parties  who  are  holders  bona  fide 
for  a  valuable  consideration,  without  notice,  they  are 
affected  with  all  the  legal  rights  and  consequences  of  or- 
dinary checks.^  "  They  are  in  fact,  and  in  law,"  says  Mr. 
Morse,  "  equivalent  to  the  drawer's  promise  to  pay  for 
value  received.  The  holder  may  sue  upon  them  as  upon  a 
promissory  note,  and  by  reason  of  their  peculiar  character 
he  is  not  held  to  present  them  at  the  bank  for  payment, 
prior  to  bringing  his  suit  against  the  maker."  ^ 

§  1584.  The  difference  in  form,  between  the  ordinary  and 
the  meinorandum  check  is,  that  the  latter  usually  has  the  in- 
sertion of  the  word  "mem.,"  which  is  used  to  indicate  the 
understanding  between  the  immediate  parties.^  Sometimes 
the  name  of  the  bank  is  cancelled  ;^  but  whether  the  word 
"  mem."  constitutes  the  only  mark  on  its  face,  or  the  bank's 
name  be  cancelled  in  addition,  the  effect  of  the  memorandum 
check  is  to  create  an  absolute  contract  of  the  maker  to  pay 
the  bona  fide  holder,  unconditionally,  and  not  upon  the  con- 
dition of  presentment  at  the  bank,  non-payment  and  notice, 
the  formalities  being  regarded  as  waived.^ 

*  Language  of  Story  on  Promissory  Notes,  §  499. 

"  Morse  on  Banking,  313  ;  Franklin  Bank  v.  Freeman,  16  Pick.,  535  ;  Gushing 
V.  Gore,  15  Mass.,  69. 

'  Dykers  v.  Leather  Bank,  11   Paige,  612;  Franklin   Bank  v.  Freeman,   16 
Pick.,  535. 

*Ball  V.  Allen,  15  Mass.,  433  ;  Ellis  v.  Wheeler,  3  Pick.,  18. 

*  Franklin   Bank  v.  Freeman,    16  Pick.,  535  ;  Dykers  V.   Leather  Bank,    11 
Paige,  612. 


5  1585-   FORMAL  PARTS  AND  VARIETIES  OF  CHECKS.      597 

In  a  Massachusetts  case,  the  paper  sued  on  was  in  form 
as  follows : 

"  Market  North  Bank,  Memo. : 
"  icoo  dolls.— cts.  Boston,  Aug.  27,  1833. 

"  Pay  to  payable,  Friday,  30  inst.,  or  bearer,  one  thousand  dollars,  y^. 
"  To  the  Cashier.  Benj.  Freeman." 

The  word  "  North  "  had  two  lines  run  through  it.  The 
court  said  :  "  A  memorandum  check  is  a  contract,  by  which 
the  maker  engages  to  pay  the  bona  fide  holder  absolutely, 
and  not  upon  a  condition  to  pay  if  the  bank  upon  which  it 
be  drawn  should  not  pay  upon  presentation  at  maturity,  and 
if  due  notice  of  the  presentation  and  non-payment  should  be 
given.  The  word  '  memorandum,'  written  or  printed  upon 
the  check,  describes  the  nature  of  the  contract  with  pre- 
cision."^ 

According  to  the  Massachusetts  cases,  the  erasure  of  the 
name  of  the  bank  destroys  the  presumption  of  consideration 
which  attaches  to  an  ordinary  check  ;  ^  but  proof  of  value 
given,  and  bona  fides,  authorizes  a  recovery  against  the 
drawer  of  a  regular  memorandum  check  in  which  the  name 
of  the  bank  is  cancelled.^ 

A  check  in  the  ordinary  form  can  not  be  shown  by  parol 
evidence  to  be  a  memorandum  check,  and  not  intended  for 
presentment,  and  so  excusing  the  holder  from  presenting 
before  he  charged  the  drawer,'*  nor  can  the  drawer  of  such  a 
check  show  that  he  was  not  to  be  responsible.^ 

§  1585.  In  Morse  on  Banking,  313,  it  is  said:  "The 
fact  that  the  word  '  memorandum '  or  the  abbreviation 
*  memo.'  is  written  on  a  check  is  sufficient  in  law  to  render 
it  a  memorandum  check.  But  the  bank  is  not  bound  to  pay 
any  attention  to  these  words,  or  to  recognize  any  contract 

>  Franklin  Bank  v.  Freeman.  i6  Pick.,  535.  The  paper  being  payable  at  a 
future  day,  seems  to  have  been  a  bill  rather  than  a  check.  But  this  point  was 
not  adverted  to,  nor  did  it  seem  essential.  See  ante,  §  1573,  and  §§  161  ct  scq., 
vol  I. 

"  Ball  V.  Allen,  15  Mass.,  433.  '  Ellis  v.  Wheeler,  3  Pick.,  18. 

*  Kelley  v.  Brown,  4  Gray,  108. 

*  American  Emigrant  Co.  v.  Clark,  47  Iowa,  672. 


598  CHECKS.  §   1585^ 

as  implied  by  them  between  the  maker  and  payee  which 
gives  the  check  any  pecuhar  character.  If  such  a  check  is 
presented  for  payment,  and  the  drawer  has  to  his  credit  suf- 
ficient funds  to  meet  it,  the  bank  must  honor  it  precisely 
like  any  other  ordinary  check.  If  the  agreement  or  under- 
standing between  the  drawer  and  payee  is,  that  it  shall  not 
be  presented  for  payment,  any  remedy  of  the  drawer  for  the 
breach  is  solely  against  the  payee.  If  the  check  is  once 
drawn  and  delivered,  the  drawer's  reliance  that  it  will  not 
be  presented  at  the  bank  can  rest  only  upon  the  good  faith 
of  the  holder.  He  can  not  drag  in  the  bank  as  a  partner  in 
the  arrangement,  neither  alter  the  duty  of  the  bank  to  pay 
his  drafts  out  of  his  deposit.  This  is  a  rule  of  law.  Usage, 
or  the  customary  understanding  of  business  men  to  the 
contrary,  can  not  operate  to  change  it." 

§  1585^.  Crossed  checks. — In  England  there  is  a  well- 
known  usage,  which  has  become  the  subject  of  legislation, 
for  the  drawer  or  holder  of  a  check  to  cross  it  with  the  name 
of  a  banker,  the  effect  of  which  was,  before  the  statute  which 
now  exists,  a  direction  to  the  drawee  bank  to  pay  the  check 
to  no  one  but  a  banker ;  or  rather  according  to  the  cases, 
with  only  a  caution  or  warning  to  the  drawees  that  care 
must  be  used  in  paying  it  to  any  one  else.  The  check  re- 
mained payable  to  bearer,  and  its  negotiability  was  not 
restrained.^  The  statute  of  19  and  20,  Victoria,  c.  25,  recites 
that  its  object  is  to  provide  that  drawers  or  holders  of  drafts, 
payable  to  bearer  or  order  on  demand,  may  be  enabled 
effectually  to  direct  the  payment  of  the  same  only  to  or 
through  some  banker.  It  then  enacts  that  the  crossing  shall 
have  the  force  of  a  direction  to  the  bankers  upon  whom  the 
check  is  drawn,  that  it  is  to  be  paid  to  or  through  some 
banker,  and  the  same  shall  be  payable  only  to  or  through 
some  banker.     This  statute  was  held  not  to  restrain  the  ne- 

■  Bellamy  v.  Majoribanks,  7  Exch.,  389  ;  21  L.  J.  Ex.,  70;  Carlon  v.  Ireland, 
5  E.  &  B.,  765 ;  25  L.  J.  Q.  B.,  113 ;  Simmons  v.  Taylor,  2  C.  B.  N.  S.,  528  ;  4 
C.  B.  N.  S.,  463 ;  27  L.  J.  C.  P.,  45.  248. 


§  1586.         PRESENTMENT  AND  PROTEST.  599 

gotiability  of  the  check.*  Another  statute,  21  and  22  Vict, 
c.  79,  enacts  this  more  at  large.  It  says  the  crossing  shall 
be  deemed  a  material  part  of  the  check,  and  provides  against 
obliteration  of  the  crossing.  But  this  statute  has  been  also 
held  not  to  restrain  the  negotiability  of  the  check,  and  its 
effect  explained  by  the  Court  of  Appeal.^  The  English 
usage  is  not  practiced,  that  we  are  aware  of,  in  the  United 
States. 

§  1585^.  In  Louisiana,  where  a  check  was  indorsed  by 
a  party  as  "  surety,"  it  was  considered  that  the  party  so  in- 
dorsing it  must  have  known  that  it  was  not  designed  for  use 
in  the  usual  manner ;  and  that  no  other  object  could  be  well 
imagined  for  requiring  a  surety  on  a  check,  than  that  it 
should  be  held  for  a  time,  or  until  funds  should  be  provided. 
And  therefore,  that  the  surety  would  not  be  released  by 
failure  to  demand  payment  in  reasonable  time.^  We  sug- 
gest that  it  is  quite  imaginable  that  the  party  taking  the 
check  might  have  questioned  the  existence  of  funds  to 
meet  it,  and  therefore  have  required  a  surety.      ^ 


SECTION  III. 

PRESENTMENT  AND  NOTICE,  AND  PROTEST  OF  CHECKS. 

§  1586.   It  is  the  general  rule,  in  respect  to  checks,  that 
the  holder  has  no  recourse  upon  the  drawer  until  the  check 

'  Simmons  v.  Taylor,  supra. 

*  Smith  V.  Union  Bank,  L.  R.,  i  Q.  R.  Div.,  31  (1875),  affirming  same  case,  L. 
R.,  10  Q.  B.,  291  :  "  It  is  asked,"  said  Lord  Cairns,  delivering  the  opinion  of  the 
Queen's  Bench  Division  of  the  Court  of  Appeal,  "  what  is  the  effect  of  the  statute 
in  enabling  the  payee  to  cross  a  check?  We  think  the  answer  is  easy.  It 
imposes  caution,  at  least,  on  the  bankers.  But  further,  by  its  express  words,  it 
alters  the  mandate,  and  the  customer,  the  drawer,  is  entitled  to  object  to  being 
charged  with  it  if  paid  contrary  to  his  altered  direction.  This  must  often 
operate  for  the  benefit  of  the  payee  or  holder  who  had  crossed  the  check.  Fur- 
ther, if,  in  addition  to  the  check  being  crossed,  the  signature  of  the  payee  was 
forged,  he  would  retain  his  property  as  pointed  out  by  Mr.  Justice  Blackburn, 
and  could  recover  it  from  the  banker  notwithstanding  16  and  17  Victoria,  c.  59, 
§  19,  which  protects  a  banker  paying  on  a  forged  indorsement." 

'  Newman  v.  Kaufman,  28  La.  An.,  865. 


600  CHECKS.  §   1587. 

has  been  presented  to  the  bank,  and  payment  refused  ;  and 
such  presentment  and  refusal  are  essential  prehminaries  to 
an  action  against  him.  And  the  same  rules  which  are  es- 
tablished in  relation  to  the  necessity  of  presentment  and 
notice,  in  order  to  charge  the  drawer  and  indorsers  of  bills 
of  exchange  in  general,  apply  as  well  to  checks.^  The  fact 
that  the  check  is  presumed  to  be  drawn  against  deposited 
funds  makes  it  of  even  greater  importance  than  in  the  case 
of  a  bill,  that  a  check  should  be  presented,  and  that  the 
drawer  should  be  notified  of  non-payment,  in  order  that  he 
may  speedily  inquire  into  the  causes  of  refusal,  and  be 
placed  in  a  position  to  secure  his  funds  which  were  de- 
posited in  the  bank.^ 

§  1587.  Distinctio7i  between  bills  and  checks  as  to  con- 
sequence of  delay  or  neglect. — But  there  is  an  important 
distinction  as  to  the  extent  of  the  legal  consequence  of 
neglect  and  delay  in  presentment  and  notice,  between 
bills  and  checks.  It  is  true  that  the  indorsers  of  such 
instruments  stand  on  the  same  footing  in  reference  to 
the  effect  of  delay,  or  failure  in  making  presentment, 
or  giving  notice.  They  are  absolutely  and  entirely 
discharged,  if  presentment  be  not  made  within  a  reason- 
able time,  and   due    notice   given.^       But  the    drawer  of 

>  Purcell  V.  Allemong,  22  Grat.,  742  (1872)  ;  Judd  v.  Smith,  3  Hun,  190  (10  N. 
Y.  S.  C.  R.) ;  Conkling  v,  Gandall,  i  Keyes,  228  ;  Middletown  Bank  v.  Morris, 
28  Barb.,  616;  Cruger  v.  Armstrong,  3  Johns'  Cas.,  79;  Murray  v.  Judali,  6 
Cow.,  484  ;  Harker  v.  Anderson,  21  Wend.,  372  ;  Merchants'  Bank  v.  Spicer,  6 
Wend.,  445  ;  Franklin  v.  Vanderpool,  i  Hall,  80  ;  Levy  v.  Peters,  9  Serg.  &  R., 
125;  Ctnroy  v.  Warren,  3  Johns'  Cas.,  259;  Edwards  v.  Moses,  2  Nott  & 
McCord,  433;  Sherman  V.  Comstock,  2  McLean,  10;  Daniel  v.  Kyle,  5  Ga., 
245  ;  Humphreys  v.  Bicknell,  2  Litt.  (Ky.),  298  ;  Ford  v.  McClung,  5  West  Va. 
(Hagans),  156;  Edwards  on  Bills,  396  ;  Clark  v.  Bank,  2  MacArthur,  249; 
Pollard  V.  Bowen,  57  Ind.,  234;  Farwell  v.  Curtis,  7  Bissell,  160. 

"^  Purcell  V.  Allemong,  22  Grat.,  742 ;  Eichelberger  v.  Finley,  Harr.  &  John., 
381  ;  Merchants'  Bank  v.  State  Bank,  10  Wall,  657  ;  True  v.  Thomas,  16  Me., 
36  ;  Hoyt  V.  Seeley,  18  Conn.,  353 ;  Matter  of  Brown,  2  Story,  502  ;  Moody  v. 
Mark,  43  Miss.,  210 ;  Linville  v.  Welch,  29  Miss.,  203  ;  Franklin  v.  Vanderpool, 
1  Hall,  78;  Foster  v.  Paulk,  41  Me.,  425  ;  Humphreys  v.  Bicknell,  2  Litt.,  296; 
Pack  V.  Thomas,  13  Sm.  &  M.,  11  ;  Case  v.  Morris,  31  Penn.  St.,  100  ;  2  Par- 
sons N.  &  B.,  71. 

*  Merchants'  Bank  v.  Spicer,  6  Wend.,  445  ;  Marcy,  J. :  "  As  the  defendant  is 
sued  as  an  indorser,  the  plaintiffs  must  establish  a  due  presentment  for  payment, 


^  1587.         PRESENTMENT  AND  PROTEST.  60I 

a  bill  Stands  upon  a  different  footing  from  the  drawer  of  a 
check.  In  the  case  of  a  bill  of  exchange,  negligence,  in  re- 
spect to  presentment  or  notice,  absolutely  discharges  the 
drawer.  But  the  drawer  of  a  check  is  regarded  as  the  prin- 
cipal debtor,  and  the  check  purports  to  be  made  upon  a 
fund  deposited  to  meet  it.  And  negligence  of  the  holder 
in  not  making  due  presentment,  or  not  giving  him  notice 
of  dishonor,  does  not  absolutely  discharge  him  from  liability 
unless  he  has  suffered  some  loss  or  injury  from  such  negli- 
gence, and  then  only  to  the  extent  of  such  loss  or  injury. 
He  is  at  most  entitled  only  to  such  presentment  and  notice 
as  will  save  him  from  loss.^  Were  it  otherwise  the  drawer 
would  profit  by  a  neglect  which  could  do  him  no  injury.* 
If  all  of  the  funds  be  lost  by  neglect  or  delay,  the  holder  of 


and  a  notice  of  non-payment  to  the  defendant,  before  he  can  be  made  chargeable 
for  the  amount  of  this  check."  Little  v.  Phoenix  Bank,  2  Hill  (N.  Y.),  429  ; 
Murray  v.  Judah,  6  Cow.,  490;  Humphreys  v  Bicknell,  2  Litt.,  298;  Daniel  v. 
Kyle,  I  Kelly  (Ga.),  304 ;    Harbeck  v.  Craft,  4  Duer,  129. 

*  Purcell  V.  AUemong,  22  Grat.,  743  ;  Bell  v.  Alexander,  21  Grat.,  i  ;  Stewart 
V.  Smith,  17  Ohio  St.,  82  ;  Emery  v.  Hobson,  63  Me.  ;  Taylor  v.  Slip,  i  Vroom 
(N.  J.),  284  ;  Murray  v.  Judah,  6  Cow.,  490 ;  Conroy  v.  Warren,  3  Johns'  Cas., 
259;  Mohawk  Bank  v.  Broderick,  10  Wend.,  309;  Little  v.  Phoenix  Bank,  2 
Hill,  425  ;  Planters'  Bank  v.  Kesee,  7  Heisk.,  200;  Park  v.  Thomas,  13  Sm.  & 
M.,  II  ;  Daniel  v.  Kyle,  i  Kellv,  304;  Stewart  v.  Smith,  17  Ohio  St.,  82;  Mor- 
rison V.  Bailey,  5  Ohio  St.,  13  ;  Cox  v.  Boone,  8  W.Va.,  500;  Cork  v.  Bacon,  45 
Wise,  192  ;  Scott  V.  Meeker,  20  Hun,  163  ;  Howes  v.  Austin.  35  111.,  396;  Law- 
rence V.  Schmidt,  35  III,  440 ;  Willetts  v.  Paine,  43  111.,  432  ;  Heartt  v.  Rhodes, 
66  111.,  351  ;  Stevens  v.  Park,  73  111.,  387  ;  St.  John  v.  Homans,  382  ;  Mornson 
V.  McCartney,  30  Mo.,  183  ;  Gregg  v.  George,  16  Kansas,  546.  In  Lovett  v. 
Cromwell,  6'\Vend.,  369,  it  was  held  that  where  an  injunction  from  chancery, 
under  the  act  to  prevent  fraudulent  bankruptcies  by  incorporated  companies,  was 
served  upon  a  bank  half  an  hour  after  it  opened  for  business,  by  which  its  oper- 
ations were  suspended,  that  the  holder  of  a  check,  received  after  banking  hours 
on  the  preceding  day,  was  not  bound  to  show  a  presentment  of  the  check  for 
payment,  to  entitle  him  to  recover  upon  the  original  consideration,  although  it 
appeared  that  the  drawer  had  sufficient  funds  in  the  bank  to  pay  the  check,  and 
that  it  would  have  been  paid  had  it  been  presented  before  the  service  of  the  in- 
junction. Matter  of  Brown,  2  Story,  502  ;  Searle  v.  Norton,  2  M.  &  R.,  401  ; 
Alexander  v.  Burchfield,  7  M.  &  G.,  1067  ;  Laws  v.  Rand,  3  C.  B.  N.  S.,  442  ; 
Keene  v.  Beard,  8  C.  B.  N.  S.,  380  (90  E.  C.  L.  R.)  ;  Robinson  v.  Hawkstord,  9 
Q.  B.,  52  ;  Blair  &  Hoge  v.  Wilson,  28  Grat..  171  ;  Clark  v.  National  Metropol- 
itan Bank,  2  MacArthur,  249  ;  Deener  v.  Brown,  i  MacArthur,  350  ;  Grithn  v. 
Kemp,  46  Ind,,  172. 

'  Hoyt  V.  Seeley,  18  Conn.,  360,  Waite,  J.  In  Kinyon  v.  Stanton,  44  Wise, 
479,  the  holder  entirely  failed  to  present  the  check,  and  eight  days  after  its  date 
the  bank  failed.  But  previously  to  its  failure,  the  drawer  withdrew  his  lands. 
He/d,  he  was  still  bound. 


602  CHECKS.  §   I5S8. 

the  check  suffers  of  course  a  total  loss.*     It  is  not  sufficient 
to  show  a  probability  of  injury, — it  must  be  proved.^ 

§  1588.  Bicrden  of  proof  as  to  injury  to  the  drawer. — 
If,  however,  suit  be  brought  against  the  drawer,  and  there 
has  not  been  due  presentment  and  notice,  the  burden  of 
proof  is  upon  the  plaintiff  to  show  that  the  drawer  has 
suffered  no  injury — injury  being  prima  facie  presumed.^ 
But  when  it  is  shown  that  the  drawer  had  no  funds,  or 
withdrew  them,  this  presumption  of  injury  is  rebutted,  and 
he  is  chargeable  without  presentment  or  notice.'*  But 
while  it  is  true  that  the  burden  of  proof  is  upon  the  plain- 
tiff to  show  that  no  loss  or  injury  resulted  to  the  drawer 
when  he  seeks  to  excuse  the  non-presentment  of  the  check ; 
yet  where  the  suit  is  brought  on  the  pre-existing  debt  for 
which  the  check  was  given,  it  has  been  held  that  the  de- 
fendant who  pleads  payment  must  not  only  show  delivery 
to  and  acceptance  of  the  check  by  the  plaintiff,  but  also 
that  through  the  plaintiff's  laches,  loss  or  mjury  has  ac- 
crued.^ 


'  In  Smith  v.  Jones,  2  Bush  (Ky.),  103,  the  check  was  dated  April  12th,  1862, 
and  was  not  presented  until  the  13th  of  January,  1863,  at  the  Citizens'  Bank  of 
Louisiana,  at  New  Orleans,  on  wliich  it  was  drawn.  The  city  had  in  the  mean- 
time been  captured  by  the  Federal  forces,  and  the  funds  on  which  the  check  was 
drawn  had  become  worthless.  Robertson,  J.,  said  :  "  Unlike  a  bill  of  exchange, 
a  check  does  not  require  '  due  diligence,'  and  apparent  laches  in  presenting  it 
for  payment  does  not  exonerate  the  drawer,  unless  by  unreasonable  delay  he  has 
suffered  loss,  and  then  he  is  entitled  to  relief /r^  tajito.  But  the  evidence  au- 
thorizes the  deduction,  that  for  nearly  a  month  afier  the  date  of  the  appellee's 
check,  the  appellants,  if  only  reasonably  provident  and  diligent,  might  have  pre- 
sented the  check  and  recovered  the  amount  of  it.  And  it  is  evident  that  when 
nine  months  after  its  date,  the  check  was  presented  for  payment,  the  property 
of  the  appellants  was  almost  worthless,  and  could  not  be  drawn  Irom  the  bank, 
or  exchanged  or  circulated  within  the  Federal  lines,  consistently  with  national 
policy  or  law."  It  was  held,  therefore,  that  there  could  be  no  recovery  on  the 
checif. 

"  Syracuse,  etc.,  R.R.  v.  Collins,  57  N.  Y.,  641. 

«  Ford  V.  McClung,  5  W.  Va.  (Hagans),  166  (1872)  ;  Little  v.  Phoenix  Bank,  2 
Hill,  425  ;  Daniel  v.  Kyle,  i  Kelly,  304;  Harbeck  v.  Craft,  4  Duer,  122;  see 
Conroy  v.  Warren,  3  Johns'  Cas.,  259 ;  2  Parsons  N.  &  B.,  71. 

*  Eichelberger  v.  Finley,  7  Har.  &  J.,  381  :  Healy  v.  Oilman,  i  Bos.,  235; 
Shaffer  v.  Maddox,  9  Neb.,  205  ;  Kinyon  v.  Stanton,  44  Wise,  479  ;  2  Parsons 
N.  &  B.,  71  ;  see  chapter  xxxi,  on  Excuses  for  Want  of  Presentment  and  No- 
tice, §  1073,  p.  117,  et  seq. 

"  Syracuse,  etc.,  R.R.  Co.  v.  Collins,  3  Lans.,  29. 


§  1590*         PRESENTMENT  AND  PROTEST.  6o^ 

§  1589.  1/  bank  remains  solvent  check-draiver  is  bound. 
— It  follows  from  the  principles  already  stated,  that  if 
the  bank  on  which  the  check  is  drawn  remains  solvent 
and  able  to  pay,  the  drawer  will  remain  bound  after  present- 
ment and  refusal  of  payment,  although  many  months,  or  even 
years,  have  elapsed  since  the  check  was  drawn.^  And  when 
the  holder  sues  upon  the  check,  and  proves  the  presentment 
to  the  bank,  and  due  notice  of  dishonor  to  the  drawer,  it 
will  devolve  upon  the  latter  to  show  that  the  bank  had  be- 
come insolvent,  and  unable  to  pay,  after  the  check  was 
drawn  and  before  presentment  was  made,  in  order  to  defeat 
a  recovery.^  A  check  may  be  barred  by  statute  of  limita- 
tions whether  the  drawer  kept  his  funds  in  the  bank  or  not' 

§  1590.  Within  what  time  check  must  be  presented. — A 
failure  of  the  bank  or  banker  who  is  drawee  of  the  check, 
and  who  held  on  deposit  a  fund  to  meet  it,  which  is  thereby 
lost,  presents  the  usual,  if  not  the  only,  case  in  which  delay 
of  the  holder  in  making  presentment,  or  giving  notice  of 
dishonor,  devolves  loss  upon  him.  But  it  is  by  no  means 
an  infrequent  case,  and  therefore  important  to  be  consid- 
ered. If  at  the  time  the  check  was  delivered  to  the  payee, 
the  bank  was  solvent,  and  held  funds  of  the  drawer  suffi- 
cient to  meet  it,  it  would  be  a  fraud  for  the  drawer,  after 
giving  a  check  upon  them,  to  withdraw  the  amount  which 
should  pay  it ;  and  as  he  could  not  rightfully  withdraw  the 
amount,  it  would  be  unjust  to  require  that,  however  long 
the  check  holder  might  permit  it  to  remain,  it  should  be  at 
the  drawer's  risk.  The  law  has  therefore  declared  that  it 
must  be  presented  within  a  reasonable  time  ;  at  the  expira- 
tion of  which  such  risk  terminates  as  to  the  drawer,  and 
becomes  the  risk  of  the  holder  if  he  permits  the  deposit  to 
remain  in  bank.  And  if  in  the  meantime  the  bank  in 
which  the  check  is  drawn  fails,  the  loss  must  fall  upon  the 

'  Bell  V.  Alexander,  21   Grat.,  6  ;  Emery  v.  Hobson,  63  Me. ;  Byles  on  Bills 
(Sharswood's  ed.)  [*2o],  93. 
"  Stewart  v.  Smith,  17  Ohio  St.,  85,  86.  '  Brust  v.  Barrett,  17  Hun,  409. 


604  CHECKS.  §   1590* 

holder.^     Such  reasonable  time  has  been  definitely  fixed  by 
the  decisions  as  follows  : 

(i)  First,  as  between  the  drawer  aitd payee. — Where  the 
payee  to  whom  the  check  is  delivered  by  the^  drawer,  re- 
ceives it  in  the  same  place  where  the  bank  on  which  it  is 
drawn  is  located,  he  may  preserve  recourse  against  the 
drawer,  by  presenting  it  for  payment  at  any  time  before 
the  close  of  banking  hours  on  the  next  day  (by  which  is 
meant  the  next  secular  day,  for  if  he  receive  it  on  Saturday, 
he  has  until  the  close  of  banking  hours  on  Monday  to  pre- 
sent it)  ;  ^  and  if  in  the  meantime  the  bank  fails,  the  loss 
will  be  the  drawer's.^  "The  rule  to  be  adopted,"  said  Lord 
Ellenborough,  in  a  leading  case,  "  must  be  a  rule  of  con- 
venience ;  and  it  seems  to  me  to  be  convenient  and  reason- 
able that  checks  received  in  the  course  of  one  day  should 
be  presented  the  next.  Is  this  practice  consistent  with  the 
law  merchant  ?  It  can  not  alter  it.  Banks  would  be  kept 
in  continual  fever  if  they  were  obliged  to  send  out  a  check 
the  moment  it  was  paid  in."  *  The  allowance  of  a  day  to 
present  the  check   does  not  extend  to  an  agent  who  re- 

'  Cork  V.  Bacon,  45  Wise,  192  ;  a7ite,  §  1587,  and  notes. 

*  Mead  v.  Caswell,  9  Mod.,  60 ;  O'Brien  v.  Smith,  i  Black  (U.  S.  Sup.  Ct.),  99. 
where  it  was  held  that  a  check  received  on  Saturday  might  be  presented  any 
time  during  banking  hours  on  Monday.     Cox  v.  Boone,  8  W.  Va.,  500. 

«  Syracuse,  etc.,  R.R.  Co.  v.  Collins,  3  Lans.  (N.  Y.),  29  ;  57  N.  Y.,  641  ; 
Smith  V.  Miller,  6  Rob.  (N.  Y.),  157;  43  N.  Y.,  171  (1870);  52  N.  Y.,  546 
(1873)  ;  Kelty  v.  Bank,  52  Barb.,  328  ;  Nunnemaker  v.  Lanier,  48  Barb.,  234  ; 
Merchants'  Bank  v.  Spicer,  6  Wend.,  443  ;  Cawein  v.  Browinski,  6  Bush  (Ky.), 
457 ;  Shrieve  v.  Duckham,  i  Lit.,  192  ;  Bickford  v.  First  Nat.  Bank,  42  III,  238  ; 
Morrison  v.  Bailey,  5  Ohio  St.,  13;  Simpson  v.  Pacific,  etc.,  Ins.  Co.,  44  Cal., 
139;  Himmelman  v.  Hotaling,  40  Cal.,  ill  ;  Ritchie  v.  Bradshaw,  5  Cal,  228; 
Veazie  Bank  v.  Winn,  40  Me.,  60;  Bailey  v.  Bodenham,  16  C.  B.  N.  S.,  288; 
III  E.  C.  L.  R. ;  Boddington  v.  Schlencker,  4  Barn.  &  Aid.,  752  ;  Robson  v. 
Bennett,  2  Taunt.,  410  ;  Rickford  v.  Ridge,  2  Camp.,  537  ;  Blair  &  Hoge  v. 
Wilson,  28  Grat.,  171.  See  Clark  v.  National  Metropolitan  Bank,  2  MacArthur, 
249;  Andrews  v.  German  National  Bank,  9  Heisk..  211;  Story  on  Notes, 
§  493  ;  Story  on  Bills,  §§  470,  471  ;  Thomson  on  Bills  (Wilson's  ed.),  119  ;  Ros- 
coe,  9,  1 58. 

"  Rickford  v.  Ridge,  2  Camp.,  537.  Lord  Mansfield,  in  the  case  of  Tindal  v. 
Brown,  I  T.  R.,  168,  states,  that  in  the  previous  case  of  Metcalf  v.  Douglas, 
"  the  jury  struggled  so  hard  in  spite  of  the  opinion  of  the  court  to  narrow  the 
rule,  that  they  held,  you  must,  in  certain  cases,  demand  payment  of  a  banker  s 
draft  within  an  hour."  The  law  of  England  is  now  well  settled  to  be  as  stated 
in  the  text.     Bank  v.  Alexander,  84  N,  C,  30. 


J  1592.         PRESENTMENT  AND  PROTEST.  605 

ceives  one  for  a  debt  of  his  principal.     Pie  must  present  it 
instantcr} 

§  1 59 1.  If  the  bank,  in  the  same  place  where  the  check 
was  drawn,  should  stop  payment  after  the  commencement 
of  business  hours  on  the  day  following,  it  will  be  no  defence 
to  the  drawer  that  the  check  would  have  been  paid  if  pre- 
sented at  an  early  hour  of  the  day ;  and  it  seems  that  the 
stoppage  of  payment  by  the  bank  before  the  close  of  busi- 
ness hours  on  that  day  would  be  a  full  excuse  for  want  of 
presentment  altogether,  as  the  holder  has  been  guilty  of  no 
negligence  at  the  time  of  stoppage,  and  from  his  subsequent 
delay  no  loss  could  accrue  to  the  drawer.^ 

§  1592.  Where  the  payee  receives  the  check  from  the 
drawer  in  a  place  distant  from  the  place  where  the  bank  on 
which  it  is  drawn  is  located,  it  will  be  sufficient  for  him  to 
forward  it  by  the  post  to  some  person  at  the  latter  place  on 
the  next  secular  day  after  it  is  received  ;  and  then  it  will  be 
sufficient  for  the  person  to  whom  it  is  thus  forwarded  to 
present  it  for  payment  on  the  day  after  it  has  reached  him 
by  due  course  of  mail.^  This  period,  which  is  requisite  for 
the  convenient  presentment  of  the  check  by  diligent  means 
must  have  been  contemplated  by  the  drawer,  and  he  remains 
absolutely  liable  although  the  bank  might  fail  pending  its 
duration.  Where  the  party  receiving  the  check  resides  in  the 
county  at  some  distance  from  the  post-office,  the  rule  of 
diligence  may  not  be  so  exacting  as  in  commercial  centres.^ 


'  Smith  V.  Miller,  43  N.  Y.,  171  ;  Farwell  v.  Curtis,  7  Bissell,  165  ;  First  N.  B. 
V.  Fourth  N.  B.,  17  Hun,  332. 

*  Syracuse  R.R.  Co.  v.  Collins,  3  Lans.,  29. 

'  Middletown  Bank  v.  Morris,  28  Barb.,  616;  Smith  v.  Jones,  20  Wend.,  192  ; 
Moule  V.  Brown,  4  Bing.,  N.  Cas.,  266 ;  Hare  v.  Henty,  30  L.  J.  C.  P.,  302 ; 
Rickford  v.  Ridge,  2  Camp.,  537 ;  Bond  v.  Warden,  i  Collyer,  583 ;  Story  on 
Notes,  §  493 ;  Byles  (Sharswood's  ed.),  [*2o],  94. 

*  See  Cox  v.  Boone,  8  W.  Va.,  500,  where  party  four  miles  from  post-office 
received  check  on  a  Wheeling  bank  on  account  of  a  debt.  He  did  not  forward 
by  next  mail,  which  left  at  7 :  30  A.M.  next  day  ;  or  by  mail  next  thereafter 
which  left  two  days  later,  and  before  it  was  forwarded  bank  failed.  Held  drawer 
of  check  was  still  liable.     But  this  case  is  very  questionable. 


6o6  CHECKS.  §   1593 

Where  a  check  was  forwarded  by  mail  by  the  bank  with  which 
the  payee  deposited  it  for  collection  in  due  course  of  mail 
and  it  was  lost,  and  the  collecting  bank  did  not  discover  the 
loss  until  the  sixteenth  day  thereafter,  it  was  held  chargeable 
with  negligence  in  not  sooner  discovering  the  loss,  and 
liable  for  the  amount* 

§  1593.  But  while  the  drawer  will  not  be  discharged 
where  the  check  is  drawn  on  a  bank  in  the  same  place  if 
presentment  be  made  on  the  next  day,  yet,  if  presentment 
for  payment  be  actually  made  on  the  very  day  the  check 
is  drawn,  and  payment  tendered,  the  holder  can  not  then 
change  his  mind  and  leave  the  funds  at  the  drawer's  risk 
until  the  next  day.  He  is  allowed  until  the  next  day  as 
matter  of  convenience  and  accommodation  to  him  ;  and 
while  he  need  not  hurry  to  make  presentment  the  same 
day,  having  once  done  so,  he  has  fixed  the  money  at  his 
own  risk.  This  was  illustrated  in  a  recent  California  case, 
where  a  check  was  drawn  on  a  bank  in  Sacramento  City 
about  nine  o'clock  in  the  morning,  and  immediately  there- 
after the  check  was  presented  and  payment  tendered,  but 
declined.  At  two  o'clock  the  same  day  the  holder  called 
again  and  demanded  payment,  but  the  bank  had  then  sus- 
pended ;  and  it  was  held  that  the  drawer  could  not  be 
bound.^ 

>  Shipsey  v.  Bowery  National  Bank,  59  N.  Y.,  485. 

-Simpson  v.  Pacific,  etc.,  Ins.  Co.,  44  Cal.,  143,  Crockett,  J.,  saying:  "On 
these  facts  the  question  to  be  solved  is,  whether  the  holder  of  a  bank  check 
drawn  against  a  sufficient  fund,  who  presents  it  for  payment  within  the  proper 
time,  and  to  whom  payment  is  then  tendered  by  the  bank,  but  who  declines  to 
accept  the  money  at  that  time,  preferring  to  retain  the  check  temporarily,  can 
hold  the  drawer  of  the  check  by  again  presenting  it  for  payment  at  a  later  hour 
of  the  same  day,  when  payment  is  refused  and  due  notice  of  dishonor  given. 
The  question  is  novel  and  not  free  from  difficulty ;  but  we  shall  be  materially 
aided  in  its  solution  by  first  ascertaining  with  accuracy  what  are  the  elements 
which  constitute  a  presentation  for  payment  in  its  legal  sense.  The  presenting 
of  a  check  for  payment  implies  that  the  holder  of  it  desires,  and  is  ready  and  will- 
ing, to  accept  payment.  It  would  be  a  contradiction  in  terms  to  say  that  the 
holder  of  a  check  presented  it  for  payment,  intending  and  averring  at  the  time 
that  he  would  not  accept  payment.  If  he  should  present  it  for  the  sole  purpose 
of  ascertaining  whether  the  signature  was  genuine,  or  whether  the  drawer  had 
funds  to  his  credit,  or  merely  for  the  purpose  of  being  identified  as  the  person 


§  1 595-         PRESENTMENT  AND  PROTEST.  6oJ 

§  1594.  (2)  Second,  as  between  the  indorse?'  and  indorsee 
of  a  check,  the  same  rules  which  regulate  diligence  as  be- 
tween the  drawer  and  the  payee  apply — the  indorser  being 
regarded  as  a  new  drawer,  and  the  indorsee  as  a  new  payee  ;* 
and  what  is  diligence  as  between  them  has  been  already 
stated. 

§  1595-  (3)  ^^^  ^^  ^^^^  third  place,  as  between  the  indorsee 
or  assig7iee  and  the  drawer ^  it  does  not  follow  from  what 
has  been  said,  that  every  indorsee  or  assignee  has  the  same 
period  from  the  time  he  received  it,  within  which  to  present 
the  check,  as  against  the  drawer ;  and  that  the  drawer 
would  still  be  liable  in  all  events,  if  the  last  holder  present- 
ed it  within  a  day,  or  forwarded  it  by  the  next  mail  after 
he  himself  received  it.  On  the  contrary,  the  period  with- 
in wiiich  the  check  must  be  presented,  in  order  to  make  the 
drawer's  liability  absolute,  is  itself  absolute.  And  no  trans- 
fer or  series  of  transfers  can  prolong  the  risk  of  the  drawer 
beyond  it.  Though  each  party  is  allowed  the  same  period, 
as  between  himself  and  his  immediate  predecessor,  that  the 
payee  had  as  between  himself  and  the  drawer,  yet  no  trans- 
feree can  stand  on  any  better  footing  than  his  transferrer 
in  respect  to  the  time  within  which  the  check  must  be  pre- 
sented, in  order  to  render  the  drawer's  and  previous  in- 
entitled  to  payment,  not  intending  then  to  present  it  for  payment,  it  is  clear  that 
this  would  not  constitute  a  demand  of  payment,  which,  in  its  very  nature,  imports 
a  willingness  on  the  part  of  the  holder  to  accept  the  money  at  that  time.  But 
if  the  check  is  presented  for  payment,  with  the  present  intention  in  the  mind  of 
the  holder  to  accept  the  money  if  tendered,  this  must  be  deemed  to  be  a  demand 
of  payment  for  all  purposes  affecting  the  rights  of  the  drawer,  even  though  the 
holder  should  afterward  change  his  purpose  and  decline  to  accept  the  money 
when  tendered  by  the  bank.  Having  once  demanded  payment  in  due  form  and 
within  the  proper  time,  and  the  bank  being  then  and  there  ready  and  willing 
and  offering  to  pay  the  check,  the  holder  is  not  at  liberty  after  this  to  retract  or 
waive  his  demand  and  decline  to  accept  payment  without  thereby  releasing  the 
drawer  from  further  liability  on  the  check.  If  the  holder  declines  to  accept  pay- 
ment when  it  is  tendered  on  a  proper  demand,  the  liability  of  the  drawer  ceases, 
for  the  reason  that  his  undertaking  was  that  the  check  would  be  paid  when  pay- 
ment should  be  first  demanded  in  due  form  and  within  the  proper  time  ;  but  he 
does  not  undertake  that  it  will  be  paid  on  a  second  demand,  when  payment  has 
been  tendered  and  refused  on  a  prior  demand  made  in  due  form  and  within  the 
proper  time." 

1  Mohawk  Bank  v.  Broderick,  10  Wend.,  304;  13  Wend.,  133. 


6o8  CHECKS.  §   1596. 

dorsers'  liabilities  absolute,  in  the  event  of  a  failure  of  the 
bank.^  And  this  rule  is  clearly  founded  upon  just  princi- 
ples, for  the  drawer  can  not  rightfully  withdraw  the  deposit, 
and  as  it  has  passed  beyond  his  control,  it  would  be  wrong 
to  hold  that  it  should  remain  indefinitely  at  his  risk  be- 
cause it  suited  the  convenience  of  others  to  transfer  instead 
of  presenting  the  checks.^  And  a  check,  unlike  a  bill  of 
exchange,  which  need  not  be  drawn  upon  a  deposit,  is  gen- 
erally designed  for  immediate  payment,  and  not  for  circu- 
lation.^ 

§  1596.  Excuses  for  failure  or  delay  in  making  pre- 
sentmejit  for  payment  or  giving  notice  of  disJiojior. — There 
may,  however,  exist  sufficient  excuse,  on  the  part  of  the 
holder,  for  delay  or  failure  in  making  presentment,  or  giv- 
ing notice.  Thus,  if  the  drawer  had  no  funds  in  the  bank 
at  the  time  of  drawing  the  check,  or  subsequently  with- 
drew them,  he  commits  a  fraud  upon  the  payee,  and  can 
suffer  no  loss  or  damage  from  the  holder's  delay  or  failure 
in  respect  to  presentment  and  notice.  He  is,  therefore, 
liable  without  presentment  or  notice,  and  may  be  sued  im- 
mediately.* And  so  when  the  drawer  directs  the  bank  not 
to  pay  the  check,  the  same  rule  applies.^     And  when  the 

'  St.  John  V.  Homans,  8  Mo.,  382  ;  Foster  v.  Paulk,  41  Me.,  425  ;  Reid  v.  Reid, 
II  Tex.,  585  ;  Lilley  v.  Miller,  3  Nott  &  McC,  257;  Brown  v.  Lusk,  4  Yerg., 
210;  Taylor  V.  Young,  3  Watts,  343;  Marker  v.  Anderson,  21  Wend.,  372; 
Cruger  v.  Armstrong,  3  Johns'  Cas.,  5  ;  Story  on  Notes,  §§  495,  496. 

^  Boehm  v.  Sterling,  7  Term  R.,  423 ;  Story  on  Notes,  §  496 ;  Byles  (Shars- 
wood's  ed.)  [*20,  21],  95.  • 

'  Down  V.  Hailing,  4  Barn.  &  C,  333. 

*  Bell  V.  Alexander,  21  Grat.,  6  ;  Fletcher  v.  Pierson,  69  Ind.,  281  ;  Brush  v, 
Barrett,  82  N.  Y.,  401  ;  Kinyon  v.  Stanton,  44  Wise,  569;  Hoyt  v.  Seeley,  18 
Conn.,  353;  Gushing  V.  Gore,  15  Mass.,  59;  True  v.  Thomas,  16  Me.,  36;  Nor- 
ris  V.  Despard,  38  Aid.,  491  ;  Eichelberger  v.  Finley,  7  Har.  &  J.,  381 ;  Conroy 
V.  Warren,  3  Johns'  Cas.,  259  ;  Murray  v.  Judah,  6  Cow.,  484  ;  Commercial  Bank 
V.  Hughes,  17  Wend.,  94;  Franklin  v.  Vanderpool,  i  Hall,  78  ;  Healy  v.  Gilman, 
I  Bosw.,  23s  ;  Matter  of  Brown,  2  Story,  502;  Valk  v.  Simons,  4  Mason,  113; 
Blankenship  v.  Rogers,  10  Ind.,  333  ;  Lilley  v.  Miller,  2  N.  &  McC.,  257 ;  Coyle 
V.  Smith,  I  E.  D.  Smith,  300;  Kemble  v.  Mills,  i  Man.  &  G.,  757;  2  Scott  N. 
R.,  121  ;  9  Dowl.,  446;  st&  ante,  §§  1073  ei  seq. 

'^  Jack  V,  Darrin,  3  E.  D.  Smith,  557;  Purchase  v.  Mattison,  6  Duer,  587; 
Whaley  v.  Houston,  12  La.  Ann.,  585  ;  Woodin  v.  Frayze,  38  N.  Y.  Sup,  Ct., 
190. 


§  159*^-         PRESENTMENT  AND  PROTEST.  609 

bank  or  banker  has  been  restrained  from  paying  out  money 
by  order  of  court,  or  from  transacting  business,  the  neces- 
sity of  presentment  and  notice  is  dispensed  with.^ 

The  indorser  of  a  check  stands  upon  a  different  footing 
from  that  of  the  drawer.  He  can  not  be  presumed  to 
know,  as  the  drawer  must  know,  the  state  of  the  latter's 
account  with  the  bank  ;  and  although  the  drawer  without 
funds  will  be  absolutely  bound,  the  indorser  of  his  check 
will  not  be  so  bound,  unless  it  be  affirmatively  shown  that 
he  knew  the  fact  that  there  were  no  funds  to  meet  it,  and 
thus  participates  in  the  wrong  committed  upon  the  holder.^ 
If  the  holder  of  a  check  presents  it  when  he  knows  there 
are  no  funds  to  meet  it,  he  participates'  in  the  drawer's 
fraud,  and  though  the  amount  be  passed  to  his  credit  the 
bank  will  not  be  bound. ^ 

If  the  holder  of  the  check  becomes  unable  to  present  it 
within  the  requisite  time,  by  reason  of  the  removal  of  the 
bank  and  the  disturbed  condition  of  the  country,  he  should 
give  notice  of  the  fact  to  the  drawer,  and  offer  to  return  the 
check  ;  and  if  he  fails  to  do  so,  the  drawer  is  not  liable.^ 
And  though  the  holder  of  the  check  is  himself  physically 
disabled,  so  that  he  can  not  proceed  in  person  to  present 
the  check  for  payment,  yet  if  he  might  have  sent  it  by  mail, 
he  will  not  be  excused  for  non-presentment.^ 

If  the  bank  has  removed  from  the  place  upon  which  the 
check  is  drawn,  and  the  check  be  returned  to  the  drawer  or 
his  agent,  the  debt  for  which  it  was  given  remains  due.^ 
Other  circumstances  (such  as  those  which  excuse  delay  in 
presentment  of  an  ordinary  bill)  may  excuse  delay  in  pre- 
senting the  check.  The  necessity  of  procuring  the  indorse- 
ment of  a  school  board,  which  had  to  be  convened,  and 


'  Lovett  V.  Cornwall,  6  Wend.,  367.         -  Humphreys  v.  Bicknell,  2  Litt.,  300. 
'  Peterson  v.  Union  Nat.  Bank,  52  Penn.  St.,  207  ;  Martin  v,  Morgan,  3  Moore, 
645  ;  Thomson  on  Bills,  270. 

^"Purcell  V.  Allemong,  22  Grat.,  739.  ''  Purcell  v.  Allemong,  22  Grat.,  739. 

°  Larue  v.  Cloud,  22  Grat.,  513. 

Vol.  II. — 39 


6lO  CHECKS.  §   1597. 

which  requires  time,  was  held  sufficient  to  excuse  delay  of 
a  week  in  a  recent  Pennsylvania  case.^ 

§  1597.  Partial  deficiency  of  deposit  is  excuse  for  want 
of  demand  and  notice. — It  not  infrequently  happens  that 
the  drawer  has  only  a  portion  of  the  amount  in  bank  neces- 
sary to  pay  his  check,  and  the  question  then  arises  whether 
the  deficiency  of  his  deposit  is  an  excuse  for  want  of  pre- 
sentment and  notice.  We  should  unhesitatingly  say  that 
the  drawer  of  an  over-check  is  bound  without  demand  or 
notice.  A  check  is  intended  to  be  the  representative  of 
cash.  It  is  the  business  of  the  drawer  to  know  the  state  of 
his  accounts  with  his  bank,  and  whether  through  fraud  or 
carelessness  he  makes  the  representation  that  he  has  cash  to 
meet  it,  as  he  does  by  the  act  of  drawing  it,  it  would  only 
put  a  premium  upon  looseness  in  commercial  transactions 
to  permit  him  to  shield  himself  behind  the  plea  of  want  of 
presentment  or  notice.  It  is  he  who  is  chargeable  with  the 
duty  of  notice  as  to  his  own  funds,  and  he  perpetrates  a 
legal  fraud  when  he  undertakes  to  transfer  and  assign  to 
another  that  which  he  does  not  possess.  It  will  be  readily 
seen  that  the  difference  between  checks  and  bills  of  ex- 
change induces  this  relaxation  of  the  strict  rules  as  to  pre- 
sentment and  notice  in  respect  to  the  former.  The  check 
purports  to  be  drawn  upon  an  actual  deposit,  and  it  is  only 
when  there  is  a  deposit  that  the  drawer  has  a  right  to  expect 
that  it  will  be  honored  ;  the  officers  of  the  bank  would 
commit  a  wrong  upon  the  stockholders  to  honor  it  without 
funds ;  while  in  the  case  of  a  bill  of  exchange,  it  is  fre- 
quently drawn  upon  consignments,  expectation  of  funds, 
or  accommodation  arrangements,  which  the  drawer  may 
reasonably  confide  in. 

In  a  Maryland  case,  where  there  were  two  checks  drawn, 
one  for  $1,450  and  one  for  $1,500,  both  were  dated  March, 
26th.     At  that  date  the  balance  to  the  drawer's  credit  was 

*  Muncy  Borough  School  Dist.  v.  Commonwealth,  84  Penn.  St.,  471. 


§  1599-         PRESENTMENT  AND  PROTEST.  6ll 

$500,  on  the  next  day  $400,  and  for  several  days  afterward 
from  $200  to  $400.  The  checks  were  presented  June  3  , 
and  in  May  the  bank  had  appropriated  the  balance  on  hand 
to  a  debt  due  it  by  the  drawer.  The  drawer  was  held 
bound  to  the  holder  without  notice  of  non-payment.  And 
Dorsey,  J.,  after  referring  to  the  cases  on  bills  of  exchange, 
said  :  "  But  it  is  conceived  that,  waiving  all  exceptions  to 
the  soundness  of  these  decisions,  they  bear  no  application 
to  the  case  now  under  consideration.  They  were  made  on 
transactions  between  individual  correspondents  who  may 
have  had  a  mutual  confidence  and  credit,  and  were  perfectly 
competent  to  honor  each  other's  bills,  drawn  either  with  or 
without  effects.  Not  so  as  to  officers  of  the  public  banking 
institutions  in  this  State.  With  them  the  customers  of  the 
bank  have  no  accommodation  credit,  and  without  a  gross 
violation  of  their  trust  they  can  honor  no  check  or  draft 
upon  them  beyond  the  amount  of  deposits  standing  to  the 
credit  of  him  by  whom  such  check  or  draft  may  be  drawn."* 

§  1598.  Waivers  of  da^iand  and  notice. — Neglect  or 
delay  in  respect  to  presentment  and  notice  may  be  waived 
by  the  drawer  of  a  check  in  like  manner  as  the  drawer  of  a 
bill  of  exchange.^  Or  the  drawer  may  extend  the  time  for 
presentment  by  any  agreement,  express  or  implied,  the 
understanding  of  the  parties  at  the  time  the  check  was 
drawn  entering  into  the  contract.* 

In  no  case  can  the  period  within  which  it  will  be  suffi- 
cient for  the  check  to  be  presented  by  the  principal  holder, 
be  prolonged  by  its  being  placed  in  the  hands  of  a  banker 
or  other  agent  for  collection.^ 

§  1 599.  Whether  check  may  be  presented  by  mail. — The 
bank  undoubtedly  has  a  right  to  an  actual   presentment  of 

'  Eichelberger  v.  Finley,  7  Harris  &  J.,  381,  387. 

2  See  chapter  on  Excuses  for  Want  of  Presentment  and  Notice,  ante,  pp.  loi, 
et  seq.,  and/c?^/,  §  i634(Z. 

*  Woodruff  V.  Plant,  41  Conn.,  344. 

*  Moule  V.  Brown,  4  Bing.  N.  Cases,  266  (33  E.  C.  L.  R.) ;  Morse  on  Banking, 
324;  Byles  on  Bills  (Sharswood's  ed.)  [*2oJ,  94;  see  ante,  §  1595. 


6l2  CHECKS.  §   1599^- 

the  check,  and  this  is  generally  made  by  the  holder  or  his 
ao-ent  at  the  counter  of  the  bank. 

It  seems  that  sending  a  check  by  post  to  the  drawee 
bank,  with  a  demand  of  payment,  is  a  good  presentment. 
In  such  a  case,  Erie,  C.  J.,  said :  "  I  do  not  mean  to  afhrm 
that  this  was  a  good  presentment.  I  incline  to  think  it 
was.  But  unless  the  money  was  remitted  by  return  of 
post,  the  absence  of  an  answer  should  have  been  consid- 
ered as  a  dishonor,  and  notice  of  such  dishonor  should  have 
been  given  promptly."^  This  method  of  presentment  is 
doubtful,  and  it  has  been  recently  said :  "  In  these  days, 
when  such  facilities  are  furnished  by  express  companies  for 
presentation  at  distant  places,  there  is  no  reason  for  adopt- 
ing a  less  direct  or  effective  mode  to  accomplish  the  ob- 
ject." ^  Where  the  check  is  sent  to  the  drawee  bank  by 
mail,  for  collection  and  return,  the  holder  makes  the  drawee 
his  agent,  and  must  bear  any  loss  arising  after  the  time 
when  the  check  could  have  been  presented  by  express  or 
other  usual  method.^ 

§  1599^.  Since  the  second  edition  of  this  work  the 
method  of  presenting  negotiable  paper  payable  at  a  bank, 
by  letter  sent  by  post  directly  to  the  bank  has  been  ap- 
proved in  New  York,  and  a  mature  consideration  of  the 
custom  of  banks,  and  of  the  reasons  underlying  them  as 
well  as  of  the  authorities,  satisfy  the  writer  that  this 
method  should  be  sustained  as  legal  and  proper.*  A  check 
comes  evidently  within  the  same  principle. 


'Bailey  v.  Bodenham,  i6  C.  B.  J.  Scott,  N.  S.  (iii  E.  C.  L.  R.)  294  (1864) ; 
see  Morse  on  Banking.  334.  See  also  Heywood  v.  Pickering,  9  L.  R.  Q.  B., 
428 ;  Prideaux  v.  Criddle,  4  L-  R-  Q-  B.,  428  ;  Hare  v.  Henty,  10  L.  R.  Q.  B., 
65  ;  Shipsey  v.  Bowery  National  Bank,  59  N.  Y. 

^Farvvell  v.  Curtis,  7  Bissell,  162  (1876),  Hopkins,  J. 

'Farwell  v.  Curtis,  7  Bissell,  162. 

♦Indi^  V.  National  City  Bank,  80  N.  Y.,  loi,  Rapallo,  J.:  "The  defendant, 
instead  of  sending  the  note  to  an  agent  or  correspondent  at  Louisville  tor  pre- 
sentment, sent  it  by  mail  directly  to  the  respondent  (the  National  City  Bank) 
where  it  was  payable.  This  appears  to  be  an  ordinary  method  of  transacting 
such  business,  and  the  defendant  was  bound  only  to  adopt  the  ordinary  rule. 
See  vol.  I,  §654^. 


$   l6oi.  CERTIFICATION    OF    CHECKS.  613 

§  1600,  The  protest  of  checks. — While  checks  have  not 
all  the  incidents  of  bills  of  exchange,  they  may  be  yet  in- 
cluded in  that  term  when  applied  to  the  steps  to  be  taker 
in  case  of  dishonor.  The  same  reasons  that  would  author 
ize  the  protest  of  an  inland  bill  of  exchange  for  non-pay 
ment,  would  authorize  the  protest  of  a  check,  the  payment 
of  which  had  been  refused  on  presentment.  And  therefore 
where  a  statute  provides  for  the  protest  of  inland  bills  and 
promissory  notes,  a  check  would  be  embraced  within  the 
description  of  paper  denominated  inland  bills  of  exchange, 
and  might  be  protested  in  like  manner.^  And  if  drawn  in 
one  State  upon  another,  a  protest  would  doubtless  be 
necessary  in  order  to  charge  an  indorser,  the  check  being 
in  that  event  a  species  of  foreign  bill,'^  It  has  been  said  in 
a  well-known  case,  that  a  check  "  is  not  protestable,  or,  in 
other  words,  protest  is  not  requisite  to  hold  either  the 
drawer  or  an  indorser."^  But  the  remark,  it  is  conceived, 
applies  only  to  inland  checks. 


SECTION    IV. 

CERTIFICATION  OF   CHECKS. 

§  1 60 1.  A  check  being  always  payable  immediately  on 
demand,  the  holder  can  only  present  it  for  payment,  and 
the  bank  can  only  fulfil  its  duty  to  its  depositor  by  paying 
the  amount  demanded.  In  other  words,  the  holder  has  no 
right  to  demand  from  the  bank  anything  but  payment  of 
the  check.  And  the  bank  has  no  right,  as  against  the 
drawer,   to  do   anything  else   but   pay   it.      Consequently 

'  Moses  V.  Franklin  Bank,  34  Md.,  574;  Norris  v.  Despard,  38  Md.,  491. 

'Harkerv.  Anderson,  21  Wend.,  372;  see  Edwards  on  Bills,  396. 

^  Morrison  v,  Bailey,  5  Ohio  St.,  13  (1855).  In  Pollard  v.  Bowen,  57  Ind.,  234 
(1877),  Nibkick,  J.,  says:  "A  protest  of  a  check  is  not  necessary  in  case  of  its 
non-payment."  See  also  Jones  v.  Heiliger,  36  Wis.,  149;  Griffin  v.  Kemp,  46 
Ind.,  172. 


6i4  CHECKS.  §  i6oia. 

there  is  no  such  thing  as  acceptance  of  checks  in  the  ordi- 
nary sense  of  the  term.  For  acceptance  ordinarily  implies 
that  the  drawer  requests  the  drawee  to  pay  the  amount  at 
a  future  day,  and  the  drawee  "  accepts  "  to  do  so,  thereby 
becoming  the  principal  debtor,  and  the  drawer  being  his 
surety.  But  still,  by  consent  of  the  holder,  the  bank  may 
enter  into  an  engagement  quite  similar  to  that  of  accept- 
ance, by  certifying  the  check  to  be  "  good  "  instead  of  pay- 
ing it. 

§  i6oi^.  Effect  of  certification  of  check. — By  certifying 
a  check  (i)  the  bank  becomes  the  principal  and  only 
debtor ;  (2)  the  holder  by  taking  a  certificate  of  the  check 
from  the  bank,  instead  of  requiring  payment,  discharges  the 
drawer  ;  (3)  and  the  check  then  circulates  as  the  repre- 
sentative of  so  much  cash  in  bank,  payable  on  demand  to 
the  holder.  Such  in  brief  is  the  effect  of  the  certification 
of  a  check.  It  has  been  said  to  be,  and  obviously  is, 
"  equivalent  to  acceptance  "  ^  in  respect  to  the  obligation  it 
creates  upon  bank  ;  but  it  would  be  confounding  terms  to 
regard  it  as  altogether  the  same  thing  in  its  effects  upon 
the  relation  of  the  parties. 

§  1602.  Certification  of  checks  is  of  recent  origin. — The 
certification  of  checks  is  an  expedient  and  outgrowth  of 
modern  commerce  quite  recent  in  its  origin,  but  now  of 
daily  and  extensive  occurrence.  It  was  a  practice  unknown 
when  Kyd  and  Byles  wrote  their  treatises.  It  is  not 
alluded  to  in  the  works  of  Story,  and  receives  but  brief 
mention  in  the  elaborate  volume  of  Parsons,  written  in  1862, 
and  published  as  recently  as  1 868.  And  yet  now  the  reports 
are  filled  with  cases  on  the  subject ;  and  recent  writers — • 
Morse  ^  and  Bigelow^  and  Redfield* — give  it  considerable 
prominence  and  attention.  The  fact  stated  by  the  United 
States  Supreme  Court  that  "  it  is  computed  by  competent 


»  Merchants'  Bank  v.  State  Bank,  lo  Wall.,  648.  '  Morse  on  Banking, 

•  Bigelow  on  Estoppel.  *  Redfield  &  Bigelow's  Lead.  Cas. 


§   1603.  CERTIFICATION    OF    CHECKS.  615 

authority  that  the  average  daily  amount  of  such  (certified) 
checks  in  use  in  the  city  of  New  York  is  not  less  than  one 
hundred  millions  of  dollars,"  ^  is  sufficient  warrant  for  an  en- 
larged statement  of  the  principles  affecting  them. 

§  1603.  Bank  by  certifying  check  becomes  pri^icipal 
debtor. — Let  us  consider  more  at  length  the  effect  of  the 
certification  of  checks.  In  the  first  place,  the  bank  be- 
comes at  once  the  principal  debtor.^  When  the  holder 
presents  the  check  to  the  bank,  the  latter  can  only  respond 
to  the  demand  for  payment  by  making  payment.  But  if 
it  be  agreed  to  between  them,  the  check  is  certified  to  be 
"good";  and  thus,  in  contemplation  and  by  operation  of 
law,  it  is  the  same  as  if  the  funds  had  been  actually  paid 
out  by  the  bank  to  the  holder,  by  him  redeposited  to  his 
own  credit,  and  a  certificate  of  deposit  issued  to  him  there- 
for. In  other  words,  a  certified  check  is  a  shorthand  cer- 
tificate of  deposit  in  favor  of  the  holder,  and  pa3^able  to 
him,  or  to  him  or  order,  or  to  bearer,  according  to  its  terms.' 

Thus  the  bank  ceases  to   be  the  debtor  of  the  oriirinal 

'  Merchants'  Bank  v.  State  Bank,  10  Wall.,  648,  Justice  Swayne  saying  :  "  By 
the  law  merchant  of  this  country,  the  certificate  of  a  bank  that  a  check  is  good 
is  equivalent  to  acceptance.  It  implies  that  the  check  is  drawn  upon  sufficient 
funds  in  the  hands  of  the  drawee  ;  that  they  have  been  set  apart  for  its  satisfac- 
tion, and  that  they  shall  be  so  applied  whenever  the  check  is  presented  for  pay- 
ment. It  is  an  undertaking  that  the  check  is  good  then,  and  shall  continue 
good ;  and  this  agreement  is  as  binding  on  the  bank  as  its  notes  of  circulation, 
a  certificate  of  deposit  payable  to  the  order  of  the  depositor,  or  any  other  obliga- 
tion it  can  assume.  The  object  of  certifying  a  check,  as  regards  both  parties,  is 
to  enable  the  holder  to  use  it  as  money.  The  transferee  takes  it  with  the  sanie 
readiness  and  sense  of  security  that  he  would  take  the  notes  of  the  bank.  It  is 
available,  also,  to  him  for  all  the  purposes  of  money."  ....  "  The  practice  of 
certifying  checks  has  grown  out  of  the  business  needs  of  the  country.  They  en- 
able the  holder  to  keep  or  convey  the  amount  specified  with  safety.  They  en- 
able persons  not  well  acquainted  to  deal  promptly  with  each  other,  and  they  avoid 
the  delay  and  risks  of  receiving,  counting,  and  passing  from  hand  to  hand  large 
sums  of  money.  It  is  computed  by  a  competent  authority  that  the  average 
daily  amount  of  such  checks  in  use  in  the  city  of  New  York  is  not  less  than  one 
hundred  millions  of  dollars.  We  could  hardly  inflict  a  severer  blow  upon  the 
commerce  and  business  of  the  country  than  by  throwing  a  doubt  on  their 
validity." 

'  Andrews  v.  German  National  Bank,  9  Heisk.,  217  ;  Merchants'  Bank  v.  State 
Bank,  10  Wall,  648  ;  Essex  Co.  Bank  v.  Bank  of  ^iontreal,  7  Biss.,  193  ;  First 
National  Bank  v.  l^each,  52  N.  Y.,  330  ;  Freund  v.  Importers',  etc.,  Bank,  19  N, 
Y.  S.  C.  (12  Hun),  537. 

•  Thomson  v.  Bank  of  British  N.  A.,  82  N.  Y.,  I. 


6l6  CHECKS.  §   1603. 

depositor,  and  becomes  the  debtor  of  the  holder  of  the 
check,  who  may  demand  the  amomit,  and  sue  the  bank  for 
its  recovery  at  any  time,^  even  after  the  lapse  of  many  years.' 
It  will  be  too  late  after  the  bank  has  certified -the  check  for 
the  drawer  to  revoke  it,  and  the  bank  will  be  bound  to  pay 
it  though  notified  by  the  drawer  not  to  do  so.^  It  will  also 
be  too  late  for  the  bank  to  say  that  the  check  was  forged, 
and  was  not  in  fact  the  drawer's,  unless  it  be  still  in  the 
hands  of  one  who  was  guilty  of  the  forgery,  or  had  knowl- 
edge of  or  complicity  in  it,  for  it  has  conceded  its  genuine- 
ness, and  indeed  asserted  it  by  certification.*  Nor  can  it 
say  that  there  were  in  fact  no  funds  of  the  drawer  to  meet 
the  check,  for  its  certificate  is  an  assurance  that  there  were 
such  funds,  and  that  it  will  apply  them  to  that  purpose.^ 
These  doctrines  are  now  universally  settled,  and  the  United 
States  Supreme  Court  has  declared  that  it  could  not  inflict 
a  severer  blow  upon  the  commerce  and  business  of  the 
country  than  by  throwing  a  doubt  upon  them.^  In  New 
York  it  has  been  (and  as  it  seems  rightly)  held  that  the 
legal  effect  of  certification  is  only  to  warrant  the  signature, 
and  not  the  terms  of  the  check  ;  that  evidence  that  it  was 
understood  by  the  custom  of  merchants  to  warrant  more 
is  inadmissible  ;  that  the  teller  has  no  authority  to  warrant 
more,  and  his  act  in  doing  so  would  not  bind  the  bank.''^ 

*  Gerard  Bank  v.  Bank  of  Penn  Township,  39  Penn.  St.,  92 ;  Morse  on  Bank- 
ing-, 281-283;  Willetts  V.  Phoenix  Bank,  2  Duer,  121. 

^  Gerard  Bank  v.  Bank  of  Penn  Township,  39  Penn.  St.,  92.  In  this  case  the 
check  was  certified  October  7th,  1852.  The  drawer  withdrew  his  funds  October 
loth,  1854  ;  and  the  holder  demanded  payment  September  3d.  1859.  The  bank 
was  held  liable,  the  statute  of  limitations  not  having  accrued. 

^  Freund  v.  Importers',  etc.,  Bank,  19  N.  Y.  S.  C.  (12  Hun),  537  ;  76  N.  Y.,  352  ; 
First  N.  B.  V.  Leach,  52  N.  Y.,  350. 

*  See  infra,  §§  1359  et  seq.,  and  chapter  XViiI,  on  Acceptance,  §§  532  et  seq., 
vol.  I. 

^  Espy  V.  Bank  of  Cincinnati,  18  Wall.,  621. 

°  Merchants'  Bank  v.  State  Bank,  10  Wall.,  648. 

'  Sec'y  Bank  v.  National  Bank,  67  N.  Y.,  458  ;  Marine  N.  B.  v.  National  City 
Bank,  59  N.  Y.,  67;  White  v.  Continental  Bank,  64  N.  Y.,  316;  2  Ames  B.  & 
N.,  802 ;  see  also  Espy  v.  Bank  of  Cincinnati,  18  Wall.,  621.  Contra,  La.  Bank 
V.  Citizens'  Bank,  28  La.  An,,  189. 


§   l6o6.  CERTIFICATION    OF    CHECKS.  617 

§  1604.  Holder  taking  certification  of  check  discharges 
drawer. — In  the  second  place,  the  holder,  by  taking  a  cer- 
tificate of  the  check  instead  of  payment,  discharges  the 
drawer.  This  results  from  what  has  been  already  said.  If 
the  bank  refuses  payment,  the  drawer  should  be  notified. 
But  if  the  holder  receives  something  else  in  lieu  of  pay- 
ment, it  is  the  same  as  payment ;  and  as  the  drawer  can  not 
legally  withdraw  the  funds  after  checking  on  them,  it  would 
be  unjust  that  they  should  be  held  at  his  risk  or  his  liability 
on  the  check  extended.^  The  indorser  of  a  check  who  is 
a  new  drawer  would  also  ordinarily  be  discharged  if  the 
holder  had  it  certified  instead  of  requiring  payment ;  but 
if  the  indorser  request  or  consent  to  the  certification,  this 
rule  would  not  apply ;  ^  and  if  the  holder  of  a  certified 
check  indorse  it,  his  indorsee  may  hold  him  liable  as  well  as 
the  bank.^ 

§  1605.  Certified  check  circnlates  as  cash. — In  the  third 
place,  the  check  when  certified  circulates  as  the  representa- 
tive of  so  much  cash  in  bank,  payable  whenever  demand- 
ed, to  the  holder.  It  is  then  like  cash,  but  still  it  is  not  the 
same  as  cash,  for  "  nullus  simile  est  idem!'  Frequently  a 
depositor  procures  his  own  check  to  be  certified  before  he 
offers  it  in  payment.  In  such  cases  it  does  not  lose  its 
character  as  a  check  in  any  particular — it  only  has  the 
additional  credit  imparted  to  it  by  the  certificate. 

§  1606.  As  to  how  a  check  may  be  certified.  No  particji- 
lar  form  of  certification  is  requisite. — Ordinarily  the  bank 
officer  simply  writes  the  word   "good"   across  the  face  of 


'  First  National  Bank  v.  Leach,  52  N.  Y.,  350  (1873).  Peckham,  J.  :  "The 
theory  of  the  law  is,  that  where  a  check  is  certified  to  be  good  by  a  bank,  the 
amount  thereof  is  then  charged  to  the  account  of  the  drawer  in  the  bank  certifi- 
cate account.  Every  well-regulated  bank  adojits  this  practice  to  protect  itself. 
....  It  follows,  that  after  a  check  is  certified  the  drawer  of  the  check  can  not 
draw  out  the  funds  then  in  the  bank  necessary  to  meet  the  certified  check.  The 
money  is  no  longer  his."  Morse  on  Banking,  382  ;  Essex  Co.  National  Bank  v. 
Bank  of  Montreal,  7  Bissell,  197. 

""  Mutual  N.  B.  V.  Rotge,  28  La.  An.,  933. 

»  Mutual  N.  Bank  v.  Rotge,  28  La.  An.,  933. 


6i8  CHECKS.  §  i6o6a 

the  instrument*  Sometimes  his  name,  or  initials,  is  added.^ 
In  England  a  well-known  mark  was  at  one  time  generally 
used  for  this  purpose  ;  but  by  statute  now  a  distinct  prom- 
ise, written  and  signed,  is  requisite. 

§  i6o6(2.  Effect  of  verbal  statement  of  bank  officer  that  check 
is  good. — In  the  absence  of  any  statutory  provision  on  the 
subject,  the  mere  verbal  statement  of  the  bank  officer  that 
the  check  is  "good,"^  or  a  promise  on  the  part  of  the  bank 
to  pay  it,  will  be  sufficient  to  operate  as  certification,  and 
by  way  of  estoppel,  provided  such  statement  or  promise 
be  communicated  to  the  holder,  and  induce  him  to  take  the 
check.''  But  unless  so  communicated  it  would  not  be.^  It 
has  been  held  by  the  United  States  Supreme  Court,  that 
even  where  so  communicated,  it  would  not  bind  the  bank 
further  than  as  to  the  genuineness  of  the  drawer's  signa- 
ture, and  the  state  of  his  account ;  and  if  the  check  were 
"  raised  "  in  respect  to  the  amount,  the  bank  giving  infor- 
mation that  it  was  "  good  "  and  not  intending  to  certify  it 
for  circulation  would  not  be  bound,^  and  in  the  U.  S.  Cir- 
cuit Court  for  the  First  Circuit  it  has  been  held  that  the 
verbal  promise  of  a  bank  to  pay  a  check  when  not  in  funds 
to  do  so  is  void  under  the  statute  of,  frauds,  being  a  verbal 
agreement  to  pay  the  debt  of  another.' 

>  Barnet  v.  Smith,  lo  Fost.,  256.  '  Morse  on  Banking,  284. 

*  Barnet  v.  Smith,  10  Fost.,  256 ;  Pope  v.  Bank  of  Albion,  59  Barb.,  226,  the 
court  said  :  "  Any  language,  whether  verbal  or  written,  employed  by  an  officer 
of  a  banking  institution,  whose  duty  it  is  to  know  the  financial  standmg  and 
credit  of  its  customers,  representing  that  a  check  drawn  upon  it  is  good,  estops 
the  bank  from  thereafter  denying,  as  against  a  bona  fide  liolder  of  the  check, 
the  want  of  funds  to  pay  the  same."     See  Morse  on  Banking,  286,  287, 

^  Nelson  v.  First  Nat.  Bank,  48  111.,  36  ;  Carr  v.  Nat.  Sec'y  Bank,  107  Mass.,  48. 

"  Bank  v.  Pettel,  41  III.,  492. 

«  Espy  V.  Bank  of  Cincinnati,  18  Wall.,  621  (1873),  Miller,  J.,  saying:  "There 
was  no  design  or  intent  on  the  part  of  the  bank  to  assume  a  responsibility  be- 
yond the  funds  of  the  drawer  in  their  hands,  nor  to  enable  the  payee  of  the 
check  to  put  it  in  circulation.  Nothing  was  said  or  done  by  the  bank  officer 
which  could  be  transferred  with  the  check  as  a  part  of  it  to  an  innocent  taker  of 
it  from  the  payee.  Such  subsequent  taker  would  have  no  right  to  rely  on  what 
was  said  by  the  bank  officers,  any  further  than  the  payee  would."  But  see  Lou- 
isiana National  Bank  v.  Citizens'  Bank,  28  La.  An.,  189. 

'  Morse  v.  Massachusetts  N.  B.,  i  Holmes,  209. 


^   1607.  CERTIFICATION    OF    CHECKS.  619 

.  §  1606b.  Certification  of  check  payable  mfutiire. — Or- 
dinarily the  certification  states  no  time  of  payment,  and  the 
check  is  then  payable  instantly  on  demand  ;  but  if  the  cer- 
tificate specify  a  future  day  of  payment,  it  is  binding  be- 
tween the  bank  and  the  holder  receiving  it.^ 

§  1607.  As  to  what  checks  may  be  certfied,  and  luhen. — ■ 
No  officer  of  the  bank  has  any  authority  to  certify  a  check 
when  there  are  no  funds  of  the  drawer  to  meet  it.  And  it 
is  only  in  favor  of  bona  fide  holders  for  value  and  without 
notice  that,  without  funds  to  meet  the  check  the  law  will 
enforce  the  liability  of  the  bank  upon  its  officers'  certificate.' 
Nor  can  any  officer  or  agent  of  the  bank  certify  his  own 
checks ;  for  no  one  acting  in  a  fiduciary  capacity  as  trustee 
or  agent  can  employ  his  position  for  his  own  private  bene- 
fit. And  where  the  name  of  the  officer  who  certifies  the 
check  is  the  same  as  the  drawer,  that  circumstance  is  suf- 
ficient to  charge  all  persons  dealing  with  the  check  that  they 
are  the  same  person  ;  and  if  such  be  truly  the  case,  and  the 
check  were  improperly  certified,  no  holder  could  recover.^ 
No  officer,  moreover,  has  any  implied  authority  to  certify  a 
check  until  it  is  presented  for  payment,  when,  of  course,  it 
must  be  actually  due  and  payable.  Therefore,  should  any 
officer  certify  a  post-dated  check,  such  check  bears  on  its 
face,  until  the  day  of  its  date  arrives,  notice  and  informa- 
tion to  all  parties  receiving  it,  that  it  has  not  been  certified 
in  the  usual  course  of  business ;  and  if  it  turn  out  that  the 
drawer  had  no  funds  on  deposit  at  the  time  of  the  certifica- 
tion, no  party  so  receiving  it  can  hold  the  bank  liable.'* 


'  Bank  of  England  v.  Anderson,  4  Scott,  50. 

''  Atlantic  Bank  v.  Merchants'  Bank,  10  Gray,  532;  Morse  on  Banking,  194, 
195  ;  Claflin  v.  Farmers',  etc.,  Bank,  25  N.  Y.,  293 ;  Cooke  v.  State  Nat'l  Bank, 
52  N.  Y„  115. 

'  Claflin  V.  Farmers',  etc.,  Bank,  25  N,  Y.,  293,  overruling  same  case  in  36 
Barb.,  540. 

*  Clarke  Nat.  Bank  v.  Bank  of  Albion,  52  Barb.,  593.  In  this  case  the  check 
was  dated  January  loth,  1866;  but  it  was  drawn  and  certified  early  in  December, 
1865,  and  discounted  about  the  same  time  to  Ward  &  Brother,  bankers.  The 
check  was  for  $6,000,  and  the  drawer  when  it  was  certified  had  only  §16.75  ^o 


620  CHECKS.  §   1607^. 

Without  special  authority  conferred  upon  him,  the  officer 
of  a  bank  has  no  implied  authority  to  certify  any  but  com- 
mercial checks — that  is,  those  drawn  in  commercial'  form, 
in  the  usual  course  of  business  ;  and  if  the  check  bear  upon 
it  a  memorandum  that  it  is  to  be  "  held  as  collateral,  etc.," 
the  cashier's  certification  is  not  in  due  course,  and  will  not 
bind  the  bank  unless  expressly  authorized.^ 

§  1607^.  Certification  of  2imndo7'sed  ckeck.^SomQtixnts 
a  check  payable  to  order  is  certified  without  the  indorse- 
ment of  the  payee  being  upon  it,  and  when  it  is  already  in 
the  hands  of  a  third  party.  In  such  cases  it  is  understood 
that  the  proper  indorsement  will  be  obtained  before  the 
amount  is  withdrawn,  and  that  the  amount  will  be  held  by 
the  bank  to  meet  it.  But  if  in  fact  the  holder  be  the  as- 
signee by  delivery  of  the  check  for  a  valid  consideration 
and  entitled  to  receive  the  money,  although  not  an  indorser, 


his  credit ;  and  lie  made  no  deposit  to  meet  it.  The  court  saying :  "  Checks 
are  never  presented  for  acceptance,  but  only  for  payment,  to  enable  the  holder 
immediately  to  demand  and  receive  the  money  stated  therein — and  in  theory  are 
not  intended  to  circulate  as  commercial  paper.  They  are  always  sup|)osed  to  be 
drawn  upon  a  previous  deposit  of  funds,  and  are  an  appropriation  of  so  much  of 
the  money  in  the  hands  of  the  banker  to  the  holder  of  the  check  (Story  on  Prom- 
issory Notes,  §§  488,  489).  They  must  be  regarded  as  drawn  and  dated  the  day 
they  bear  date  (The  Mohawk  Bank  v.  Broderick,  13  Wend.,  133).  Where  a 
check  is  drawn  and  negotiated  before  it  bears  date,  the  effect  is,  that  the  same 
is  payable  on  demand,  on  and  after  the  day  on  which  it  purports  to  bear  date, 
and  nothing  more  (S.  C,  10  Wend.,  308).  They  are  not  due  before  payment  is 
demanded,  in  which  respect  they  differ  from  bills  of  exchange  on  a  particular 
day  (Chitty  on  Bills,  7  Am.  ed.,  322  ;  Harker  v.  Anderson,  21  Wend.,  374). 
From  these  propositions  of  law,  it  follows  that  this  check  was  certified  by  the 
cashier  before  its  payment  could  have  been  legally  demanded,  and  before  it 
could  be  presumed  that  the  drawer  had  made  a  deposit  for  its  payment ;  all  of 
which  appeared  on  the  face  of  the  paper,  and  was  in  the  law  full  notice  to  Ward 
&  Bro.  Post-dated  checks  are  instruments  often  used,  and  their  nature  and 
character  are  well  understood  by  bankers  and  the  trading  community.  By  all 
such  persons  it  is  regarded  that  the  drawer  is  not  in  funds  at  the  bank  on  which 
he  draws  his  check,  when  he  makes  and  delivers  the  same,  and  does  not  expect  to 
be  until  the  arrival  of  the  date  inserted  in  the  check.  Ward  &  Bro.  could  not  then 
have  maintained  an  action  on  the  check  against  the  bank,  because  :  First :  This 
check  was  certified  by  the  cashier  before  it  was  payable  by  its  terms,  and  before 
any  legal  demand  of  payment  was  or  could  be  made.  Second:  It  was  certified 
when  the  presumption  is  that  the  drawer  had  no  funds  in  the  bank  to  meet  it. 
Third:  Ward  &  Bro.  were  not  bona  fide  holders  of  this  check  without  notice  o' 
the  facts,  which  vitiates  the  certification." 
'  Dorsey  v.  Abrams,  85  Penn.  St.,  299. 


§   1609.  CERTIP^ICATION    OF    CHECKS.  62 1 

the  bank,  it  has  been  held,  would   be   protected  in   paying 
him,  where  the  check  was  drawn  for  accommodation.^ 

§  1608.  Checks  certified  by  mistake. — If  the  bank  certi- 
fies a  check  to  be  good  by  mistake,  under  the  erroneous 
impression  that  the  drawer  had  funds  on  deposit,  when  in 
fact  he  had  none,  or  has  been  induced  by  some  fraudulent 
representation  to  certify  it  as  good,  the  certification  may  be 
revoked  and  annulled,  provided  no  change  of  circumstances 
has  occurred  which  would  render  it  inequitable  for  such 
right  to  be  exercised.  If  the  check  still  remains  in  the 
hands  of  the  holder  who  held  it  when  it  was  certified, 
and  the  mistake  is  discovered  and  notified  to  him  so 
speedily  that  he  has  time  afforded  him  to  notify  and  pre- 
serve the  liability  of  indorsers,  the  bank  may  retract  its 
certificate.^  But  if  another  person  has  become  the  holder  of 
it,  or  circumstances  have  so  changed  that  the  rights  of  the 
holder  would  be  prejudiced,  and  especially  if  it  has  been 
paid  to  a  bona  fide  holder  without  notice,  it  is  absolutely  es- 
topped from  doing  so.^ 

§  1609.  As  to  who  may  certify  for  the  bank.  President 
or  board  of  directors  may. — What  officers  of  the  bank  have 
implied  power  ex  officio  to  certify  checks  is  next  to  be  con- 
sidered. The  board  of  directors  undoubtedly  have,  for 
they  are  the  bank's  managers  and  its  representatives  in  the 
broadest  sense.*  And  the  president  of  the  bank,  who  is  ex 
officio  their  president  and  mouthpiece,  also  undoubtedly  has 
such  power.^ 

>Freund  v.  Importers',  etc.,  Bank,  76  N.  Y.,  352  (1879).  Compare  Abrams  v. 
Union  N.  Bank,  31  La.  An.,  61.  See  §  726  as  to  equities  pleadable  against  purchaser 
of  overdue  paper  which  present  analogies  to  the  question  decided  in  this  case. 

^  Irving  Bank  v.  Wetherald,  36  N.  Y.,  335  ;  34  Barb.,  323  ;  Second  National 
Bankv.  Western  National  Bank,  51  Md.,  128  ;  see  chapter  xvni,  on  Accept- 
ance. §  493,  vol.  I. 

'Bank  of  Republic  v.  Baxter,  31  Vt.,  loi. 

*  See  chapter  on  Corporations  as  Parties. 

*  Claflin  V.  Farmi^rs',  etc.,  Bank,  25  N.  Y.,  293. 


622  CHECKS.  §   161O. 

§  1 6 10.  Cashier  has  implied  power  to  certify  checks. — ■ 
The  cashier  undoubtedly  has  implied  power  to  certify 
checks,  and  it  has  been  so  held  in  numerous  cases.^  In 
Massachusetts  alone  has  the  contrary  doctrine  prevailed, 
on  the  ground  that  it  is  a  power  to  pledge  the  credit  of  the 
bank  to  its  customers,  which,  by  the  very  constitution  of  a 
bank,  resides  only  in  the  president  and  directors.  And 
there  it  has  been  held  that  even  if  it  were  proved  that  the 
teller  had  by  usage  certified  checks,  it  would  be  a  bad  usage, 
and  could  not  be  upheld.^  But  besides  the  authorities 
cited  in  the  note  as  sustaining  the  cashier's  implied  power, 
it  has  been  decided  by  the  United  States  Supreme  Court 
that  a  bank  is  liable  upon  checks  certified  by  its  cashier, 
although  it  was  proved  that  he  acted  without  authority, 
and  although  it  was  not  shown  that  he  had  ever  certified 
checks  before,  or  that  the  cashiers  of  banks  in  the  same 
place  were  accustomed  to  certify  checks.  The  court  said  : 
*'  The  power  of  the  bank  to  certify  checks  has  been  suf- 
ficiently considered.  The  question  we  are  now  considering 
is  the  authority  of  the  cashier.  It  is  his  duty  to  receive  all 
the  funds  which  come  into  the  bank  and  to  enter  them 
upon  its  books.  The  authority  to  receive  implies  and  car- 
ries with  it  authority  to  give  certificates  of  deposit  and 
other  proper  vouchers.  When  the  money  is  in  the  bank 
he  has  the  same  authority  to  certify  a  check  to  be  good, 
charge  the  amount  to  the  drawer,  appropriate  it  to  the  pay- 
ment of  the  check,  and  make  the  proper  entry  on  the  books 
of  the  bank.  This  he  is  authorized  to  do  virtute  officii. 
The  power  is  inherent  in  the  office."^  And  the  exercise 
of  such  power  is  rather  a  mere  transfer  of  credit  from  the 
drawer  of  the  check  to  the  holder  of  it  than  a  pledge  of  the 
credit  of  the  bank.^ 

'  Clarke  National  Bank  v.  Bank  of  Albion,  52  Barb.,  592 ;  Pope  v.  Bank  ot 
Albion,  59  Barb.,  226 ;  Cooke  v.  State  National  Bank,  52  N.  Y.,  115. 

2  Mussey  v.  Eagle  Bank,  9  Mete,  313  ;  Atlantic  Bank  v.  Merchants'  Bank,  ic 
Gray,  532. 

*  Merchants'  Bank  v.  State  Bank,  10  Wall.,  648.        ■*  Morse  on  Banking,  192 


5   l6ll  CERTIFICATION    OF    CHECKS.  623 

§  1610^.  Teller  has  implied  powci^  to  certify  checks. — 
The  teller  of  the  bank  also  undoubtedly  has  an  inherent 
implied  power  to  certify  checks,  for,  though  a  subordinate 
of  the  cashier,  he  is  simply  an  arm  with  which  certain  por- 
tions of  his  work  are  performed  ;^  and  it  has  been  thought 
that  he  is  the  more  proper  officer  to  discharge  this  partic- 
ular duty.^  But  the  fact  that  the  teller  may  certify  checks 
by  no  means  implies  that  when  he  may,  the  cashier  may 
not. 

§  i6iO(^.  Assistant  cashier  has  no  implied  power  to  cer 
tify  checks. — The  assistant  cashier  of  a  bank  has  no  im 
plied  power  to  accept  or  certify  a  check,  and  where  such  an 
officer  wrote  on  a  check  presented  to  the  bank,  "Accepted, 
A.  J.  Chester,  A.  Cash.,"  it  was  held  that  even  a  bona  fide 
holder  for  value  was  chargeable  with  an  infirmity  in  the 
transaction,  the  style  of  the  acceptance  putting  him  on 
guard  as  to  the  authority  of  the  officer.^ 

§  1 6 II.  Bank  officer  can  not  certify  his  own  check. — 
There  is  this  limitation  upon  the  implied  power  of  the 
president  or  other  officer  of  a  bank  to  certify  checks :  he 
can  not  certify  his  own  check,  and  any  party  taking  a 
check  drawn  by  a  party,  and  then  certified  by  him  for  a 
bank  as  its  officer,  takes  it  with  notice  of  the  double  relation 
he  is  acting  in,  and  can  not  be  placed  upon  the  footing  of  a 
bona  fide  holder  without  notice.  This  doctrine  rests  on  the 
principle  that  no  person  can  act  as  agent  of  both  parties  to 
a  contract,  although  he  may  himself  have  no  interest  on 
either  side  ;  nor  can  he  act  as  agent  in  regard  to  a  contract 
in  which  he  has  any  interest,  or  in  which  he  is  a  party  on 
the  side  opposite  to  his  principal.* 

*  Farmers',  etc.,  Bank  v.  Butchers',  etc..  Bank,  14  N.  Y.,  624 ;  16  N.  Y.,  133  ; 
Mead  V.  Merchants'  Bank,  25  N.  Y.,  146 ;  Irving  Bank  v.  Wetherald,  36  N.  Y., 
335  ;  contra,  Mussey  v.  Eagle  Bank,  9  Mete,  313. 

"  Farmers',  etc.,  Bank  v.  Butchers',  etc.,  Bank,  14  N.  Y„  624;  16  N.  Y.,  133. 

'  Pope  V.  Bank  of  Albion,  57  N.  Y.,  127. 
Claflin  V.  Farmers',  etc..  Bank,  25  N.  Y.,  294,  overruling  S.  C.  in  36  Barb., 
540  ;  see  also  New  York  &  N.  H.  R.K.  Co.  v.  Schuyler,  34  N.  Y.,  30,  64  ;  Titus 
V.  Great  Western  Turnpike  Co.,  5  Lans.,  253  (5  N.  Y.  S.  C.  R.)  ;  ante,  §  1607. 


624  CHECKS.  $   1612, 

SECTION   V. 

WHOSE   CHECKS   SHOULD   BE   PAID   BY  THE   BANK. 

§  161 2.  Signature  of  check-drawer  should  be  identical 
with  entry  of  credit. — When  a  deposit  has  been  made  in  a 
bank,  its  officers  should  be  careful  that  no  portion  of  it  is 
paid  out  upon  the  check  of  any  party  but  the  depositor  or 
depositors.  The  proper  and  only  safe  rule  for  the  bank  to 
adopt  is  to  require  the  signature  to  be  identical  in  terms 
with  the  credit  on  its  books.^  Thus  if  the  credit  be  simply 
to  A.  B.,  let  the  check  be  signed  simply  A.  B.  ;  and  if  it 
be  to  "A.  B.,  trustee,"  or  "A.  B.,  trustee  for  C.  D.,"  let 
the  signature  be  i7i  totidem  verbis?  So  if  several  persons 
not  partners  make  a  deposit  to  their  joint  credit,  the  signa- 
ture of  each  one  should  be  required.  But  if  it  be  to  their 
joint  and  several  credit,  the  check  of  any  one  may  be  hon 
ored.^  Where  one  or  more  of  the  joint  depositors  abscond, 
equity  will  relieve  the  others.* 

§  161 2«.  If  a  deposit  be  made  in  bank  to  the  credit  of  a 
certain  person  as  agent  or  trustee,  the  use  of  such  terms 
would  charge  the  bank  with  notice  that  the  funds  were 
there  in  a  fiduciary  relation  ;  it  would  have  no  lien  upon 
them  for  the  private  debts  of  the  depositor,  and  if  it  per- 
mitted them  to  be  used  for  his  private  purposes  in  transac- 
tions with  the  bank  it  would  be  bound.^ 

§  1 61 3.  In  the  case  of  a  partnership  deposit  it  should,  as 
a  rule,  be  paid  out  only  upon  a  check  signed  in  the  copart- 

■  Tryon  v.  Okley,  3  G.  Greene  (Iowa),  289. 

"  Innes  v.  Stephenson,  i  M.  &  R.,  145  ;  Stone  v.  Marsh,  Ryan  &  M.,  364 ; 
Sloman  v.  Bank  of  England,  14  Sim.,  459  ;  9  Jur.,  243  ;  Dixen's  Case,  2  Lewin 
Cr.  Gas.,  178. 

'  Morse  on  Banking,  266. 

'^  Ex  parte  Hunter,  2  Rose,  382  ;  ex  parte  Collins,  2  Cox,  427. 

'  Central  N.  B.  v.  Connecticut  Mut.  Ins.  Co.,  U.  S.  S.  C,  Nov.,  1881  ;  Morri- 
son's Transcript,  vol.  3,  No.  i,  53  ;  Pannell  v.  Hurley,  2  Collyer  New  Cas.,  24I. 
See  also  Duncan  v.  Jaudon,  15  Wall.,  165  ;  Bailey  v.  Finch,  L.  R.,  7  O.  B.,  34  , 
ex  parte  Kingston ;  in  re.  Gross,  6  Ch.  App.  L.  R.,  632 ;  Bundy  v.  Town  of 
Monticello,  S.  C.  Ind.,  Feb.,  1882  ;  Cent.  L.  J.,  Mch.  3, 1882,  p.  177  (Vol.  14,  No.  9). 


§    1615.    WHOSE  CHECKS  SHOULD  BE  PAID  BY  THE  BANK.       625 

nership  name.  But  any  one  of  the  firm  is  empowered  to 
make  such  signature.  If  there  are  dormant  partners,  the 
bank  is  not  bound  to  pay  a  check  signed  by  one  of  them  in 
the  partnership  name,  unless  it  knew  or  should  have  known 
the  fact  that  the  signer  was  a  member  of  the  copartnership  ; 
for  otherwise  its  refusal  to  pay  would  be  legal  and  proper.^ 
Whether  or  not  a  copartner  could  bind  the  firm  by  signing 
the  names  of  the  several  partners  has  been  questioned.  It 
would  seem  that  he  could. ^  And  where  a  check  was  sisrned 
by  one  partner  "for  A.  B.  C.  and  D.  C.,"^  and  another 
"A.  &  Co.,  per  procuration  of  A.,"'*  they  were  each  held 
sufficient  as  copartnership  checks. 

§1614.  It  is  lawful  for  a  bank  to  show  that  a  deposit 
standing  in  the  name  of  an  individual  partner  was  really  a 
partnership  deposit ;  but  it  would  be  necessary  to  go  further 
and  show  that  it  was  really  paid  in  on  partnership  account, 
and  was  designed  to  constitute,  or  at  least  ought  rightfully 
to  have  been  designed  to  constitute,  a  fund  for  partnership 
purposes,  in  order  to  warrant  the  bank  to  pay  out  to  part- 
nership checks.^  If  two  distinct  firms  unite  in  their  capac- 
ities as  such  to  form  a  third,  payment  upon  the  check  of 
either  firm  would  be  valid.^ 

§  161 5.  As  to  personal  representatives  and  trustees. — 
Where  a  deposit  is  made  to  the  credit  of  several  executors 
or  administrators,  the  check  of  any  one  may  be  honored,  for 
the  reason  that  each  one  is  competent  in  law  to  control  the 
estate  in  hand.'''    But  the  rule  respecting  trustees  is  different. 

*  Cook  V.  Seeley,  2  Exch.,  749, 

'  Norton  v.  Seymour,  3  C.  B.,  792  ;  Grant  on  Banking,  32  ;  Morse,  Id.,  274. 

3  Ex  parte  Buckley,  14  Mees.  &  W.,  469  ;  overruling  Hall  v.  Smith,  i  Barn. 
&  C,  407. 

*  Williamson  v.  Johnson,  i  Barn.  &  C,  149. 

*  Sims  V.  Bond,  5  Barn.  &  Ad.,  389. 

*  Duff  V.  East  India  Co.,  15  Vesey,  Jr.,  198. 

"Pond  V.  Underwood,  2  Lord  Raym.,  1210;  Gaunt  v.  Taylor,  2  Hare.  413; 
ex  pa7'te  Rigby,  19  Ves.,  462  ;  Allen  v.  Dundas,  3  T.  R.,  125  ;  Can  v.  Read,  3 
Atk.,  695. 

Vol.  II. — 40 


626  CHECKS.  §  1616 

They  act  under  a  joint  power,  and  the  signature  of  all  is, 
generally  speaking,  necessary  to  the  validity  of  the  check.^ 
But  in  an  English  case,  where  there  w^ere  five  trustees  of  a 
small  trust  fund,  and  they  were  widely  apart  from  each 
other,  the  Court  of  Chancery  ordered  that  payment  might 
be  made  "  to  them,  or  any  of  them,"  to  save  expense.^ 
In  the  event  of  the  death  of  an  executor,  to  wiiose  credit 
a  deposit  stands,  the  bank  should  pay  thereafter  to  the 
check  of  the  administrator  de  bonis  non  of  the  estate  of 
the  prior  deceased,  and  not  that  of  his  own  personal  repre- 
sentative.^ 

§  1 6 1 6.  In  the  case  of  deposits  by  corporations,  the  bank 
should  ascertain,  by  examination  of  the  corporate  charter 
and  by-laws,  what  officers  are  competent  to  draw  checks. 
If  the  corporation  should  furnish  to  the  bank  the  name  of 
the  party  authorized  to  draw  checks,  it  would  undoubtedly 
be  justified  in  paying,  and  should  pay,  checks  drawn  by 
such  party.'*  But  otherwise,  the  check  should  purport  on 
its  face  to  be  the  corporate  act.  And  in  England,  where 
three  railroad  directors  were  empowered  to  draw  checks, 
and  the  three  persons  who  were  in  fact  directors  signed 
their  individual  names  to  a  check  without  styling  themselves 
directors,  it  was  held  that  the  check  did  not  sufficiently 
purport  to  be  the  check  of  the  company,  although  it  bore 
the  impression  of  a  stamp  of  the  corporate  name,  and 
would  not  bind  it  even  in  the  hands  of  a  bona  fide  holder 
for  value.^  But  in  cases  where  the  money  has  been  paid 
out  by  the  bank  on  such  checks,  if  it  can  be  traced  to  the 
corporation  and  proved  to  have  been  actually  received  by 
it,  the  bank  will  be  entitled  to  charge  the  amount  in  account 
against  the  corporation.^ 

'  Morse  on  Banking,  267.  "^  Shortbridge's  Case,  12  Vesey,  Jr.,  28. 

'  Alleghany  Bank's  Appeal,  48  Penn.  St.,  328  ;  Farmers',  etc..  Bank  v.  King, 
57  Penn.  St.,  364. 

*  Fulton  Bank  v.  N.  Y,  &  Sharon  Canal  Co.,  4  Paige,  127. 

'  Serrell  v.  Derbyshire  R.R.  Co.,  9  C.  B.,  811  ;  19  L.  J.  C.  P.,  377. 

•  In  re.  Norwich  Town  Co.,  22  Beav.,  143. 


§  idiya.  WHAT  checks  should  be  paid  by  the  bank.     627 

§  i6i6a.  The  usage  of  a  corporation  in  drawing  its 
checks,  and  customary  manner  of  conducting  its  business, 
may  justify  the  payment  of  checks  drawn  according  to 
such  course  of  business  even  when  the  proper  officers  dc 
not  sign  the  checks.  And  it  has  been  recently  held  by  the 
United  States  Supreme  Court  that  where  checks  had  been 
drawn  by  the  president  and  secretary  of  a  corporation  on  a 
bank  which  acted  as  its  treasurer  during  a  long  period,  and 
without  objection,  the  bank  had  a  right  to  assume  their 
authority  to  draw  checks,  or  over-checks,  and  to  assume 
also  that  the  money  was  obtained  and  used  by  the  corpora- 
tion ;  and  that  the  fact  that  such  officers  were  illegally 
elected  would  not  affect  the  validity  of  their  transactions  in 
the  premises.^ 


SECTION  VL 

WHAT  CHECKS  SHOULD  BE  PAID  BY  THE  BANK. 

§  161 7.  When  a  check  is  presented  to  the  bank,  all  that 
the  holder  can  require  of  the  bank  is  its  payment ;  he  can 
not  require  its  certification  or  acceptance,  for  although  the 
bank  may  consent  to  the  holder's  request  to  certify  it,  if  it 
so  pleases,  it  is  by  no  means  compellable  to  do  so.'"^ 

§  1617^.  Checks  are  payable  according  to  priority  of 
presentment. — But  the  holder  has  a  right  to  demand  pay- 
ment on  presentment  of  the  check,  and  if  a  number  of 
checks  be  presented  during  the  day,  it  is  the  duty  of  the 
bank  to  pay  them  according  to  priority  in  the  time  of  pre- 
sentment at  its  counter,  and  not  according  to  their  priority 
in  date.  It  has  no  right  to  distribute  a  fund  pro  rata 
amongst  several  check  holders  when   it  has  not  sufficient 

*  Mahoney  Mining  Co.  v.  Anglo  California  Bank,  Morrison's  Transcript,  3d 
vol.,  No.  2,  p.  180.     See  also  same  case  in  vol.  3,  No.  5,  p.  785. 
'  Bradford  v.  Fox,  39  Barb.,  203  ;  ante,  §  1601. 


628  CHECKS.  §   1618. 

funds  to  pay  all ;  nor  has  it  a  right  to  pay  a  check  subse- 
quently presented,  to  the  exclusion  of  one  previously  pre- 
sented.^ The  rule  for  it  to  follow  is,  "  first  come  first 
served,"  and  a  departure  from  it  renders  it  responsible  to 
the  first  comer.^  When  a  number  of  checks  are  presented 
at  once,  and  their  gross  amount  is  beyond  the  funds  of  the 
drawer,  it  would  seem  that  the  bank  is  not  bound  to  pay 
any  of  them  ;^  but  it  has  been  said  that  in  such  a  case,  "  if 
the  bank  choose  to  pay  the  first  in  date,  it  would  be  diffi- 
cult to  see  on  what  ground  either  the  drawer  or  the  holders 
of  the  others  could  complain."  ■*  And  it  seems  but  right 
to  let  priority  of  date  decide  when  there  is  no  priority  in 
presentment. 

§  1 6 1 8.  Bank  may  require  proof  of  payee's  identity,  and 
may  have  reasoitable  time  to  ascertain  gen2iineness  of  in- 
dorsers  signature. — The  bank  should  not  pay  the  check 
drawn  upon  it  save  to  the  actual  payee,  or  to  his  order  ;  and 
if  it  mistakes  the  payee's  identity  when  the  check  is  unin- 
dorsed, it  is  responsible.^  It  is  also  entitled  to  a  reasonable 
time  to  ascertain  the  genuineness  of  an  indorser's  signature 
when  the  check  is  payable  to  order.^  Yet  if  the  bank 
should  pay  an  unindorsed  check  payable  to  a  certain  person 
or  order,  to  the  real  assignee  thereof,  the  payment  would 
be  good,  the  money  having  reached  the  hands  of  the  party 
actually  entitled  to  receive  it.'' 

§  i6i8<^.  The  bank  should  not  pay  a  check  after  7iotice 
of  its  loss  or  before  maturity.^ — "  Payment  of  the  check 
by  the  bank  before  it  is  due  will  not  be  a  discharge,  unless 

*  Matter  of  Brown,  2  Story,  502  ;  2  Parsons  N.  &  B.,  78  ;  Morse  on  Banking, 
248,  249. 

"  Morse  on  Banking,  248,  249. 

'  Dykers  v.  Leather  Man.  Bank,  1 1  Paige,  611.  *  2  Parsons  N.  &  B.,  'jZ. 

'  Dodge  V.  National  Exchange  Bank,  30  Ohio  St.,  i  ;  Risley  v.  Phoenix  Bank, 
18  N.  Y.  S.  C.  (II  Hun),  484. 

*  Robarts  v.  Tucker,  4  E.  L.  &  Eq.,  236  ;  ante,  %  1571. 

'  Freund  v.  Importers'  &  Traders'  N.  B.,  76  N.  Y.,  352. 

*  Godin  V.  Bank  of  Commonwealth,  6  Duer,  76 ;  Morse  on  Banking,  260. 


§  l6lS5.     WHAT  CHECKS  SHOULD  BE  PAID  BY  THE  BANK.   629 

made  to  the  real  proprietor  of  it ;  and,  therefore,  where  a 
banker,  contrary  to  usage,  paid  the  check  before  it  bore 
date,  which  had  been  lost  by  the  payee,  it  was  held  that  he 
was  liable  to  repay  the  amount  to  the  person  losing  it.  In 
this  case,  although  the  holder  had  the  legal  title  arising 
from  the  possession  of  the  check,  yet  he  was  not  dona  fide 
the  holder,  with  authority  to  collect,  and  as  the  banker  paid 
it  out  of  the  usual  course  of  business,  he  paid  it  at  the  risk 
of  being  obliged  to  pay  it  again,  if  the  party  presenting  it 
had  not  just  right  to  receive  it."  ^  The  bank  can  not  charge 
the  check  against  the  depositor's  account,  unless  it  makes 
payment  of  it  in  the  usual  course  of  business.  On  this 
principle  it  was  held,  in  Connecticut,  that,  where  the  plain- 
tiffs who  received  the  check  from  a  third  party  payable  to 
their  order,  indorsed  it  to  the  order  of  the  bank  cashier, 
enclosed  it  in  an  envelope,  and  sent  it  to  the  bank  for  de- 
posit by  a  messenger  whom  they  knew  to  be  untrustworthy, 
and  the  latter  removed  the  envelope,  received  payment  of 
the  bank,  and  then  absconded  with  the  amount — the  plain- 
tiffs were  entitled  to  recover  the  amount  of  the  bank.^ 

§  161 8<$.  Whether  death  of  drawer  revokes  check. — The 
death  of  a  drawer  of  a  check,  as  is  stated  by  many  authori- 
ties, operates  as  a  revocation  of  the  authority  of  the  bank 
or  banker  upon  which  it  is  drawn  to  pay  it ;  and  though  it 
is  conceded  that  if  the  bank  or  banker  pay  the  check  be- 
fore notice  of  the  death,  the  payment  is  valid,^  otherwise, 
it  has  been  considered,  it  is  not.''  This  view  has  been  gener- 
ally based  upon  the  decision  in  the  English  case  of  Tate  v. 

'  Wheeler  v.  Gould,  20  Pick.,  545,  Shaw,  C.  J.,  citing  Da  Silva  v.  Fuller  from 
Chitty  on  Bills. 

'  Bristol  Knife  Co,  v.  First  Nat.  Bank,  41  Conn.,  421.  Phelps,  J.,  and  Foster, 
J.,  dissenting. 

'  Byles  on  Bills  (Sharswood's  ed.),  24;  Chitty  on  Bills  (13  Am.  ed.),  429;  2 
Parsons  N.  &  B.,  82. 

*  Ibid.  Morse  on  Banking,  260,  where  it  is  said :  "  At  the  instant  of  his 
(the  drawer's)  death,  the  title  to  his  balance  vests  in  his  legal  representatives, 
and  his  own  order  is  no  longer  competent  to  withdraw  any  part  of  that  which 
is  no  longer  his  property." 


6^0  CHECKS.  §   l6lS5. 


Hilbert/  where  it  was  held  that  the  gift  of  a  common  check 
on  a  banker  payable  to  bearer  was  not  a  valid  donatio  mor- 
tis causa,  or  an  appointment  or  disposition  in  the  nature  of 
it.  It  is  quite  true  that  authority  to  an  agent  is  revoked 
as  a  general  rule  by  death  of  the  principal ;  ^  but  this  doc- 
trine is  qualified  by  the  equally  well-settled  principle,  that 
if  the  authority  be  coupled  with  an  interest  in  the  thing 
vested  in  the  agent,  the  death  of  the  principal  operates  no 
revocation.^  Now  where  a  check  is  given  to  the  payee  for 
a  valuable  consideration  (and  the  check  imparts  value),  the 
authority  to  the  payee  to  collect  the  amount  from  the  bank 
is  coupled  with  a  vested  interest  in  the  check.  He  can  sue 
the  drawer  upon  the  check  if  it  be  dishonored.'*  The  draw- 
ing of  the  check  without  funds  to  meet  it  is  a  fraud,^  and 
the  English  case  above  referred  to  does  not  determine,  as 
has  been  supposed,  that  when  the  check  is  given  for  value, 
the  authority  of  the  banker  to  pay  it  is  revoked.  The 
death  of  the  drawer  of  an  ordinary  bill  of  exchange  does 
not  revoke  it,^  and  we  can  discern  no  principle  of  law 
which  allows  the  death  of  the  drawer  to  affect  the  rights 
of  a  check  holder  who  has  given  value  for  it.^  The  idea 
that  the  death  of  the  drawer  of  a  check  given  to  the  payee 
for  value,  operates  a  revocation,  is,  as  it  seems  to  us,  a  total 
misconception  of  the  law.  For  a  check  is  a  negotiable  in- 
strument as  often,  if  not  more  frequently,  given  for  value, 
than  any  other  species  of  commercial  paper.  The  drawer 
is  deemed  the  principal  debtor;^  and  it  is  anomalous  to 

*  2  Vesey,  Jr.,  ii8  (1793)  ;  4  Brown  Ch.  Cas.,  286;  Chitty,  Jr.,  on  Bills,  510. 
""  Story  on  Agency,  §  488.  '  Story  on  Agency,  §§  488,  489. 

«  Ante,  §§  1 587,  1 588,  1 589.  '  §§  1 596  et  seq. 

«  Seea;z/^,  §498;  Chitty  on  Bills,  282,  287  ;  Cutts  v.  Perkins,  12  Mass.,  206; 
Edwards  on  Bills,  454  ;  2  Parsons  N.  &  B.,  287. 

'  In  Thomson  on  Bills,  244,  it  is  said :  "  It  has  been  held  in  England  that  a 
check  on  a  banker  is  revoked  by  the  grantor's  death,  so  that  payment  of  it  by 
the  banker  will  not  be  good  unless  it  is  made  before  he  hears  of  the  drawer's 
death.  It  seems  to  be  considered  as  a  kind  of  mandate.  In  Scotland,  such  a 
check,  being  an  assignment  of  the  funds  in  the  banker's  hands,  might  be  com- 
pleted by  presentment  to  him  even  after  the  drawer's  death."     Morse,  260. 

*  Atite,  §  1 587,  and  cases  cited. 


5   l6l8i$.    WHAT  CHECKS  SHOULD  BE  PAID  BY  THE  BANK.       63  1 

hold  that  his  death  in  anywise  lessens  his  obligations,  or 
the  right  of  the  bank  to  pay  it,  when  given  for  valuc.^ 

'  Burke  v.  Bishop,  27  La.  An.,  465  (1875) ;  21  Am.,  Rep.,  567,  seems  to  sus- 
tain these  views,  though  it  was  declared,  as  is  conceded  :  "  If  it  had  been  a 
check  drawn  by  Hampton  Elliott,  and  he  had  died  before  it  was  presented,  and 
the  check  was  a  donation,  the  check  would  have  been  worthless,  because  by  de- 
mise of  the  donor,  his  mandate  to  his  agent,  the  bank,  was  revoked."  In  an 
article  published  in  the  Bankers'  Magazine,  of  New  York  city,  for  February, 
1879,  p.  619,  the  author  has  amplified  the  views  which  are  here  presented  in  the 
text ;  and  from  that  article  the  following  extract  is  made  :  "  It  is  an  entire  mis- 
conception of  the  nature  of  a  check,  as  we  think,  to  look  upon  it  as  a  mere 
mandate.  It  imports  that  the  payee  has  given  value  for  the  right  to  draw  the 
funds  from  the  banker,  and  to  hold  that  it  is  a  mere  mandate  to  the  banker  to 
pay  the  amount  it  calls  for,  is  to  lose  sight  of  its  higher  and  more  comprehen- 
sive character,  that  of  a  negotiable  instrument,  employed  as  a  necessary  instru- 
ment of  commerce,  circulating  from  hand  to  hand  almost  as  freely  as  money; 
and  is  to  allow  the  greater  to  be  swallowed  up  in  the  less.  If  it  is  to  be  re- 
garded as  an  authority  to  the  banker  to  pay  the  amount,  it  ought  also  to  be  re- 
garded as  an  authority  to  the  payee,  or  other  holder,  to  receive  the  amount. 
Being  presumably  given  to  the  payee  for  value,  the  authority  to  him  to  receive 
the  amount  is  presumably  an  authority  coupled  with  an  interest.  Then  it  is  a 
double  mandate.  In  so  far  as  it  is  an  authority  coupled  with  an  interest,  it  is  ir- 
revocable. No  citation  of  authority  is  needful  for  this  universally  recognized 
doctrine.  If  the  banker's  authority  to  pay  be  revoked  by  the  drawer's  death,  we 
are  driven  to  this  paradoxical  conclusion :  that  an  authority  coupled  with  an  in- 
terest may  be  practically  revoked  and  annulled  by  the  revocation  of  another  au- 
thority not  coupled  with  an  interest ;  and  the  law  would  appear  in  this  state  of 
self-stultification  that  the  authority  to  collect  the  amount  continues,  and  is  irre- 
vocable, while  the  authority  to  pay,  which  is  necessary  to  its  exercise,  ceases  by 
revocation  !  Is  not  this  reductzo  ad  absurduin?  According  to  the  view  which 
we  have  elsewhere  taken  of  a  check,  it  operates  as  an  assignment  of  the  fund 
upon  which  it  is  drawn,  as  between  the  drawer  and  the  payee,  or  holder,  and  the 
assignment  binds  the  bank  as  soon  as  it  is  notified  thereof  by  the  presentment 
of  the  check.  See  Daniel  on  Negotiable  Instruments,  §  1643.  But  we  acknowl- 
edge that  this  is  not  the  predominant  view,  and  that  the  numerical  weight  of 
authority  is  agamst  it.  Be  this  as  it  may,  it  is  universally  conceded  that  the 
check  operates  as  an  assignment  of  the  fund  pro  tanto,  as  soon  as  the  bank 
consents  to  it  by  certification  or  payment.  This  being  the  case — the  assignment 
depending  not  upon  the  drawer  who  has  by  the  act  of  drawing  given  his  con- 
sent, and  not  upon  the  act  of  the  banker — we  can  not  see  how  the  death  of  the 
party  who  has  consented  can  annul  the  right  of  another  to  acquiesce  and  con- 
cur in  his  act.  Professor  Parsons,  in  a  note  to  his  text,  takes  this  view.  Says 
he:  'The  right  on  the  part  of  the  drawee  to  complete  the  assignment  would 
seem  to  be  a  privilege  of  his  own,  and  it  is  somewhat  difficult  to  see  how  the 
death  of  the  drawer  can  affect  it.  The  drawer  has  given  the  holder  a  written 
instrument  authorizing  the  latter  to  apply  to  the  drawee  for  the  assignment  of 
certain  funds.  The  holder  of  the  bill  who  has  received  it  for  a  sufficient  con- 
sideration has  an  interest  in  this  authority — not  merely  in  the  proceeds  of  the 
bill,  but  in  the  bill  itself;  and  the  rule  is,  that  an  authority  coupled  with  an  in- 
terest is  irrevocable.'  2  Parsons  N.  &  B.,  287,  note.  This  language  is  used  in 
respect  to  an  ordinary  bill ;  but  the  author  evidently  regards  it  as  equally  appli- 
cable to  a  check.  We  concede  that  if  the  check  were  a  gift  to  the  payee,  and 
the  banker  knew  that  fact,  the  death  of  the  drawer  would  operate  as  a  revoca- 
tion of  the  banker's  authority  to  pay  it.  In  such  a  case  the  authority  to  the 
donee  to  collect,  as  well  as  that  of  the  banker  to  pay,  is  not  coupled  with  such 
an  interest  as  to  continue  them  in  force.     '  If  it  had  been  a  check  drawn  by 


632  CHECKS.  §   1 6 19. 

§  1 619.  Bank  may  take  time  to  ascertain  if  there  are 
f tends  to  meet  check. — If  the  bank  is  not  in  funds  to  pay 
the  check  at  the  time  it  is  presented,  it  should  at  once  re- 
fuse payment.  If  there  is  a  doubt  whether  or  not  it  is  in 
funds,  the  bank  may  take  time  to  examine  or  run  up  its 

Hampton  Elliott,  and  he  had  died  before  the  check  was  presented,  and  the  check 
was  a  donation,  the  check  would  have  been  worthless,  because,  by  the  demise  ot 
the  donor,  his  mandate  to  his  agent,  the  bank,  was  revoked,'  is  the  language  ot 
the  Supreme  Court  of  Louisiana,  in  Burke  v.  Bishop,  27  La.  An.,  465  (1875).  In 
such  a  case  all  that  is  said  in  Tate  v.  Hilbert  would  apply.  But  the  banker  is 
not  to  presume  that  a  check  is  a  donation.  To  require  such  a  presumption  on 
his  part,  is  to  make  him  presume  what  in  ninety-nine  cases  out  of  a  hundred  is 
not  the  fact,  is  to  make  him  presume  contrarj-  to  what  a  purchaser  may  presume  ; 
is  to  except  a  check  from  the  universally  accepted  rule  of  the  law  merchant  that 
negotiable  instruments  import  value  ;  and  is  to  attach  one  presumption  to  the 
check  while  the  drawer  is  alive,  and  another  to  the  same  paper  upon  his  demise. 
In  the  case  of  Cutts  v.  Perkins,  12  Mass.,  206,  a  master  of  a  ship  in  London 
bound  to  the  U.  S.,  having  goods  on  board  consigned  to  a  Boston  merchant, 
and  being  indebted  to  a  London  merchant,  drew  a^bill  on  the  consignee  in  favor 
of  the  London  merchant  for  the  amount  of  the  freight  money.  Before  the  bill 
was  presented  the  master  died,  and  it  was  contended  that  his  death  operated  as 
a  revocation  of  the  bill.  Putnam,  J.,  delivering  the  opinion  of  the  court,  said  : 
'  Upon  the  delivery  of  a  bill  of  exchange  to  the  payee  the  liability  of  the  drawer 
becomes  complete.  Some  writers  have  holden  that  where  the  indorsement  was 
intended  as  a  mere  authority  to  enable  one  to  receive  the  money  for  the  use  ot 
the  indorser,  the  death  of  the  indorser  should  operate  as  a  revocation  of  the 
authority.  But  the  law  is  clearly  otherwise,  when  the  authority  is  coupled  with 
an  interest,  and  in  such  case  the  death  of  the  drawer  will  not  be  a  revocation  of 
the  request  on  the  drawee  to  accept.'  This  case,  as  we  think,  correctly  states 
the  law.  If  the  death  of  the  drawer  revokes  the  drawee's  right  to  accept  and 
pay  the  bill,  then  an  indorser's  death  must  also  revoke  it,  for  he  is  regarded  as 
a  new  drawer,  and  thus  confusion  and  uncertainty  are  introduced  into  the  law 
merchant  in  respect  to  instruments  which  of  all  others  should  be  most  sure  and 
stable.  In  Billing  v.  De  Vaux,  3  Man  &  Gr.,  565,  a  bill  drawn  in  favor  of  the 
plaintiffs  was  accepted  by  letter  after  the  drawer's  death.  The  payee  sued  the 
acceptor,  and  he  was  held  liable.  Tindal,  C.  J.,  said  :  '  I  am  not  aware  of  any 
principle  of  law  by  which,  upon  the  death  of  the  drawer  of  the  bill,  the  right 
and  liabilities  of  the  parties  thereto  were  at  all  varied.'  Coltman,  J.,  said  :  '  The 
other  circumstance  relied  on  is  that  Mersing,  the  drawer,  was  dead  at  the  time 
the  letter  was  written  to  him,  and,  therefore,  that  it  is  to  be  considered  as  mere 
waste  paper.  Possibly  that  might  be  the  case  were  its  effects  confined  to  the 
parties  themselves.  But  here  the  bill  had  been  put  in  circulation.'  The  bill  was 
in  the  hands  of  the  payee.  Maule,  J.,  said  :  '  The  letter  (of  acceptance)  operates 
for  the  benefit  of  Mers'ing's  (the  drawer's)  estate,  for  his  death  could  not  vary 
the  rights  and  liabilities  of  third  parties.'  We  think  this  case  direct  authority 
as  against  the  inferences  which  have  been  drawn  from  Tate  v.  Hilbert.  Rights 
accrue  upon  the  delivery  of  a  bill  or  check  to  the  payee.  They  are  not  varied 
by  the  subsequent  death  of  the  drawer.  The  drawee  of  the  bill  may  accept  and 
pay  it ;  the  drawee  of  the  check  may  also  honor  it ;  for  it  is  presumably  given 
for  consideration,  and  its  payment  operates  for  the  benefit  of  the  estate  of  the 
deceased,  which,  upon  its  dishonor,  would  be  bound  for  its  payment  out  of  gen- 
eral assets.  It  is  to  be  hoped  that  the  erroneous  doctrines  of  the  text  writers 
may  soon  be  brushed  away,  and  that  the  clear  principles  which  apply  to  this  im- 
portant question  may  be  universally  recognized  and  adopted." 


§   1619.     WHAT  CHECKS  SHOULD  BE  PAID  BY  THE  BANK.        633 

account  in  order  to  ascertain,  but  it  should  be  careful  not 
to  detain  the  check  an  unreasonable  time.  It  has  been 
held  that,  according  to  the  usage  of  trade,  a  check  drawn 
on  a  banker  in  the  city  of  London  "  may  be  retained  by 
the  banker  on  whom  it  is  drawn  until  five  o'clock  p.m.  of 
the  day  on  which  it  is  presented,  and  if  there  be  no  assets, 
it  may  then  be  returned  to  the  person  presenting  it,  and 
that  too  althouijh  it  has  been  in  the  first  instance  cancelled 
by  mistake,  as  intended  to  be  honored."  *  This  privilege  of 
retention  of  checks  until  five  o'clock  is  applicable  by  cus- 
tom only  to  the  city  of  London  ;  but  it  has  been  held  in 
the  United  States  that  a  bank  might  return  a  check  at  any 
time  within  twenty-four  hours,  on  discovering  that  there 
were  no  funds  to  meet  it,  without  being  estopped  by  its 
detention  for  that  period  from  showing  that  fact.^ 

'  ^lorse  on  Banking,  251. 

*  Overman  v.  Hoboken  City  Bank,  31  N.  J.  L.  R.  (2  Vroom),  563.  In  this 
case  the  check  was  presented  to  the  Hoboken  City  Bank  between  tweh-e  and  one 
o'clock  on  October  31st.  On  the  following  day,  about  twelve  o'clock,  noon,  that 
bank  returned  it  to  the  Ocean  Bank,  from  which  it  was  received,  marked  "  not 
good."  It  was  held  that  the  retention  of  the  check  for  this  period,  a  little  less 
than  twenty-four  hours,  was  not  implied  acceptance,  and  created  no  obligation 
on  the  Hoboken  Bank  to  pay  it.  Beasley,  C.  J.,  saying:  "There  can  be  no 
doubt  that  the  drawee  of  a  bill  of  exchange  or  check  can  so  deal  with  it  that, 
although  he  make  no  express  acceptance,  the  law,  with  an  eye  to  the  public  inter- 
est, will  infer  an  acceptance  on  his  part.  Thus,  if  such  drawee  were  to  return  the 
bill  in  his  possession  contrary  to  the  usual  mode  of  intercourse  between  himselt 
and  the  holder,  and  under  such  circumstances  as  to  induce  a  reasonable  belief 
that  it  had  been  honored,  such  conduct  might  amount  in  law  to  a  constructive 
acceptance.  But  no  case  was  cited  upon  the  argument,  and  none  has  been 
found  in  which  it  was  ruled  that  a  mere  retention  of  the  bill  by  the  drawee,  such 
retention  being  unqualitied  by  any  adventitious  circumstance,  such  as  a  usage  of 
trade,  cr  an  understood  mode  of  intercourse  between  the  parties,  will,  by  intend- 
ment of  law,  be  considered  equivalent  to  an  acceptance  of  such  bill.  Treating 
the  subject  on  principle,  we  must  arrive  at  the  opposite  result.  It  is  the  business 
of  the  holder  of  the  bill  of  exchange  or  check  to  present  it  for  acceptance  or 
payment.  Upon  such  presentation,  the  drawee  has  a  reasonable  time  to  inspect 
his  accounts  and  ascertain  whether  he  is  in  funds  to  meet  the  demand  ;  and  it 
has  been  said  that  such  reasonable  time  is  the  space  of  tw^enty-four  hours 
(Bellasis  v.  Hester,  i  Ld.  Raym.,  280).  After  the  lapse  of  this  reasonable  time, 
whatever  period  that  may  be,  the  holder  of  the  bill  has  a  right  to  know  whether 
the  bill  is  accepted  or  dishonored.  But  it  is  his  duty  to  wait  upon  the  drawee  to 
ascertain  this.  If,  therefore,  in  ttie  ordinary  course  of  commercial  l)usiness,  a 
holder  of  a  bill  leave  it  with  the  drawee,  or  send  it  to  him  by  mail,  and  such 
holder  do  not,  after  the  efflux  of  a  reasonable  time,  call  for  such  bill,  so  as  to 
ascertain  whether  it  has  been  accepted  or  not,  there  is  nothing  in  such  a  trans- 
action upon  which  to  raise  or  imply  an  engagement  to  accept,  or  a  contract  ol 
acceptance,     in  the  same  manner,  if  a  check,  instead  of  being  presented  at  the 


634  CHECKS.  §  1620. 

§  1620.  In  the  next  place,  as  to  part  paymeiit  of  checks. 
— If  the  bank  refuses  to  pay  the  check  in  full,  the  holder  is 
clearly  not  bound  to  receive  part  payment  thereof  ;  for  he 
has  an  order  for  so  much  money,  and  any  less  amount  fails 
to  meet  its  demands.  And,  on  the  other  hand,  it  is  fre- 
quently said,  that  a  bank  not  having  full  funds  to  pay  the 
check,  is  not  bound  to  pay  it  in  part,  as  it  is  entitled  to 
possession  of  the  check  as  its  voucher  against  the  drawer 
for  payment.^  Whether,  indeed,  it  would  be  justified  in 
making  part  payment,  if  so  inclined  to  do,  has  been  ques- 
tioned, and  a  late  writer  has  observed  that  "the  better  rule, 
perhaps,  would  be,  to  save  misunderstandings  and  compli- 
cations, that  if  a  bank  can  not  pay  in  full,  it  not  only  may 
not,  but  must  not  pay  at  all."^ 


counter  of  a  bank  by  the  holder  or  his  agent,  should  be  forwarded  by  mail,  such 
bank,  it  is  conceived,  in  the  absence  of  any  established  course  of  dealing 
between  itself  and  such  holder,  would  be  under  no  obligation  to  return  such 
check,  but  could  safely  wait  in  silence  the  further  action  of  such  holder.  In  the 
case  of  Jeune  v.  Ward,  2  Stark.,  326,  the  bill  had  been  retained  by  the  drawee 
over  a  month,  and  Lord  Ellenborough,  at  Nisi  Prius,  had  permitted  a  recovery 
as  on  an  acceptance,  having  put  the  case  to  the  jur}^  on  the  broad  ground  that  it 
was  the  duty  of  the  drawee  to  return  the  bill  to  the  holder.  But  the  Court  of 
King's  Bench,  considering  this  a  misdirection,  granted  a  new  trial,  and  Mr.  Jus- 
tice Bayley,  in  his  opinion  delivered  on  that  occasion,  thus  expresses  his  view  of 
the  law  :  '  Where  a  bill  of  exchange  is  left  for  acceptance  in  the  ordinary  course 
of  commercial  transactions,  it  is  the  duty  of  the  party  to  call  for  it  within  a 
reasonable  time,  in  order  to  ascertain  whether  it  has  been  accepted  or  not, 
unless,  as  in  one  of  the  cases  cited,  some  other  and  peculiar  course  of  dealing 
has  been  established  between  the  parties.'  The  same  rule  is  laid  down  by  Chitty 
in  these  words :  '  But  it  would  seem  that  the  mere  detention  of  a  bill  for  an 
unreasonable  time  by  the  drawee  will  not  amount  to  an  acceptance,  although  the 
drawee  disfigure,  cancel,  or  destroy  the  bill.  And,  by  the  usage  of  trade  in 
London,  a  check  may  be  retained  by  a  banker  on  whom  it  was  drawn,  till  five 
o'clock  in  the  afternoon  of  the  day  on  which  it  is  presented  for  payment,  and 
then  returned,  though  it  has  been  previously  cancelled  by  mistake.  And  con- 
structive acceptances  ought  to  be  watched  with  the  utmost  care,  for  when  a 
party  puts  his  name  on  a  bill,  he  knows  what  he  does,  and  that  he  thereby 
enters  into  a  contract ;  but  it  is  laying  down  a  very  loose  and  dangerous  rule 
when  any  degree  of  latitude  is  given  to  these  constructive  acceptances.  The 
cases  which  have  been  determined  in  favor  of  these  constructive  acceptances 
have  all  been  decided  on  very  special  circumstances'  (Chitty  on  Bills,  175). 
Equally  clear  and  explicit  is  the  language  of  Prof  Parsons.  He  says  :  '  We 
think,  however,  both  on  authority  and  reason,  that  mere  detention  or  delay 
should  not,  of  itself  and  alone,  be  considered  as  the  equivalent  of  acceptance  ' " 
(2  Pars,  on  Bills  and  Notes,  284).     See  §  492,  vol.  i. 

'  Matter  of  Brown,  2  Story,  502  ;  St.  John  v.  Homans,  8  Mo..  382 ;  Murray  v. 
Judah,  6  Cow.,  490. 

^  Morse  on  Banking,  257.  The  author  continues  :  "  The  drawer  has  not  re- 
quested the  bank  to  make  a  part  payment.     He  has  demanded  that  it  do  a 


§   l620.      WHAT  CHECKS  SHOULD  BE  PAID  LY  THE  BANK.        635 

It  is  quite  clear,  we  think,  that  unless  the  holder  will  sur- 
render the  check,  the  bank  is  not  obliged  to  pay  it  in  part, 
for  it  is  entitled  to  the  check  as  a  voucher.  But  if  the 
holder  offers  to  give  up  the  check  on  receiving  part  pay- 
ment, we  can  not  perceive  that  the  bank  would  be  warranted 
in  refusing  such  part  payment  ;  and  so,  likewise,  if  the 
holder  would  place  a  sufficient  sum  to  the  drawer's  credit, 
to  make  the  check  good  before  drawing  out  the  amount. 
This  view  is  sustained  in  a  well-considered  nisi  p ruts  case,* 
and  was  previously  intimated  by  Professor  Parsons,  at  least 
to  the  extent  that  the  drawer  would  have  no  right  to  com- 
plain of  the  part  payment."^     Therefore,  we  should  say,  as 

certain  act,  to  wit,  pay  a  certain  sum  of  money  on  his  account.  If  it  will  not  do 
this  act  according-  to  the  terms  of  the  authority  embodied  in  the  request,  it  by 
no  means  follows  that  it  is  authorized  to  substitute  for  it  a  partial  performance, 
or  in  fact  a  materially  different  act.  Power  to  pay  only  a  part  of  a  sum  is  not 
necessarily  implied  in  an  order  expressed  without  alternative  to  pay  that  specific 
sum." 

*  Bromley  v.  Commercial  National  Bank  (Court  of  Common  Pleas  of  Philadel- 
phia), reported  in  American  Law  Times  for  November  and  December,  1872, 
vol.  V,  p.  219.  In  this  nisi priiis  case  it  appeared  that  the  payee  of  a  check  for 
$725  presented  it  to  the  bank  for  payment.  The  teller,  when  about  to  pay  it, 
discovered  that  there  was  but  $229.92  to  the  drawer's  credit.  The  payee  then 
demanded  the  payment  of  this  balance  to  him,  which  the  bank  refused.  The 
plaintiff  then  offered  to  deposit  to  the  drawer's  credit  a  sufficient  sum  to  make 
the  check  good,  if  the  bank  would  then  pay  it.  This  it  also  refused.  The  court 
held  that  the  payee  w'as  entitled  to  the  balance  in  the  bank. 

*  2  Parsons  N.  &  B.,  78,  79.  In  i  Parsons  N.  &  B.,  552,  it  is  said  :  "  In  our 
chapter  on  Checks  we  consider  the  law  of  presentment  in  regard  to  them  ;  here 
we  will  only  say,  that  the  exception  should  be  construed  more  liberally  with  re- 
gard to  checks,  at  least  where  the  check  is  drawn  on  a  public  banking  corpora- 
tion. These  corporations  do  not  receive  goods  on  consignment,  therefore  there 
can  be  no  reason  to  expect  that  the  check  will  be  honored  on  any  such  grounds 
as  this.  There  would  seem  to  be  scarcely  any  reasonable  grounds  to  expect 
payment,  and  consequently  any  right  to  draw  a  check,  unless  the  bank  had  suf 
ficient  funds  to  pay  it."  In  a  note  subjoined  to  the  foregoing  observations,  the 
learned  author  acids  :  "  We  are  not  aware  of  any  authority  for  this.  In  Edwards 
V.  Moses,  2  Nott  &  McC,  433,  all  the  facts  that  appeared  were,  at  the  time  when 
the  check  should  have  been  presented,  the  drawer  had  withdrawn  all  his  funds. 
Richardson,  J.,  said  that  it  was  a  mere  case  of  overdrawing,  and  due  present- 
ment and  notice  were  held  necessary.  But  we  doubt  the  authority  of  this  case. 
In  Cruger  v.  Armstrong,  3  Johns'  Cas.,  5,  the  check  was  drawn  for  $2,500.  On 
the  day  of  its  date  the  bank  paid  out  checks  of  the  drawer  to  the  amount  of 
$3,500,  and  at  the  close  of  banking  hours  a  balance  was  left  of  S400.  Present- 
ment was  held  necessar}\  Lewis,  C.  J.,  dissenting.  The  authority  of  this  case 
may  be  somewhat  doubtful.  Radcliffe,  J.,  said  that  presentment  was  necessary, 
though  notice  might  not  have  been,  and  founds  his  opinion  on  this,  which  is 
clearly  incorrect.  Kent,  J.,  said  :  '  In  the  present  case  Uiere  is  no  such  demand 
proved,  nor  is  there  anything  in  this  case  to  take  it  out  of  the  general  rule.  It 
can  not  be  considered  as  a  check  fraudulently  drawn  without  effects  in  the 


636  CHECKS.  §  162I. 

the  holder  consents,  the  bank  would  have  no  right  to  re- 
fuse it. 

§  162 1.  In  the  fourth  place,  as  to  what  i$  payment  by 
the  bank. — Where  a  check  drawn  upon  a  bank  is  presented 
to  it  by  the  holder,  for  deposit  to  his  credit,  and  the  amount 
is  credited  to  the  holder,  the  legal  effect  is  precisely  the 
same  as  though  the  money  were  first  paid  out  to  him,  and 
then  by  him  deposited  in  the  bank.  It  is  the  right  of  the 
bank  to  refuse  to  pay  it,  or  it  may  reject  it  conditionally.* 
But  if  it  accepts  the  check  as  valid,  and  pays  out  the  money 
(or  what,  as  some  authorities  hold,  is  the  same  thing,  cred- 
its it  to  the  holder's  account),  it  can  not  at  any  time  there- 
after, even  on  the  same  day,  returfi  the  check  on  discover- 
ing that  there  were  no  funds  to  meet  it,  and  cancel  the 
transaction,^  for  the  collection  is  then  treated  as  accom- 
plished. 

But  if  the  check  holder  merely  requested  the  check  to 
be  placed  to  his  account,  and  the  bank  does  not  debit  the 
drawer,  or  credit  the  holder  with  the  amount,  or  cancel  the 
check,  it  may  return  the  check  on  discovering  that  it  was  an 
overdraft,  provided  it  does  so  in  time  to  give  the  holder 
due  notice  of  dishonor.  "  If,"  says  Lord  Denman,  C.  J., 
in  an  English  case,  "  on  delivering  the  check,  he  (the 
holder)  had  said  at  once,  'cash  on  this  check,'  or  'give  me 
credit  for  it,'  he  must  have  drawn  from  Reader  (the  bank 
clerk)  a  distinct  answer ;  but  by  merely  saying,  '  place  this 
to  my  account,'  he  leaves  it  upon  the  usual  terms,  and  sub- 
hands  of  the  banker.  The  presumption  is  that  the  check  would  have  been  paid 
if  diligently  presented  ;  at  least,  there  is  not  sufficient  evidence  to  justify  a  resort 
to  the  drawer  without  having  made  the  experiment.'  The  answer  to  this  may 
perhaps  be,  that  the  drawer  is  bound  to  know  what  his  balance  in  bank  is,  and, 
as  the  holder  is  not  bound  to  present  a  check  in  any  case  until  the  next  day,  and 
as  there  were  checks  outstanding,  the  amount  of  which  added  to  that  of  the 
check  in  suit  exceeded  his  balance,  the  presumption  of  payment  would  have 
been  slight." 

»  Pratt  V.   Foote,  9  N.  Y.,  463  ;  Oddie  v.  National  City  Bank,  45  N.  Y.,  735  ; 
Morse  on  Banking,  320,  321. 

^  Oddie  V.  National  City  Bank,  45  N.  Y.,  735   (1871).     See  Irving  Bank  v. 
Wetherald,  36  N.  Y.,  337. 


^   1623.  PAYMENTS    BY    CHECKS.  637 

ject  to  the  contingencies  to  which  bills  or  checks  so  paid 
in  are  liable;  and  if  he  received  notice  of  dishonor  in 
proper  time,  it  was  sufficient."^ 

§  1622.  Mr.  Morse  observes  that  "if  the  bank,  as  prob- 
ably happens  in  the  great  majority  of  cases,  simply  takes 
the  check  without  especial  remark,  and  notes  it  on  the  de- 
positor's bank-book,  thus  treating  it  in  every  respect  as  if 
it  were  a  check  upon  any  other  bank  instead  of  upon  itself, 
these  facts  do  not  create  a  payment  or  render  the  bank 
liable  for  the  amount  to  the  depositor.  The  officers,  hav- 
ing dealt  with  the  check  in  the  ordinary  form,  have  placed 
the  bank  only  under  the  ordinary  obligation,  to  wit,  that  of 
collecting  the  check  in  due  course  of  business  for  the  bene- 
fit of  the  depositor."^  In  California  it  is  considered  that 
if  the  depositor  hands  the  bank  officer  a  check  on  another 
bank,  and  it  is  credited  on  his  bank-book,  it  is  to  be  re- 
garded as  received  for  collection,  and  if  not  paid  may  be 
returned  and  cancelled  ;  and  that  the  same  rule  applies  even 
though  thfe  check  be  on  the  same  bank  where  the  depositor 
has  it  credited  on  his  account.^ 


SECTION  VII. 

PAYMENTS   BY   CHECKS. 

§  1623.  In  respect  to  payment  by  checks,  a  creditor  may, 
if  he  pleases,  accept  a  check  in  absolute  discharge  of  the 
debt ;  but  where  a  check  is  received  by  the  creditor,  there 
is  no  presumption  that  he  takes  it  in  payment,  but,  on  the 
contrary,  the  implication  is  that  it  is  only  to  be  regarded  as 
payment  if  cashed.''     And  so  strong  is  this  implication,  the 

'Boyd  V.  Emmerson,  2  Ad.  &  El.  184.     See  Oddie  v.  Nat.  Bank,  supra. 

''  See  Morse  on  Banking,  320.     See  posf,  §  1623. 

*  Nat.  Gold  Bank  v.  McDonald,  51  Cal.,  65. 

^Currie  v.  Misa,  L.  R.,  10  Exch.,  153  (1S75);  12  Moak  Eng.  R.,  592;  The 
People  V.  Baker,  20  Wend.,  602  ;  Small  v.  Franklin  Mining  Co.,  99  Mass.,  277  ; 
Ocean  Tow  Boat  Co.  v.  Ship  Ophelia,  11  La.  Ann.,  28  ;  Smith  v.  Miller,  43  N. 


638  CHECKS.  §   1623. 

check  being-  presumptively  drawn  upon  a  fund  deposited 
to  meet  it,  that  more  evidence  is  required  to  prove  that  a 
check  given  to  take  up  a  note  is  received  in  satisfaction 
and  discharge  than  is  demanded  when  one  note  is  given 
for  another.^  Certainly  the  holder  of  a  bill  or  note  is  not 
bound  to  give  it  up  on  receipt  of  a  check  until  the  latter 
is  paid.^  In  Massachusetts,  the  law  on  this  subject  has 
been  well  expressed,  the  court  saying :  "  A  check  is 
merely  evidence  of  a  debt  due  from  the  drawer.  Whether 
it  shall  operate  as  payment  or  not  depends  upon  two 
facts  :  first,  that  the  drawer  has  funds  to  his  credit  in  the 
bank  on  which  it  is  drawn  ;  and  second,  that  the  bank  is 
solvent,  or,  in  other  words,  pays  its  bills  and  the  checks 
duly  drawn  upon  it,  on  demand.  The  receipt  of  a  check, 
therefore,  before  presentment,  if  there  is  no  laches  on  the 
part  of  the  holder,  is  not  payment  of  the  debt  for  which  it 
is  delivered.  But  if  the  party  receiving  it  is  guilty  of  laches 
in  presenting  it,  and  the  bank  in  the  meantime  suspends 
payment,  he  thereby  makes  it  his  own,  and  it  shall  operate 
as  payment  of  his  debt,  the  drawer  having  funds  in  the 
bank  at  the  time  of  drawing  the  check,  and  not  having 
withdrawn  them."^  In  Virginia,  the  Supreme  Court  of  Ap- 
peals says,  Burks,  J.,  giving  the  opinion  :  "  The  giving  of 
a  check  for  an  antecedent  debt  is  not  an  absolute  payment 
and  extinguishment  of  the  debt  in  the  absence  of  an  agree- 
ment giving  it  that  effect.  Ordinarily,  it  is  only  a  means 
of  payment,  and  the  debt  will  not  be  extinguished  unless 


Y.,  171  (1870),  52  N.  Y.,  546  (1S73) ;  Bradford  v.  Fox.  38  N.  Y.,  289  ;  Sweet  v. 
Titus,  1 1  N.  Y.  S.  C.  (4  Hun),  639 ;  Davison  v.  City  Bank,  57  N.  Y.,  82  ;  Phil- 
lips V.  Bullard,  58  Ga.,  256  ;  Everett  v.  Collins,  2  Camp.,  515  ;  Tapley  v.  Mars- 
tens,  8  T.  R.,  451  ;  Heartt  v.  Rhodes,  66  111.,  351.  Check  may  by  agreement 
be  taken  as  absolute  payment,  and  whether  so  taken  or  not  is  question  of  fact 
for  the  jury.     Blair  &  Hoge  v.  Wilson,  28  Grat.,  165. 

'  Olcott  V.  Rathbone,  5  Wend.,  590  ;  2  Parsons  N.  &  B.,  86. 

^  The  People  v.  Baker,  20  Wend.,  602  ;  Barnet  v.  Smith,  10  Fost.,  256 ;  Hans- 
ard V.  Robinson,  7  B.  &  C,  90 ;  Moore  v.  Barthrop,  i  B.  &  C,  5  ;  Pearce  v, 
Davis,  I  Moody  &  R.,  365;  Ward  v.  Evans,  12  Mod.,  521. 

3  Taylor  v,  Williams,  1 1  Mete,  44 ;  Sweet  v.  Titus,  1 1  N.  Y.  S.  C.  (4  Hun) 
639. 


5   1 624-  PAYMENTS    BY    CHECKS.  639 

and  until  the  check  be  paid,  or  unless  loss  be  sustained  by 
the  drawer  in  consequence  of  the  laches  of  the  holder,  in 
which  case  the  debt  will  be  discharged  in  proportion  to  the 
loss  sustained."^  When  checks  deposited  with  a  bank,  and 
credited  in  the  depositor's  pass-book,  are  taken,  in  the  ab- 
sence of  any  special  agreement,  they  are  deemed  to  be 
taken  for  collection,  and  not  as  cash.  They  may  be  after- 
ward returned  and  the  credit  annulled  if  there  are  no  funds 
to  meet  them  ;  and  this  is  so  whether  the  check  is  drawn 
on  the  same  bank  or  another.^ 

§  1624.  Whether  agent  for  collection  may  receive  check 
in  payincnt. — It  is  frequently  the  case  that  a  bank  or  other 
agent  for  collection  of  a  bill  or  note  receives  the  check  of  a 
debtor  and  surrenders  up  the  bill  or  note  to  him.  This 
practice  was  sustained  in  an  English  case,  where  it  was 
held  that  a  banker  in  London,  to  whom  bills  of  exchange 
had  been  sent  for  collection,  was  not  guilty  of  negligence 
toward  his  correspondent  in  surrendering  them  up  on  re- 
ceipt of  checks  drawn  upon  a  banker  in  London,  though 
the  checks  were  dishonored  for  want  of  funds.  This  de- 
cision was  based  upon  the  ordinary  course  of  trade  and 
business  of  bankers.^  But  Mr.  Chitty  observes  :  "  That 
doctrine  may  now  be  questionable,  and  most  of  the  London 
bankers,  on  presenting  a  bill  for  payment  in  the  morning, 
leave  a  ticket  where  it  lies  due,  and  declaring  that  '  in  con- 
sequence of  great  injury  having  arisen  from  the  non-pay- 
ment of  drafts  taken  for  bills,  no  drafts  can  in  future  be 
received  for  bills,  but  that  the  parties  may  address  them  for 
payment  to  their  bankers,  or  attach  a  draft  to  the  bill  when 
presented.'"*     And  Mr.  Byles  considers  that  the  practice 


'  Blair  &  Hoge  v.  Wilson,  28  Grat.,  171  (1877). 

"  National  Gold  Bank,  etc.,  v.  McDonald,  51  Cal.,64  (1875) ;  Morse  on  Banks. 
320,  321. 
'  Russell  V.  Hankey,  6  T.  R.,  12  (i794)- 
«  Chitty  on  Bills  (13  Am.  ed.)  [*369],  41 5- 


640  CHECKS.  §   1625. 

is  no  longer  usual  In  London,  and  doubts  if  it  would  be 
protected.^ 

§  1625.  In  United  States  agent  for  collection  shotild  7toi 
receive  check  i7t  payinent. — In  the  United  States  it  is  quite 
certain  that  a  banker  or  other  agent,  holding  a  bill  or  note 
for  collection,  would  act  at  his  peril  in  delivering  it  up  on 
receipt  of  a  check  for  the  amount  ;  and  that  if  the  debtor 
did  not  pay  the  amount  in  money,  and  the  drawer  or  in- 
dorsers  were  not  duly  notified,  they  would  be  discharged, 
and  the  loss  would  fall  upon  the  collecting  agent.^  If,  in- 
deed, on  the  same  day  that  the  bill  or  note  was  due  the 
agent  received  a  check  for  the  amount  and  delivered  up  the 
bill  or  note,  but  on  presentment  of  the  check  at  the  bank, 
and  refusal  of  payment  that  very  day,  it  had  been  returned, 
the  bill  or  note  reclaimed  and  protested,  and  the  drawer  or 
indorsers  duly  notified,  then  no  right  would  be  forfeited, 
but  the  liability  of  all  preserved.^  But  if  the  agent  neg- 
lected to  present  the  check  until  the  next  day,  it  would 
then  be  too  late  to  preserve  recourse  against  the  drawer,  if 
a  foreign  bill,  by  making  protest  ;  and  if  in  the  meantime 
the  bank  had  failed,  the  loss  would  fall  upon  the  agent. 
And  in  New  York,  the  Court  of  Appeals  would  seem 
to  have  gone  further  than  this,  and  to  hold  that  in  all 
cases  the  agent  must  present  the  check  on  the  very 
day  he  receives  it,  or  he  would  be  liable  for  any  re- 
sulting loss.  This  seems  to  us  the  correct  doctrine, 
for  the  agent  exceeds  authority  in  taking  the  check,  and 
therefore  acts  at  his  peril.'*     And  while  it  may  be,  and 

'  Byles  (Sharswood's  ed.)  [*24],  100. 

=  Whitney  v.  Esson,  99  Mass.,  no;  Turner  v.  Bank  of  Fox  Lake,  3  Keyes, 
425  ;  Smith  v.  Miller,  43  N.  Y.,  171  ;  52  N.  Y.,  546  ;  Rathbun  v.  Citizens' Steam- 
boat Co.,  76  N.  Y.,  376. 

3  Turner  v.  Bank  of  Fox  Lake,  3  Keyes,  425  ;  Smith  v.  Miller,  43  N.  Y.,  171. 

*  Smith  V.  Miller,  43  N.  Y.,  171  (1870),  Allen,  J.,  saying :  "  If  the  check  were 
worthless  when  given,  or  became  w^orthless  before  it  could  have  been,  with  rea- 
sonable diligence,  presented  for  payment,  the  loss  would  have  fallen  upon  the 
defendants,  and  they  would  not  have  been  discharged  from  their  liability,  unless 
the  plaintiffs  had  omitted  to  notify  them  in  due  time  of  the  non-payment  of  the 
bill.     There  would,  in  such  case,  be  no  loss  resulting  from  negligence 


5  1626.  PAYMENTS  BY  CHECKS.  64 1 

as  a  general  rule  undoubtedly  is,  the  practice  of  creditors, 
in  mercantile  communities,  to  take  checks  in  the  collection 
of  debts,  and  frequently  to  surrender  other  instruments  on 
receiving  them,  such  a  practice,  on  the  part  of  the  principal, 
falls  far  short  of  a  usage  which  would  permit  the  agent  to 
do  likewise.^  If,  however,  the  principal  received  the  check 
from  the  agent  for  collection,  who  took  it  instead  of  money, 
without  objection,  he  would  waive  his  right  to  hold  the 
agent  responsible,  and  ratify  the  transaction.^ 

§  1626.  Whether  receiving  certified  check  is  paymc?it. — 
It  not  infrequently  happens  that  a  depositor  intending 
to  offer  his  checks  to  creditors,  procures  their  certifica- 
tion by  the  bank  before  he  delivers  them  to  the  payees  ; 
and  the  questions  then  arise  whether  or  not  such  certified 
checks,  when    taken  for  debts,  are  to   be  regarded    as   so 

When  a  check  is  taken  instead  of  money,  by  one  acting  for  others,  as  was  done 
by  the  plaintiffs,  a  delay  of  presentment  for  a  day,  or  for  any  time  beyond  that 
within  which,  with  proper  and  reasonable  diligence,  it  can  be  presented,  is  at 
the  peril  of  the  party  thus  retaining  the  check  and  postponing  presentment.  It 
a  custom  can  exist  in  law,  and  does  exist  in  fact,  authorizing  such  delay  at  the 
risk  of  the  absent  principal,  it  must  be  shown  ;  it  can  not  be  presumed  to  exist 
without  evidence.  The  undisputed  evidence  in  this  case  shows  a  practice,  if  not 
inconsistent  with  the  existence  of  any  such  custom,  at  least  more  in  harmony 
with  the  relative  rights  and  obligations  of  the  parties  as  recognized  by  law  ;  and 
which,  had  it  been  adopted  by  the  plaintiffs,  would  have  prevented  all  loss.  The 
proof  is,  that  the  account  of  the  drawers  of  the  check  was  good  at  the  bank 
during  all  business  hours  of  the  day  on  which  it  was  drawn  ;  that  the  amount  to 
their  credit,  and  subject  to  their  draft,  was  more  than  sufficient  to  pay  all  out- 
standing checks  ;  and  if  this  check  had  been  presented  it  would  have  been  paid, 
or  certified  as  good,  which  would  have  been  equivalent  to  payment.  The  plain- 
tiffs had  two  full  hours  for  presenting  the  check It  was  the  duty  of  the 

plaintiffs  to  present  the  check  at  the  bank  at  least  during  the  day  on  which  they 
received  it,  and  obtain  either  the  money  or  a  certificate,  or  cause  the  same  to  be 
protested  for  non-payment  ;  and  not  having  done  so  they  were  chargeable  with 
negligence  and  the  consequent  loss."     See  S.  C,  52  N.  Y.,  546  (1S73). 

'  Whitney  v.  Esson,  99  Mass.,  1 10. 

'  Rathbun  v.  Citizens'  Steamboat  Co.,  76  N.  Y.,  376  (distinguishing  Walker  v. 
Walker,  5  Heiskell,  425),  Church,  C.  J.,  saying:  "The  circumstances  here  are 
capable  of  but  one  construction,  according  to  the  mode  and  habits  of  business, 
and  that  is,  that  the  plaintiffs  adopted  and  ratified  the  act  of  the  carrier  (in  taking 

the   check)    by  the  unqualified  acceptance  of  the  check The   case  of 

Walker  v.  Walker,  5  Heiskell's  R.,  425,  gives  some  countenance  to  the  conten- 
tion of  the  plaintiff,"  but  Chief-Justice  Church  explains  the  difference  between 
that  case  and  the  one  under  consideration,  showing  that  in  the  Tennessee  case 
the  drawer  of  the  check  failed  before  the  principal  received  it  from  his  agent ; 
and  that  as  the  principal  did  not  know  that  intervening  fact  he  was  not  regarded 
as  ratifying  the  transaction. 

Vol.  II.— 41 


642  CHECKS.  §   1627. 

much  cash  taken  in  absolute  payment,  or  are,  notwithstand- 
ino-  the  certificate  of  the  bank,  still  mere  checks,  with  the 
usual  characteristics  of  such  instruments  ;  and  whether  or 
not  the  holder  must  exercise  any  extraordinary  diligence  in 
presenting  them.  Both  upon  reason  and  authority  it  may 
be  stated,  that  although  it  be  the  fact  that  certified  checks 
pass  from  hand  to  hand,  as  cash,  they  are  not  cash,  or  cur- 
rency, in  the  legal  sense  of  those  terms,  but  they  do  not 
lose,  by  the  fact  that  they  are  certified  when  delivered,  any 
of  the  characteristics  which  attach  to  uncertified  checks ; 
nor  do  they  impose  any  greater  diligence  upon  the  holder, 
who  has  the  same  time  in  which  to  present  them  as  if  they 
were  uncertified.-^ 

§  1627.  The  only  effect  of  the  certification  of  the  check 
^.s  to  give  it  additional  currency,  by  carrying  with  it  the 
evidence  that  it  was  drawn  in  good  faith,  on  funds  to  meet 
its  payment,  and  lending  to  it  the  credit  of  the  bank  in  ad- 
dition to  the  credit  of  the  drawer.  Beyond  this  it  does  not 
differ  from  an  uncertified  check,  nor  does  it  make  any  dif- 
ference whether  the  drawer  is  actually  charged  on  the 
books  of  the  bank  or  not  with  the  amount  of  the  check 
when  it  is  certified  as  "good."  According  to  general 
usage  the  bank,  when  it  makes  such  certificate,  expects  to 
pay  the  check  out  of  the  drawer's  funds  in  its  hands,  and 
makes  some  memorandum,  or  takes  some  other  course,  by 
which  it  will  not  permit  the  amount  necessary  to  meet  the 
check  to  be  anticipated  ;  and  this  both  drawer  and  payee 
understand.  So  the  practical  effect  of  certifying  the  check 
is  the  same,  whether  the  drawer  is  actually  charged  on  the 
books  or  not,  as  in  either  case  that  amount  of  his  funds  is 
withdrawn  from  his  control  until  the  payment  of  the  check 
is  refused.^ 


^Bickiord  v.  First  Nat.  Bank,  42  111,  238;    Rounds  v.  Smith,  42  111.,  245 
Brown  v.  Leckie,  43  111.,  497. 
*  Brown  v.  Leckie,  43  111.,  501. 


<^    1629.  OVER-CHFXKS.  643 

§  1628.  Bank  can  not  offset  amount  due  by  holder 
against  check. — A  bank  upon  which  a  check  is  drawn,  it 
has  been  held,  can  not  plead,  as  offset,  an  amount  due  the 
holder  of  the  check  against  him,  because  a  check  is  only 
conditional  payment,  the  holder  being  the  mere  agent  of 
the  drawer  to  procure  the  money  which  is  demanded  by 
the  check,  and  to  apply  the  same  when  received  in  pay- 
ment of  the  debt  due  by  the  drawer  to  him.^  Especially 
does  this  rule  apply  when  the  holder  of  the  check  is  to 
receive  the  amount  for  the  benefit  of  another.  Vast 
amounts  of  property  are  sold  by  agents,  brokers,  and  com- 
mission men  for  their  principals,  and  it  would  be  unreason- 
able and  unjust  when  they  received  a  check,  as  the  means 
of  procuring  the  money  of  their  principals,  to  permit  the 
bank  to  set  off  an  amount  due  by  them  individually.^ 


SECTION  VIII. 

OVER-CHECKS. 

§  1629.  We  have  already  seen  that  it  is  a  fraud  for  a 
person  to  draw  a  check  upon  a  bank  when  he  has  no  funds 
on  deposit  to  meet  it.^  It  is  in  effect  a  representation  to  the 
payee  that  there  are  funds  to  meet  it,  and  the  holder  is  de- 
ceived and  misled  if  such  be  not  the  case.  But  further  than 
this,  the  overchecking  a  deposit  has  been  regarded  as  a  most 
improper  act  on  the  part  of  the  depositor,  and  even  fraudu- 
lent, unless  done  by  arrangement  with  the  bank  ;  for  its  of- 
ficers, naturally  relying  on  the  good  faith  of  their  customer, 
are  apt  to  pay  his  check  without  scrutiny,  and  the  bank 
may  thus  be  defrauded  of  its  money.''  Certainly  it  is  a  bad 
practice  to  overdraw,  and  one  that  should  not  be  tolerated  ; 

•  Brown  v.  Leckie,  43  111.,  501.  '  Brown  v.  Leckie,  43  111.,  501- 
'  See  a7ite,  §  1 596. 

*  True  V.  Thomas,  16  Me.,  36;  Morse  on  Banking,  318. 


644  CHECKS.  §  1630. 

but  it  is  too  severe  to  regard  an  over-check  as  in  all  cases 
prima  Jacie  a  fraud  and  imposture  in  a  criminal  point  of 
view. 

§  1630.  Over-checks  may  be  authorized  by  the  ba7ik. —  It 
is  undoubtedly  in  the  power  of  the  bank  to  authorize  over- 
checks,  or  checks  without  any  funds  whatever,  upon  ne- 
gotiations with  the  drawer.  Such  dealing  would  be  in  the 
nature  of  a  loan  ;  and  the  bank  would  be  bound,  if  the 
arrangement  were  consummated,  upon  a  legal  contract. 
But  mere  permission  to  overdraw,  not  communicated  to  the 
check  holder,  would  certainly  be  of  no  avail  in  legal  effect. 
And  such  permission  would  not  warrant  a  drawer  in  stating 
absolutely,  solely  on  the  faith  thereof,  that  his  check  was 
"good."^  In  a  case  before  the  U.  S.  Supreme  Court,  in 
which  it  appeared  that  a  mining  corporation  had  legal 
authority  "  to  enter  into  any  obligations  or  contracts  es- 
sential to  the  transaction  of  its  ordinary  affairs,  or  for  the 
purposes  for  which  it  was  created,"  could  enter  legally  into 
an  arrangement  with  a  bank  to  pay  its  over-checks  ;  and 
where  such  checks  were  customarily  drawn  by  its  president 
and  secretary  without  objection,  the  bank  had  a  regret  to 
assume  that  they  were  authorized  to  draw  them.^ 

§  1630^.  Bank  officer  paying  over-check  without  au- 
thority is  bound. — The  officers  of  the  bank  should  be 
careful  to  pay  no  over-check  without  distinct  authority  from 
the  bank ;  for  such  over-check  would  be  chargeable 
against  them,  and  its  payment  would  be  a  grave  departure 
from  official  duty.  And  no  payee  or  holder  should  receive 
a  check,  knowing  that  the  drawer  had  no  funds  to  meet  it, 
as  he  would  thus  join  in  an  attempt  to  mislead  the  bank ; 
and  if  he  got  the  money  on  such  a  check  he  could  be  com- 
pelled by  suit  to  return  it.^ 

'  Ballard  v.  Fuller,  32  Barb.,  68. 

^  Mahoney  Mining  Co.  v.  Anglo  Californian  Bank,  U.  S.  S.  C,  January,  1882  ; 
Morrison's  Transcript,  vol.  3,  No.  5,  p.  785.     See  also  vol.  3,  No.  2,  p.  180. 

3  Martin  v.  Morgan,  Gow.,  123  ;  i  B.  &  B.,  289;  3  Moore,  635,  S.  C,  Byles 
CSharsvvood's  ed)  [*i6],  88 ;  Morse  on  Banking,  254. 


^   1632.    CANCELLED,   DISHONORED,   AND  STALE  CHECKS.        645 


SECTION  IX. 

CANCELLED,   DISHONORED,    AND   STALE   CHECKS. 

§  163 1.  When  a  check  is  presented  to  a  bank  for  pay 
ment,  or  is  offered  in  a  business  transaction,  the  bank  or  the 
party  negotiating  for  it  should  examine  it  carefully  and  ob- 
serve whether  or  not  it  bears  upon  it  any  marks  indicating 
that  it  has  been  cancelled,  or  has  grown  stale.  And  the 
party  to  whom  the  holder  offers  to  transfer  it,  should  ob- 
serve whether  or  not  there  are  any  marks  of  dishonor  about 
it.  For  if  the  check  bear  upon  it  indications  that  it  has 
been  cancelled — as,  for  instance,  if  it  appears  to  have  been 
torn  to  pieces  and  pasted  together — the  bank  will  be  liable 
to  the  drawer,  if  it  turn  out  that  it  had  been  cancelled  by 
the  drawer,  as  its  appearance  was  sufficient  to  excite  its  sus- 
picions, and  to  have  led  to  a  refusal  of  payment.^  So  if 
the  check  bear  marks  of  its  dishonor,  a  transferee  would  be 
entitled  to  stand  in  no  better  position  than  his  transferrer,  as 
it  would  then  have  (like  any  other  negotiable  instrument  so 
marred)  "a  death  wound  apparent  on  it."^ 

§  1632.  Bank  sJiould  not  pay  long  outstanding  check. 
—A  check  is  payable  instantly  on  demand  ;  and  as  here- 
tofore set  forth,  it  should  be  presented  within  a  day  when 
the  payee  receives  it  in  the  place  where  drawn,  and 
forwarded  by  the  next  day,  wiien  forwarding  is  neces- 
sary, in  order  to  preserve  the  payee's  recourse  against 
the  drawer,  in  the  event  of  a  failure  of  the  bank.^ 
But  if  the  bank  remains  solvent  the  holder  may  retain  the 
check  as  long  as  he  pleases,  and  hold  the  drawer  liable  until 
the  time  for  suit  is  ended  by  the  statute  of  limitations.'* 
But   the    pavee   acts   unwisely   if    he    delays   to   present 

'  Scholey  v.  Ramsbottom,  2  Camp.,  185. 

'  See  Goodman  v.  Harvey,  4  Ad.  &  El.,  870  ;  §§  724,  732,  788,  vol.  i. 

•  See  atiic,  §§  1590  et  seq.  *  Thomson  on  Bills,  1 18. 


646  CHECKS.  §  1633. 

a  check,  as  the  bank  and  the  drawer  may  both  fail.  And 
it  is  not  advisable  for  a  bank  to  pay  a  check  which  has  been 
long  outstanding,  or  for  any  one  to  receive  it  by  transfer, 
without  inquiry.  For  while  age  can  not  invalidate  a  good 
check  (unless  the  limitation  has  applied),  and  the  fact  that 
it  was  dishonored  when  transferred,  and  that  presentment 
was  delayed  does  not  lessen  the  drawer's  liability,^  unless 
he  has  suffered  loss  ;  ^  yet  the  lapse  of  a  long  period  from  its 
date  before  its  payment,  is  a  circumstance  so  out  of  the 
ordinary  course  of  business  that  it  ought  to  arouse  sus- 
picions and  excite  inquiry.  And  the  bank  paying,  or  the 
party  receiving  such  a  check,  acts  at  his  peril. 

§  1633.  When  check  is  deemed  stale. — No  precise  period 
of  time  can  be  specified  at  which  a  check  would  be  deemed 
so  stale  as  to  subject  the  receiver  to  equitable  defences,  or 
a  bank  to  loss,  in  the  event  that  such  defences  arose,  or  the 
liability  of  the  drawer  had  ceased.  In  Pennsylvania,  where 
at  the  time  the  check  was  drawn  the  drawer  had  no  effects 
in  the  bank,  nor  provided  any  afterward,  and  a  year  and  a 
day  after  the  day  named  for  payment  it  was  presented  to 
and  paid  by  the  bank,  and  it  appeared  that  the  debt  was 
discharged  by  the  drawer  after  the  check  was  drawn,  it  was 
held  that  the  circumstance  of  its  age  was  sufficient  "  to  put 
the  bank  on  inquiry,"  and  its  negligence  precluded  it  from 
relief  against  the  drawer.^  So  the  lapse  of  two  and  a  half 
years,  especially  when  the  check  contained  a  mark  indicat- 
ing that  it  was  a  memorandum  check,  has  been  held  to 
open  the  check  to  equities."*  And  in  another  case,  the  lapse 
of  five  months.^  In  an  English  case,  where  the  owner  lost 
a  check,  and  it  was  paid  five  days  after  its  date  to  a  shop- 
keeper by  the  bank,  it  was  held  that  the  shopkeeper  should 
refund  to  the  true  owner,  having  taken  the  check  overdue, 

*  Cowing  V.  Altman,  79  N.  Y.,  168.  '  See  §  1590. 
'  Lancaster  Bank  v.  Woodward,  18  Penn.  St.,  357. 

*  Skillman  v.  Titus,  32  New  Jersey  L.  R.  (3  Vroom),  96. 

*  First  Nat.  Bank  v.  Needham,  29  Iowa,  249  (1870). 


§   1634.    CANCELLED,  DISHONORED,  AND  STALE  CHECKS.        647 

unless,  indeed,  he  were  protected  by  the  title  of  his  assignor, 
and  the  burden  of  proof  to  that  effect  lay  on  him.  Hol- 
royd,  J.,  said:  "A  check  is  payable  immediately,  the 
holder  of  it  takes  it  at  his  peril,  and  a  person  taking  it 
after  it  is  due  takes  it  also  at  his  peril."  ^  In  New  York, 
where  the  check  was  transferred  fourteen  months  after  its 
date,  the  lapse  of  time  was  held  sufficient  to  put  the  trans- 
ferrer on  inquiry  ;  but  it  being  proved  that  the  check  was  de- 
livered long  after  its  date,  and  was  on  the  same  day  trans- 
ferred to  the  holder,  it  was  decided  to  be  valid  in  his 
hands,  notwithstanding  there  was  a  good  defence  as  be- 
tween the  drawer  and  payee.^ 

§  1634.  On  the  other  hand,  the  fact  that  the  holder  received 
the  check  one  day,^  four  days,^  six  days,*^  eight  days,^  or  ten 
days,'^  or  nearly  a  month^  after  date  has  been  considered  in- 
sufficient to  subject  him  to  equitable  defences,  though  taken 
in  connection  wnth  other  circumstances,  its  being  somewhat 
stale  might  be  evidence  of  bad  faith.^  And  if  by  the 
drawer's  fault  the  bank  pays  an  altered,  forged,  or  otherwise 

'  Down  V.  Hailing,  4  B.  &  C,  330  (17  E.  C.  L.  R.)  ;  6  D.  &  R.,  445 ;  2  C.  &  P.,  1 1. 
But  this  case  is  explained  in  London,  etc.,  Bankv.Groome,  cited  in  note,  §  1634. 

'  Cowing  V.  Altman,  71  N.  Y.,  436,  overruling  s.  C,  5  Hun,  556. 

^  Himmelman  v.  Hotaling,  40  Cal.,  in. 

'' First  Nat.  Bank  v.  Harris,  108  Mass.,  514.  In  this  case,  "a  check  on  a 
bank  in  Boston  was  sent  from  Boston  by  mail  to  Rochester,  in  New  York,  and 
there  bought  lour  days  after  its  date,  and  was  presented  for  payment  two  days 
afterward.  Ne/ii,  that  the  buyer  was  not  subject  to  equities  existing  between 
the  original  parties,  of  which  he  had  no  notice,  either  on  the  ground  tliat  the 
lapse  of  time  between  the  date  of  the  check  and  his  purchase  of  it  should  have 
put  iiim  upon  inquiry,  or  on  the  ground  of  unreasonable  delay  in  making  pre- 
sentment." 

'  Rothschild  v.  Corney,  9  B.  &  C,  388. 

'  London  and  County  Bank  v.  Groome,  English  High  Court,  Q.  B.  D.,  Dec.  19, 
1881  ;  Central  L.  J.,  April  28,  1882,  Vol.  14,  No.  17,  explaining  Down  v.  Hailing, 
supra. 

'  Ames  V.  Meriam,  98  Mass.,  294,  the  court  saying  :  "  A  holder  who  takes  a 
check  in  good  faith  and  for  value  several  days  after  it  is  drawn,  receives  it  with- 
out being  subject  to  defences  of  which  he  has  no  notice  before  or  at  the  time  his 
title  accrues." 

'  Lester  v.  Given,  8  Bush  (Ky.),  357. 

'  Bank  of  Bengal  v.  Fagan,  7  Moore  P.  C,  72  ;  London,  etc.,  Bank  v.  Groome, 
supra. 


648  CHECKS.  §  1634^. 

invalid  check,  the  bank  will  not  be  liable  to  him.^  And 
where  the  drawer  himself  delayed  nine  months  to  issue  the 
check,  he  could  not  object  against  the  holder  .who  received 
it  from  him  the  circumstance  of  its  staleness.^  Without 
any  circumstances  of  this  kind  arising,  the  certain  age  at 
which  a  check  may  be  said  to  be  stale  is  as  uncertain  as  the 
fixing  of  the  day  on  which  a  young  lady  becomes  an  old 
maid.  Mr.  Morse  says  that  its  age  "must  be  something  so 
extraordinary  as  to  be  inconsistent  with  the  ordinary  course 
of  business  in  order  to  give  the  bank  the  right  to  demand 
delay. "^  Another  writer  regards  a  check  as  "  never  over- 
due,"* but  this  is  going  too  far. 

1634(2.  Excuses  for  want  of  presentment  and  notice. — A 
declaration  by  the  drawer  of  a  check  before  maturity  that 
it  would  not  be  paid,  would  excuse  want  of  presentment 
or  notice,^  and  a  part  payment  before  maturity  would 
waive  the  necessity  of  presentment  and  notice,  as  it  would 
be  the  presumed  intention  of  the  parties  that  it  should  not 
be  presented.'' 

SECTION   X. 

RIGHT   OF   HOLDER   OF  UNCERTIFIED  CHECKS  TO  SUE  THE  BANK, 

§  1635.  The  question  whether  or  not  the  holder  of  a 
check  may  sue  the  bank  holding  funds  of  the  drawer,  upon 
its  refusal  to  pay  it,  has  divided  the  opinions  of  courts  and 
jurists,  and  no  little  perplexed  the  legal  profession.  And 
it  has  been  observed  by  a  discriminating  writer  that  "  when 
one  comes  to  examine  the  authorities  which  range  them- 
selves on  either  side,  and  to  investigate  the  chains  of  reason- 
ing by  which  these  authorities  respectively  seek  ^o  support 
themselves,  the  tale  of  the  two  honorable  knights  who  fought 


'  Lickbarrow  v.  Mason,  2  T.  R.,  63. 

""  Boehm  v.  Sterling-,  7  T.  R.,  423.  '  Morse  on  Banking,  264. 

^  Tiiomson  on  Bills,  118. 

'  Minturn  v.  Fisher,  7  Cal,  573.     See  ante,  §§  1596,  1598. 

'  Levy  V.  Teters,  9  Sergt.  &  R.,  125. 


§  1636.   RIGHT  OF  HOLDER  OF  UNCERTIFIED  CHECKS.    649 

about  the  question  of  whether  the  shield  between  them 
was  golden  or  silvern,  is  forcibly  brought  to  mind.  Each 
line  of  arsfument  in  its  turn  seems  the  more  correct  and  the 
more  satisfactorily  backed  by  respectable  vouchers."^  But 
this  writer  concludes  that  the  weight  of  authority  is  in  favor 
of  the  check  holder's  right  of  action,  and  expresses  his  own 
judgment  to  the  like  effect.^  We  shall  first  review  the  au- 
thorities, and  then  state  our  own  conclusions. 

§  1636.  The  doctrine  that  check  holder  can  not  sue  the 
bank. — There  are  a  series  of  cases  in  which  it  is  declared 
that  the  check  holder  can  not  sue  the  bank  unless  the  check 
has  been  certified,  or  otherwise  accepted  ;  cases,  however,  in 
which  no  question  respecting  checks  was  presented,  the  in- 
strument in  suit  being  either  an  order  or  a  bill  of  exchange. 
These  cases  are  often  cited  in  support  of  the  proposition 
that  the  check  holder  can  not  sue  the  bank  without  accept- 
ance ;  but  really  they  are  not  authority  for  that  doctrine, 
as  a  check  is  necessarily  drawn  upon  a  bank,  and  differs 
from  an  order  or  a  bill  of  exchange,  which  need  not  be.^ 
There  are  also  a  number  of  cases  in  which  the  opinion  has 
been  expressed,  or  the  decision  has  been  pertinently  made 
to  the  like  effect  that  the  check  holder  can  not  sue  the 
bank.  They  proceed  upon  the  ground  that  there  is  no 
privity  of  contract  between  the  holder  of  the  check  and  the 
bank,  unless  the  latter  does  some  act  by  which  it  is  created  ; 
that  while  it  may  be  an  appropriation  of  the  fund,  in  whole 
or  in  part,  as  between  the  drawer  and  the  holder,  until  the 
bank  consents  to  it,  it  is  in  nowise  bound  to  pay  the  amount 
to  the  holder  ;  that  especially  is  this  the  case  when  the  check 
is  for  part  of  a  deposit,  as  one  cause  of  action  might  thus 
be  split  up  into  many  ;  and  that  the  only  remedy  which 


*  Morse  on  Banking,  459.  *  Id.,  473. 

»  M;indeville  v.  Welch,  5  Wheat.,  277  (case  of  a  bill  of  exchange)  ;  Cowper- 
thvvaite  v.  Sheffield.  3  Corns.,  243  (1850).  (bill  of  exchange)  ;  New  York  Bank  v. 
G/bsoM,  5  Duer,  574  (1856),  (bill  of  exchange)  ;  Grinnell  v.  Suydam,  3  Sandf., 
133  (b.ll  of  exchange)  ;  Luff  v.  Pope,  5  Hill,  413  (order  on  individual— not  a 
bankJ  •  Dana  v.  Third  Nat.  Bank,  13  Allen,  445  (bill  of  exchange). 


650  CHECKS.  §   1636^. 

exists  for  a  wrongful  refusal  of  the  bank  to  pay  the  amount 
deposited  to  meet  the  check,  is  a  suit  by  the  drawer,  or  the 
holder  in  tort,  for  the  wrong  done  ;  or  suit  by  the  drawer 
for  damages  for  breach  of  the  implied  contract  to  pay  it.^ 

S  1636^.  Views  of  U.  S.  Supreme  Court — exception  to 
general  rule. — The  Supreme  Court  of  the  United  States 
has  unanimously  adopted  the  view,  that  ordinarily  a  check 
holder  can  not,  sue  the  bank;^  but  it  has  qualified  its 
opinion  by  remarking :  "  It  may  be,  if  it  could  be  shown 
that  the  bank  had  charged  the  check  on  its  books  against 
the  drawer,  and  settled  with  him  on  that  basis,  that  the 
plaintiff  could  recover  on  the  count  for  money  had  and 
received,  on  the  ground  that  the  rule  ex  cequo  et  bono  would 
be  applicable,  as  the  bank  having  assented  to  the  order,  and 
communicated  its  assent  to  the  paymaster  (the  drawer), 
would  be  considered  as  holding  the  money  to  the  plaintiff's 
use  ;  and  therefore  under  an  implied  promise  to  pay  it  on 
demand."  ^  And  in  Pennsylvania  the  exception  thus  sug- 
gested is  established.* 

'Bank  of  Republic  v.  Millard,  10  Wall.,  152  (1869)  ;  Chapman  v.  White,  2 
Seld.,  412  (1852).  The  instrument  in  suit  was  called  a  bill,  but  was  really  a 
reo-ular  check  drawn  by  one  bank  upon  another.  Carr  v.  Nat.  Security  Bank, 
lo';  Mass.,  45  (1871)  ;  ^tna  Nat.  Bank  v.  Fourth  Nat.  Bank,  46  N.  Y.,  82 
(187 1) ;  Van  Men  v.  American  Nat.  Bank,  52  N.  Y.,  4  (1873)  :  Duncan  v.  Berlm, 
60  N.  Y.,  151  (1875)  ;  Tyler  v.  Gould,  48  N.  Y.,  682  ;  Planters'  Bank  v.  Merrit, 
7  Heisk.,  117;  Planters'  Bank  v.  Kesee,  Id.,  200;  National  Bank  v.  Second 
National  Bank,  69  Ind.,  579  ;  Rosenthal  v.  Martin  Bank,  U.  S.  C.  C,  Southern 
Dist.  of  N.  Y.,  Nov.,  1879  ;  34  Am.  Rep.,  238  ;  Essex  Bank  v.  Bank  of  Montreal, 

7  Biss.,  193  ;  BuUard  v.  Randall,  i  Gray,  605  ;  Moses  v.  Franklin  Bank,  34  Md., 
580  (1 87 1),  Alvey,  J.  :  "  It  is  certainly  a  general  rule  that  the  drawee  who  re- 
fuses to  accept  a  bill  of  exchange  can  not  be  held  liable  on  the  bill  itself;  nor  to 
the  holder  for  the  refusal,  except  it  be  upon  the  ground  of  fraud  and  loss  to  the 
latter.  A  bank  upon  which  a  check  is  drawn  occupies  in  this  respect  a  similar 
position  to  that  of  a  drawee  of  a  bill  of  exchange.  It  is  but  the  agent  of  the 
depositor,  holding  his  funds  upon  an  implied  contract  to  honor  and  take  up  his 
checks  to  the  extent  of  the  funds  deposited.  The  obligation  of  the  bank  to  ac- 
cept and  pay  is  not  to  the  holder,  but  to  the  drawer."     Bellamy  v.  Majonbanks, 

8  El.  &  Eq.,  523  (1851),  Parke,  B.  ;  Purcell  v.  Allemong,  22  Grat.,  742  (1872), 
Anderson,  J.,  obiter  ;  2  Parsons  N.  &  B.,  61,  62.     St&post,  §§  1644,  1645. 

=  Bank  of  Republic  v.  Millard,  10  Wall.,  152  ;  First  Nat.  Bank  v.  Whitman, 
94  U.  S.  (4  Otto),  343- 

=  Bank  of  Republic  v.  Millard,  10  Wall.,  152. 

«  Seventh  Nat.  Bank  v.  Cook,  73  Penn.  St.,  485-  In  the  more  recent  case  of 
Saylor  v.  Bushong,  not  yet  reported,  but  referred  to  in  the  Public  Ledger  of 


5»    1637.       RIGHT  OF  HOLDER  OF  UNCERTIFIED  CHECKS.  65 1 

§  1636^.  Ill  England  a  check  has  been  held  to  consti- 
tute no  equitable  assignment  of  the  fund,  although  the 
drawer  instructed  the  banker  by  letter  to  place  the  amount 
to  the  drawer's  credit,  Sir  G.  Jcssel,  Master  of  tlic  Rolls, 
saying  :  "  A  check  is  clearly  not  an  assignment  of  money 
in  the  hands  of  a  banker  ;  it  is  a  bill  of  exchange  payable 
at  a  banker's."^  And  again,  where,  under  the  act  of  36  & 
2)"]  Victoria,  whereby  the  assignee  of  a  chose  in  action  may 
sue  in  his  own  name,  the  holder  of  a  check  sought  to  charge 
the  bank,  the  attempt  failed,  and  Brett,  J.,  said  :  "  The 
bank  has  made  a  contract  with  the  drawer  that  they  will 
honor  his  checks  to  the  amount  of  his  account.  They 
break  that  contract.  How  can  that  give  a  right  of  action 
to  a  third  person  ?  The  check  is  but  an  order  to  pay,  and 
not  an  absolute  assignment  of  anything."^ 

§  1637.  The  opposing  view  that  the  check  holder  may 
sue  the  bank  as  soon  as  it  wrongfully  refuses  to  pay  the  check 
has  been  taken  in  a  number  of  cases  which  were  well  con- 
sidered, and  rests  upon  conceptions  of  the  relations  of  the 
parties  which  are  consistent  with  and  favorable  to  the  usages 
of  trade,  and  are  difficult  to  be  successfully  combated. 
Thus  it  has  been  decided  in  South  Carolina,  that  the  check 
holder  had  a  right  of  action  in  assumpsit  against  the  bank, 
if  it  refused  to  pay  the  check,  when  it  had  funds  of  the 
drawer  available  for  doing  so,  upon  the  implied  promise 
which  the  law  raises  in  his  behalf.^  A  similar  view  seems 
to  have  been  taken  in  Louisiana.*    It  has  been  directly  and 

April  15,  1882,  the  Supreme  Court  of  Pennsylvania,  per  Trunkey,  J.,  says  :  "  If 
the  bank  expressly  or  impliedly  promises  the  drawer  to  pay  the  check  the  holder 
may  sue  (the  bank)  if  payment  be  refused,  When  a  depositor  settles  his  account 
with  the  bank  and  leaves'  the  exact  amount  of  an  outstanding  check  expressly 
for  its  payment,  and  the  bank  tacitly  retains  the  money  and  settles  on  that  basis, 
it  is  liable  to  the  holder  on  the  implied  acceptance." 

»  Hopkinson  v.  Foster,  19  Equity  Cas.  L.  R.,  74  (1874)  ;  see  also  Whartsn  v. 
Walker,  4  B.  &  C,  163  ;  Yates  v.  Bell,  3  B.  &  Al.,  643  ;  Warwick  v.  Rogers,  5 
M.  &  G.,  374- 

«  Schroeder  v.  Central  Bank,  34  L.  T.  R.,  735  ;  ~-\  W.  R.,  ']\. 

'  Fogarties  v.  State  Bank,  12  Rich.  Law,  518. 

*  Van  Bibber  v.  La.  Bank,  14  La.  An.,  481,  but  this  was  overruled  in  Case  v. 
Henderson,  23  La.  An.,  49. 


652  CHECKS.        ,  §   1638. 

distinctly  so  decided  in  Illinois,^  lowa,^  Missouri,^  Kentucky, 
and  in  Illinois  has  been  held  that  the  right  to  sue  the  bank 
passes  by  transfer  to  each  successive  holder.^  . 

The  learned  editor  of  Byles  on  Bills  ^  seems  to  be  of  this 
opinion.  And  in  Kentucky  it  has  been  held  that  where 
the  drawer  of  the  check  notified  the  bank  by  letter,  the 
holder  could  sue  the  bank  ;'  but  the  check  is  itself  notifi- 
cation, and  we  can  not  see  how  a  letter  from  the  same  hand 
could  add  to  its  effect.  If  the  money  is  deposited  as  the 
check  holder's,  although  in  the  drawer's  name,  and  the  fact 
is  communicated  to  the  bank  before  any  other  right  has  at- 
tached to  the  fund,  it  would  clearly  be  in  equity  the  prop- 
erty of  the  holder,  and  he  might  recover  it  of  the  bank.^ 

§  1638.  True  principles  applicable  to  rights  of  check 
holder. — Our  own  views  on  this  question  may  be  expressed 
as  follows  :  There  are  four  distinct  parties  who  may  be  im- 
mediately interested  in  the  effect  of  a  check  drawn  upon  a 
deposit — (1)  the  drawer;  (2)  the  holder;  (3)  the  bank; 
and  (4)  a  stranger — claiming  the  amount  under  a  subse- 
quent check,  assignment,  or  levy. 

(i)  Now,  as  between  the  drawer  and  the  payee  (or 
holder),  there  is  no  doubt  that  the  delivery  of  the  check  con- 

'  Chicago  Marine,  etc.,  Ins.  Co.  v,  Stanford,  28  111.,  168  ;  Brown  v.  Leckie,  43 
III.,  500;  Munn  V.  Burch,  25  111.,  35  (1861)  ;  Union  Nat.  Bank  v.  Oceana  Co. 
Bank,  80  111.,  212. 

*  Roberts  v.  Austin,  26  Iowa,  316  (1868). 

^  Senter  v.  Continental  Bank,  7  Mo.  Ap.,  532  (1879)  ;  McGrade  v.  German 
Sav.  Inst.,  4  Mo.  Ap.,  330  (1877)  ;  Zelle  v.  German  Sav.  Inst.,  4  Mo.  Ap.,  401 
(1877). 

*  Lester  v.  Given,  8  Bush  (Ky.),  358  (1871). 

*  Union  Nat.  Bank  v.  Oceana  County  Bank,  80  111.,  212. 

«  In  Byles  on  Bills  (Sharswood's  ed.)  [*2i],  96,  note  i,  it  is  said  by  the  learned 
American  editor  :  "  A  bill  of  exchange  is  not  an  equitable  assignment  or  appro- 
priation, but  the  cases  treat  a  check  on  a  banker  as  such  ;  and  if  the  holder  is  a 
holder  for  value,  as  to  whom  the  drawer  can  not  revoke  rightfully  the  power 
whicli  he  holds,  coupled  with  an  interest,  why  should  not  the  banker  upon  dis- 
tinct claim  and  notice  be  held  bound  by  the  equity  ?  " 

'  Lesler  v.  Given,  8  Bush  (Ky.),  361  ;  see  Weinstock  v.  Bellvvood,  12  Bush 
(Ky.),  140. 

«  Allen  V.  American  Nat.  Bank,  3  Lans.,  517  (187 1)  ;  seeHopkinson  v.  Foster 
18  Eq.  Cas.  L.  R.,  74  (1874),  and  ajite,  §  1636. 


^  1638.   RIGHT  OF  HOLDER  OF  UNCERTIFIED  CHECKS.     653 

stitutes  an  assignment  of  the  amount  ;^  and  as  we  have  al- 
ready seen,  it  is  a  fraud  to  give  the  check  without  having  a 
corresponding  amount  to  meet  it.**  But  as  yet  the  drawer 
and  payee  (or  holder)  are  the  only  parties  whose  rights  are 
affected  by  the  check.  Something  more  is  necessary  to 
affect  the  bank,  or  a  stranger  holding  another  check.  As 
soon  as  the  payee  (or  holder)  presents  the  check  to  the 
bank  and  demands  payment,  we  think  that  thing  is  done.' 
For  the  bank  is  then  notified  of  the  appropriation  of  the 
amount  to  the  holder.  If  a  subsequent  check  is  presented, 
drawn  on  the  same  fund,  it  would  be  a  fraud  upon  the 
holder  to  pay  that,  and  thus  deprive  him  of  his  precedence. 

If  a  subsequent  assignment,  in  a  different  form,  were 
made  of  the  fund  by  the  drawer,  it  would  be  valid  against 
the  drawer  if  communicated  to,  and  a(ited  upon  by,  the 
bank  before  presentation  of  the  check.  For  otherwise  the 
bank  would  suffer  from  a  wrong  committed  by  the  drawer 
in  which  it  had  no  participation. 

The  objection  to  the  check  holder's  suing  the  bank,  on 
the  ground  that  there  is  no  privity  between  him  and  the 
bank,  seems  to  us  utterly  untenable.     It  is  true  there  is  no 

^  Matter  of  Brown,  2  Story,  502 ;  Bell  v.  Alexander,  21  Grat.,  6  ;  Bank  of  Re- 
public V.  Millard,  10  Wall.,  152  ;  Morrison  v.  Bailey,  5  Ohio  St.,  13  ;  Robinson 
V.  Hawks,  9  Q.  B.,  52  ;  German  Sav.  Inst.  v.  Adae,  8  Federal  R.,  106.  In  Keene 
V.  Beard,  8  C.  B.  N.  S.,  372,  Byles,  J.,  said  :  "  In  one  thing  a  check  differs  from 
a  bill  of  exchange  ;  it  is  an  appropriation  of  so  much  money  of  the  drawer's  in 
the  hands  of  the  banker  upon  whom  it  is  drawn,  for  the  purpose  of  discharging 
a  debt  or  liability  of  the  drawer  to  a  third  person  ;  whereas  it  is  not  necessary 
that  there  should  be  money  of  the  drawer's  in  the  hands  of  a  drawee  of  a  bill  of 
exchange."  But  it  has  been  remarked,  touching  this  expression  of  Byles,  J.,  by 
Sir  G.  jessel,  Master  of  the  Rolls,  in  Hopkinson  v.  Forster,  19  Eq.  Cas.  L.  R., 
74  (1874)  :  "  I  do  not  understand  the  expressions  attributed  to  Mr.  Justice  Byles, 
in  Keene  v.  Baird  ;  but  I  am  quite  sure  that  learned  judge  never  meant  to  lay 
down,  that  a  banker  who  dishonors  a  check  is  liable  to  a  suit  in  equity  by  the 
holder." 

•  See  a7ite,  §  1 596. 

*  In  Morse  on  Banking,  471,  it  is  said :  "  It  is  true — and  it  is  all  that  the  cited 
cases  decide — that  before  demand  for  payment  no  assignment  exists,  no  obliga- 
tion has  been  created,  no  privity  has  grown  up,  and  the  very  right  of  the  bank  to 
pay  may  be  taken  away  by  any  one  of  a  great  number  of  occurrences.  But  the 
act  of  presentment  and  demand,  made  before  any  one  of  these  occurrences  has 
taken  place,  is  the  act  which  creates  at  once,  by  usage  of  business  and  under- 
standing of  all  concerned,  the  obligation,  the  privity,  and  the  appropriation,  or  at 
least  the  right  to  claim  an  appropriation." 


654  CHECKS.  §  1638. 

privity  before  the  presentment  of  the  check,  but  by  that 
very  act  they  are  brought  in  privity,  and  the  check  holder's 
right  to  sue  the  bank  completed. 

The  sole  motive  often,  if  not  generally,  inducing  the  de- 
positor to  place  his  funds  in  bank  is  the  desire  to  have 
them  in  safety,  where  they  may  be  checked  on  at  conven- 
ience. The  bank  receives  its  reward  in  the  use  of  the 
money,  and  in  the  business  attracted  in  checking  it  out. 
And  it  is  the  universal  understanding  between  banks  and 
depositors,  arising  from  the  customs  of  trade,  that  the  check 
of  the  latter  is  to  be  paid  upon  presentment.^  The  United 
States  Supreme  .Court  so  declares  in  a  recent  opinion, 
though  as  yet  it  has  not  followed  that  declaration  to  its 


1  Roberts  v.  Austin,  26  Iowa,  324.  "  As  to  the  objection  of  want  of  privity, 
although  at  one  time  there  was  some  conflict  of  opinion,  it  is  now  laid  down  by 
text  writers  to  be  settled,  that  in  cases  of  simple  contract,  if  one  person  makes  a 
promise  to  another  for  the  benefit  of  a  third,  the  latter  may  maintain  an  action 
upon  it,  though  the  consideration  did  not  move  from  him.  2  Greenl.  on  Ev., 
§  109,  and  authorities  cited  in  note  i.  Nor  does  it  make  any  difference  in  prin- 
ciple that  the  beneficiary  or  party  suing  upon  the  promise  was  unknown  to  the 
promisor.  This  want  of  knowledge  by  the  promisor  as  to  who  will  be  the 
party  enforcing  the  promise  exists  in  the  case  of  every  negotiable  instrument. 
The  promisor  having  made  his  promise  upon  sufficient  consideration,  whether  it 
is  in  writing,  verbal,  or  implied,  may  and  ought  to  be  required  to  perform  it  ac- 
cording to  the  tenor  of  it,  and  not  otherwise,  to  the  party  becoming  entitled 
thereto."  "  As  to  the  objection  of  liability  to  several  parties  who  may  hold  the 
checks,  instead  of  to  the  one  depositor,  it  should  be  remembered  that,  by  the 
custom  of  merchants  and  bankers  everywhere,  alike  well  known  to  farmers, 
mechanics,  merchants,  bankers,  and  courts,  the  party  receiving  the  deposit  does 
so  upon  either  an  express  or  implied  promise  to  pay  the  same  upon  presentation 
of  the  checks  of  the  depositor,  by  whomsoever  presented.  If,  therefore,  he  is 
made  liable  to  numberless  parties,  it  is  because  of  his  promise  made  for  their 
benefit,  and  known  to  them,  and  which  he  has  failed  to  perform."  Munn  y. 
Burch  et  al.,  25  111.,  35.  And  if  it  be  true,  as  it  doubtless  is,  that  the  banker  is 
liable  to  the  depositor  for  the  damages  resulting  to  him  by  reason  of  the  failure 
to  pay  his  checks,  this  liability  ought  not,  upon  principle,  to  exempt  him  from 
the  performance  of  his  promise  or  undertaking  to  pay  the  checks ;  the  holder 
may  enforce  the  promise,  while  the  depositor  recovers  nominal  or  special  dam- 
ages for  the  breach  of  it,  Rolin  v.  Stewart,  14  C.  B.,  595.  Parties  are  often 
liable  to  two  actions  at  law,  by  different  suitors,  for  one  and  the  same  wrongful 
act.  A  trespasser  upon  real  estate  may  be  liable,  for  one  trespass,  to  two  actions 
— one  by  the  tenant,  the  other  by  the  reversioner.  So  a  party  promising  to  dis- 
charge an  incumbrance,  and  failing  to  do  so,  may  be  liable  to  an  action  by  the 
promisee,  and  also  to  an  action  by  the  party  holding  the  incumbrance.  These 
are  but  illustrations  of  a  large  class  of  cases,  both  in  tort  and  upon  contract, 
where  a  party  may  be  liable  to  two  actions  by  different  parties  for  the  same 
wrong,  or  upon  a  breach  of  the  same  promise."  See  post,  §  1643,  "^ote  5,  and 
§  1644  and  notes. 


§    1640.       RIGHT  OF  HOLDER  OF  UNXERTIFIED  CHECKS.  655 

logical  sequence.^  The  drawer  of  the  check  makes  the  de- 
posit, and  draws  the  check  with  this  understanding.  The 
bank  receives  the  money  with  the  like  understanding,  and 
so  the  holder  receives  the  check.  And  the  mutual  under- 
standing of  the  parties,  although  they  have  not  individually 
concerted  together,  creates  an  implied  privity,  and  com- 
pletes the  contract  between  them. 

§  1639.  But  it  is  again  objected,  that  if  the  holder  could 
sue  the  bank  for  the  amount,  it  would  be  liable  to  a  suit 
from  two  different  persons  for  the  same  thing,  as  the  de- 
positor could  sue  it  also.^  But  while  the  depositor  could 
sue  the  bank  for  the  wrong  done  in  refusing  to  pay  his 
check,  and  recover  any  consequential  damages,^  he  could 
not,  we  should  say,  sue  it  for  the  amount  of  the  check 
after  its  presentment.  For  then  the  assignment  is  com- 
pleted as  against  the  bank — its  assent  has  been  obtained  by 
its  reception  of  the  deposit,  the  right  of  the  depositor 
parted  with,  and  of  the  holder  perfected.  And  while  both 
depositor  and  holder  could  sue  the  bank,  their  causes  of  ac- 
tion would  be  as  distinct  as  a  tort  is  from  a  contract.^ 

§  1640.  Check  holder  s  remedies. — From  these  views  our 
conclusion  is,  that  the  check  holder  has  two  remedies  : 

First :  He  may  sue  the  drawer  of  the  check  and  the  bank 
in  one  action — the  former  as  drawer,  and  the  latter  as  an 
implied  acceptor.  For  as  an  acceptance  of  a  bill  may  be 
implied,  so  may  the  acceptance  of  a  check.  And  as  a 
promise  to  accept  will  operate  as  an  acceptance   to  the 

»  Central  N.  B.  v.  Connecticut  Mut.  Life  Ins.  Co.,  U.  S.  S.  C,  Nov,  7,  18S1  ; 
Morrison's  Transcript,  vol.  3,  No.  i,  p.  62,  Mathews,  J. :  "  The  contract  be- 
tween the  bank  and  the  depositor  is,  that  the  former  will  pay  according  to  the 
checks  of  the  latter." 

=  Bank  of  Republic  v.  Millard,  10  Wall.,  156,  Davis,  J.:  "It  is  conceded  that 
the  depositor  can  bring  assumpsit  for  the  breach  of  the  contract  to  honor  his 
checks,  and  if  the  holder  has  a  similar  right,  then  the  anomaly  is  presented  ol 
a  right  of  action  upon  one  promise  for  the  same  thing,  existing  in  two  distinct 
persons  at  the  same  time." 

'  Morse  on  Banking,  234;  2  Parsons  N.  &  B.,  62  ;  Hopkinson  v.  Forster,  18 
Eq.  Cas.  L.  R.,  74. 

*  See  Roberts  v.  Austin,  ante,  p.  555. 


656  CHECKS.  §   1 64.1 

holder  who  takes  a  bill  on  the  faith  thereof,  so  should  it  be 
as  to  a  check.  Now,  by  the  very  act  of  drawing  a  check, 
the  drawer  communicates  to  the  payee  the  fact  that  the  bank 
holds  that  amount  to  his  credit,  which  it  has  agreed  to  pay 
on  his  check.  By  receiving  the  deposit,  the  bank  has  im- 
pliedly so  agreed.  And  the  holder  receiving  the  check,  in 
reliance' on  this  condition  of  things,  should  be  sustained, 
provided  the  drawer  has  not  deceived  him  by  drawing  with- 
out funds  to  meet  the  check,  and  allowed  to  proceed  against 
both  parties  in  the  manner  above  indicated. 

It  is  no  answer  to  these  views  to  say  that  the  holder  of  a 
bill  can  not  sue  the  drawee  unless  it  be  accepted.  The 
drawee  of  a  bill  does  not  receive  money  to  be  paid  out  on 
checks.  And  the  distinction  between  the  bank  or  banker 
on  whom  the  check  is  drawn,  and  the  ordinary  drawee  of  a 
bill,  is  the  very  gist  of  the  distinction  between  the  rights 
of  the  holders  of  the  different  instruments. 

§  1 64 1.  Second :  The  check  holder  may  sue  the  drawer 
of  the  check  on  its  dishonor,  or  sue  the  bank  for  money 
had  and  received  to  his  use  ;  for,  as  we  have  said,  the  bank 
receiving  a  deposit  receives  it  for  the  use  of  the  depositor, 
and  for  the  use  of  such  persons  as  he  may  order  it  to  be 
paid  to  by  his  checks.  Assumpsit  is  an  equitable  action, 
and  ex  cequo  et  bono,  the  check  holder  should  be  entitled  to 
recover  from  the  bank  the  amount  foi  which  he  holds  the 
depositor's  order. 

§  1642.  Damages  for  improper  dishonor  of  check. — The 
depositor  may  always  recover  nominal  damages  from  the 
bank  improperly  dishonoring  his  check,  and  a  trader  may 
recover  substantial  damages.  If  not  a  trader,  the  depositor 
would  have  to  allege  and  prove  special  injury.^     An  agent 

1  Rolin  V.  Stewart,  14  C.  B.  (5  J.  Scott),  607  (78  E.  C.  L.  R.)  Williams,  J., 
said :  "  I  think  it  can  not  be  denied  that  if  one  who  is  not  a  trader  were  to  bring 
an  action  against  a  banker  for  dishonoring  a  check  at  a  time  when  he  had  funds 
of  the  customer  in  his  hands  sufficient  to  meet  it,  and  special  damage  were  al- 
leged and  proved,  the  plaintiff  would  be  entitled  to  recover  substantial  damages. 
And  when  it  is  alleged  and  proved  that  the  plaintiff  is  a  trader,  I  think  it  is 


§   l643-  HOW  FAR  A  CHECK  IS  AN  ASSIGNMENT.  657 

who  has  put  to  his  private  account  funds  of  an  undisclosed 
principal,  may  recover  damages  from  the  bank  for  refusal 
to  honor  his  check  upon  them,  although  he  had  improperly 
obtained  them.^ 


SECTION   XL 

HOW   FAR  A   CHECK   IS   AN    ASSIGNMENT    OF   THE   FUND   DRAWN 

UPON. 

§  1643.  We  have  seen  already  that  a  check  operates  as 
an  assignment  of  the  fund  on  which  it  is  drawn  pro  tanto, 
from  the  very  time  it  is  drawn  and  delivered,  as  between 
the  drawer  and  the  payee  or  holder.*  And  secondly,  that 
the  assignment  binds  the  bank  as  soon  as  the  check  is  pre- 
sented.^ Thirdly,  that  as  between  the  drawer  and  holder 
on  the  one  part,  and  a  party  claiming  under  a  subsequent 
assisrnment  on  the  other,  that  if  the  latter  holds  a  check 
also,  and  first  presents  it,  he  thereby  acquires  priority  over 
the  check  not  previously  presented.^  And  any  subsequent 
assignee  to  whom  the  bank  had  assented  to  pay  the  amount 
would,  in  like  manner,  acquire  priority,  as  the  bank  would 
be  bound  to  pay  him  in  preference  to  the  prior  check  hold- 
er who  had  not  presented  the  check.^  But  if  the  check 
were  presented  before  any  subsequent  assignee  had  ob- 
tained the  assent  of  the  bank,  and  thus  brought  it  in  priv- 
ity of  contract  with  it,  we  should  say  that  by  such  present- 
ment the  check  holder  acquired  priority  for  the  reasons 
that  have  been  heretofore  considered.^  And,  therefore,  a 
general  assignment  for  the  benefit  of  creditors  would  not 
defeat  the  check  holder,  although  he  had  not  presented  the 

equally  clear  that  the  jury,  in  estimating  the  damages,  may  take  into  their  con- 
sideration the  natural  and  necessary  consequences  which  must  result  to  the 
plaintiff  from  the  defendant's  breach  of  contract ;  just  as  in  the  case  of  an  action 
for  a  slander  of  a  person  in  the  way  of  his  trade,  or  in  the  case  of  an  imputation 
of  insolvency  on  a  trader,  the  action  lies  without  proof  of  special  damage." 

>  Tassell  v.  Cooper,  9  C.  B.,  509. 

^Ante,  §  1638.  ^  Ante,  §  1638.  *  Ante,  §§  1617,  1638. 

^  Ante,  %  1617.  ^  Ante,  §  1617.     Contra,  cases  cited,  §  1636. 

Vol.  II. — 42 


658  CHECKS.  §   1644. 

check,^  nor  would  the  appointment  of  a  receiver  to  take 
possession  of  the  funds  of  the  drawee.^  There  may  be  as- 
signment of  a  bank  deposit  by  mere  parol^  And  these 
cases  which  insist  that  a  check  does  not  per  se  import  an 
assignment  pro  tanto  seem  to  us  to  give  less  weight  to 
written  than  to  verbal  testimony. 

§  1644.  Conjlict  between  attachment  and  garnishmeni 
process  and  assignment. — It  is  a  principle  of  law  that 
wherever  there  is  a  legal  or  equitable  assignment  of  a  debt 
or  fund  prior  to  service  of  attachment  or  garnishment  proc- 
ess upon  the  debtor,  the  assignee  is  entitled  to  priority 
over  the  attachment  or  garnishment  creditor,  provided  he 
makes  it  known  to  the  court  in  time  to  intercept  its  judg- 
ment in  favor  of  such  creditor,  even  though  the  party  owing 
the  debt  or  holding  the  fund  assigned  should  not  have  had 
notice  of  such  assignment  prior  to  the  service  of  such  proc- 
ess,"* and  a  fortiori  does  the  rule  apply  where  there  is  notice.^ 

'  German  Sav.  Inst.  v.  Adae,  8  Fed.  R.,  106 ;  First  N.  B.  v.  Coates,  8  Fed. 
R.,  540,  Miller,  J.,  held  that  check  is  an  "  equitable  assignment "  pro  taiito. 
In  Roberts  v.  Austin,  26  Iowa,  327,  Cole,  J.,  said:  "The  controversy  then  is 
simply  this  :  Markell  having  received  full  consideration  therefor,  dravv^s  his  checks 
upon  his  banker,  with  whom  he  has  funds  on  deposit  for  their  payment.  After- 
ward, and  before  their  presentation,  Markell  (by  his  assignee)  notifies  the  drawee 
to  withhold  payment.  This  is  done  without  any  claim  of  wrong  on  the  part  of 
the  drawees,  and  without  any  pretence  or  suggestion  against  their  just  and 
equitable  right  to  the  money  specified  in  the  check.  Now,  as  between  Markell 
on  the  one  hand,  and  the  holders  of  these  checks  on  the  other,  in  whose  favor 
are  the  equities  ?  No  person  could  hesitate  for  a  single  moment  in  declaring 
that  the  money  (which  in  effect  has  been  brought  into  court  for  the  benefit  of 
the  parly  entitled  thereto)  should  be  paid  to  the  holders  of  the  checks,  rather 
than  to  Markell,  who  has  once  received  from  them  the  money  which  the  checks 
represent.  If,  as  between  Markell  and  the  holders,  the  latter  would  be  entitled 
to  the  money,  then,  since  the  assignee  of  Markell  stands  in  his  shoes  and  suc- 
ceeds only  to  his  rights,  the  holders  of  the  checks  would  be  entitled  to  the 
money  as  against  the  assignee,  and  this,  too,  regardless  of  whether  the  holder 
of  a  check  can  maintain  his  action  against  the  drawee,  or  whether  a  check  op- 
erates as  an  assignment  pro  lanfo  of  the  deposit,  as  hereinbefore  discussed." 
Contra,  Lunt  v.  Bank  of  North  America,  49  Barb.,  221. 

''Merrill  v.  Anderson,  17  N.  Y.  S.  C,  (10  Hun),  606  (1877).  See  Duncan  v. 
Berlin,  §  1644,  note. 

"  Risley  v.  Phoenix  Bank,  18  N.  Y.  S.  C.  (11  Hun),  484. 

*  Anderson  v.  De  Soer,  6  Grat.,  364  ;  Maher  v.  Brown,  2  La.,  492 ;  Giddings 
V.Coleman,  12  N.  H.,  153. 

'Legro  v.  Staples,  16  Me.,  252  ;  United  States  v.  Vaughan,  3  Bin.,  394 ;  Colt 
V.  Ives,  31  Conn.,  25  ;  Nesmith  v.  Drum,  8  Watts  &  S.,  9  ;  Adams  v.  Robinson 
I  Pick.,  461. 


§    1646.  CHECKS    AS    EVIDENCE.  659 

And  as  a  check  is  an  assignment  of  the  fund  pro  tanto, 
it  would,  upon  this  principle,  defeat  an  attachment  or  gar- 
nishment, although  not  presented  until  after  process  was 
served  upon  the  debtor.^  This  doctrine  rests  upon  the 
ground  that  the  attachment  or  garnishment  creditor  ac- 
quires no  rights  but  those  subsisting  in  his  debtor  at  the 
time  that  process  is  served  on  the  garnishee,  and  is  in  effect 
a  mere  suitor  for  whatever  his  debtor  might  then  have  a 
right  to  recover. 

§  1645.  In  England  it  is  held  that  there  are  some  cases 
in  which  equity  would  regard  a  check  as  an  assignment  of 
the  fund,  as  in  the  case  of  the  death  of  the  drawer,  and  the 
consequent  revocation  of  the  banker's  authority  (which  is 
there  held  to  be  its  effect),  the  holder  may  have  relief  in 
equity  against  the  banker.*  But,  as  a  general  rule,  a  check 
is  not  there  regarded  as  an  assignment* 


SECTION  XII. 

CHECKS  AS   EVIDENCE. 

§  1646.  In  the  hands  of  the  payee,  a  simple  check  which 
is  unpaid  and  has  not  been  presented  for  payment,  can  not  be 
used  as  evidence  of  any  indebtedness  from  the  drawer  to 

'See  chapter  I,  §§  15,  16,  et  seq.,  vol.  i ;  also  Wheatly  v.  Strobe,  12  Cal.,  98. 
But  cofifra,  that  a  check  is  not  an  assignment,  and  will  not  defeat  an  attach- 
ment, see  Tyler  v.  Gould,  48  N.  Y.,  682  ;  Loyd  v.  Caffrey,  46  Penn.  St.  ;  Duncan 
V.  Berlin,  60  N.  Y.,  151  (1875),  Church,  C.  J.  :     "A  check  upon  a  bank  does  not 

operate  as  an  assignment  of  the  money  deposited A  parol  acceptance  is 

not  valid  (i  R.  S.,  768).  The  promise  did  not  bind  the  bank,  and  no  action 
would  lie  upon  it  in  favor  of  the  holder.  The  case  of  Bullard  v.  Randall,  i 
Gray,  605,  was  similar  in  its  circumstances  to  this ;  and  the  court  held  they 
would  not  avail  against  the  lien  of  a  trustee  process  served  before  the  check  act- 
ually reached  the  bank.  When  the  attachment  was  ser\'ed,  the  check  had 
neither  been  accepted,  certified,  nor  paid,  nor  had  it,  in  fact,  been  presented 
for  payment."  Held,  that  the  attaching  creditor  had  priority.  See  also  Lunt  v 
Bank  of  N.  A.,  49  Barbour,  221  ;  Att'v  Gen'l  v.  Continental  L.  I.  Co.,  71  N.  Y.. 
325  ;  Risley  v.  Phoenix  Bank,  18  N.  Y.'S.  C.  (11  Hun),  484. 

'  Rodick  V.  Gandelle,  12  Beav.,  325  ;  i  D.  G,  M.  &  G.,  763. 

*  Hopkinson  v.  Foster,  L.  R.,  19  Eq.,  74. 


66o  CHECKS.  §   1646 

the  payee,  for  the  drawer  has  only  contracted  that  the  bank 
should  pay  the  amount  on  demand,  and  until  demanded  the 
drawer  is  not  bound.^  But  when  this  is  done  and  shown, 
the  check  then  imports  a  debt  from  the  drawer  to  the 
payee,  and  it  may  be  sued  on  without  proving  the  consider- 
ation, value  received  being  presumed.^ 

In  the  hands  of  an  indorsee,  the  check,  in  like  manner, 
is  not  sufficient  evidence  that  the  drawer  owes  the  debt,  un- 
less a  demand  upon  the  bank  and  refusal  to  pay  be  shown  ;^ 
and  as  against  the  indorser,  proof  of  notice  of  non-payment 
must  be  superadded.* 

The  natural  inference  from  the  giving  of  a  check  is,  that 
it  was  given  in  payment  of  a  debt  due  the  payee  from  the 
drawer,  or  that  the  payee  gave  cash  for  it  when  it  was 
drawn,  and  in  order  to  charge  the  payee  as  a  debtor  to  the 
drawer,  it  must  be  shown  that  the  check  was  in  fact  loaned 
him.^  Where  the  drawer's  executor  sued  the  payee  of  a 
paid  check  for  the  amount,  charging  that  it  was  a  loan. 
Lord  Kenyon,  C.  J.,  said:  "There  is  no  evidence  to  estab- 
lish a  debt.  No  evidence  is  offered  of  the  circumstances 
under  which  the  draft  was  given ;  it  might  be  in  payment 
of  a  debt  due  by  the  testator,  or  the  defendant  might  have 
given  cash  for  it  at  the  time."^  But  when  it  is  shown  that 
cash  was  not  given  for  the  check,  that  it  was  not  taken  in 
payment  of  a  debt,  there  is  no  presumption  that  it  was  in- 
tended as  a  gift ;  and  unless  it  were  proved  to  have  been  so 
intended,  the  payee  would  be  chargeable  with  the  amount 

'  Flemming  v.  McClain,  13  Penn.  St.,  177 ;  Pearce  v.  Davis,  i  Moo.  &  R.,  36i„, 
2  Parsons  N.  &  B.,  83. 

"  See  itifra,  %  1652.  Mr.  Morse  states  that  there  must  be  "  proof  of  the  con- 
sideration on  which  the  check  was  given."  Morse  on  Banking,  290,  312.  This 
is  incorrect.     See  cases  belov^,  and  see  infra 

^Anfe,  §§  1586  el  seq.  '  Ibid. 

^  Terry  v.  Ragsdale,  33  Grat.,  348;  Huntzinger  v.  Jones,  60  Penn.  St.,  170; 
Connelly  V.  McKean,  64  Penn.  St.,  118;  Patten  v.  Ash,  7  Serg.  &  R.,  116; 
Graham  v.  Cox,  2  Car.  &  K.,  702;  Headley  v.  Reed,  2  Cal.,  322  ;  Thompson  v. 
Pitman,  i  Fost.  &  F.  N.  P.,  339 ;  2  Parsons  N.  &  B.,  84 ;  Yates  v.  Shepardson. 
39  Wise,  173. 

•  Gary,  Ex'r  of  Greatorex  v.  Gerish,  4  Esp.,  9. 


^   1648.  CHECKS   AS    EVIDENCE.  66 1 

as  a  loan.^  And  whenever  a  loan  from  the  drawer  to  the 
payee  is  proved,  the  eheck  may  be  given  in  evidence  of  the 
amount.* 

.  §  1647.  In  the  hands  of  the  bank,  a  check  drawn  upon 
it  imports  that  the  bank  held  funds  of  the  drawer  upon 
deposit,  and  has  paid,  out  of  them,  the  amount  of  the  check 
to  the  holder.^  And  it  does  not  import  a  loan  from  the 
bank  to  the  drawer  ;  but  if  it  appears  that  the  check  was 
paid  without  funds,  an  implied  promise  is  raised  that  the 
drawer  will  refund  the  amount  to  the  bank.* 

§  1648.  hi  the  hands  of  the  drawer,  a  check  payable  to 
a  certain  party  or  order,  and  bearing  his  indorsement,  and 
which  has  been  paid  by  the  bank,  is  as  good  a  receipt  for 
money  paid  to  the  payee  as  the  drawer  could  desire.^  But 
if  the  check  were  drawn  payable  to  A.  or  bearer,  or  to  bearer, 
which  is  the  same  in  legal  effect,  it  is  not,/^r  .r^,  evidence  in 
the  drawer's  hands,  of  payment  to  A.  It  must  be  proved 
that  the  party  alleged  to  have  been  paid  by  the  check  re- 
ceived the  money.^  And  if  the  check  be  payable  simply  to 
A.,  it  seems  that  mere  payment  of  the  check  is  not  evidence 
that  A.  received  the  money,  unless  the  check  bear  A.'s  in- 
dorsement.'^ But  it  may  be  doubted  if  the  bank  can  require 
his  indorsement  unless  the  check  be  payable  to  his  order.* 
And  clearly,  it  can  not  require  the  holder's  indorsement  when 
the  check  is  payable  to  bearer.^ 

'  Baker  v.  Williamson,  4  Penn.  St.,  456  ;  Huntzinger  v.  Jones,  60  Penn.  St., 
170. 

"  Healy  v.  Gilman,  i  Bosw.,  235. 

'Lancaster  Bank  v.  V^ooclward,  18  Penn.  St.,  361  ;  Conway  v.  Case,  22  111., 
127 ;  Healy  v.  Gilman,  i  Bosw.,  235  ;  Fletcher  v.  Manning,  12  M.  &  W.,  571. 

*  Fletcher  v.  Manning,  12  M.  &  W.,  571  ;  Thurman  v.  Van  Brunt,  19  Barb., 
409;  Morse  on  Banking,  290,  291. 

■*  Connelly  v.  McKean,  64  Penn.  St.,  113;  Egg  v.  Barnett,  3  Esp.,  196, 
Thompson  v.  Pitman,  i  Fost.  &  F.  N.  P.,  339. 

"  Patten  v.  Ash,  7  Serg.  &  R.,  116;  People  v.  Baker,  20  Wend.,  602;  People 
V.  Howell,  4  Johns,  296 ;  Mountford  v.  Harper,  16  M.  &  W.,  825  ;  Pearce  v. 
Davis,  I  Mood.  &  R.,  365  ;  Lloyd  v.  Sandilands,  Gow.,  13. 

^  Flemming  v.  McClain,  13  Penn.  St.,  177. 

*  2  Parsons  N.  &  B.,  83.  °  Connelly  v.  McKean,  64  Penn.  St.,  113. 


662  CHECKS.  §   1649. 

Without  proof  of  the  particular  consideration,  a  check  is 
not  evidence  that  it  was  paid  upon  a  particular  account.^ 

§  1649.  It  is  almost,  and  indeed  we  suppose  quite,  the 
universal  custom  of  banks  which  have  paid  the  checks  of 
their  depositors,  to  cancel  them  by  some  mark  indicating 
that  they  have  been  paid,  and  to  return  them  in  the  de- 
positor's bank  pass-book  as  vouchers  for  the  amounts  paid 
out  from  his  funds  on  deposit.  And,  doubtless,  an  obli- 
gation to  do  this  may  be  inferred  in  most  cases  from  the 
usage  of  business,  and  the  prior  course  of  dealing  between 
the  bank  and  its  depositor.^  When  the  bank  pays  the 
holder  the  amount  of  the  check,  it  is  clearly  entitled  to  the 
possession  of  it  as  a  voucher  for  the  payment.^  But  after 
debiting  it  against  the  drawer  in  account  with  the  bank,  it 
is  the  duty  of  the  bank  to  return  the  check  to  its  depositor, 
who  has  the  better  right  to  their  permanent  possession,  as 
they  are  to  him  vouchers  of  payment  of  his  debt  to  the 
•  payee  named  in  them  ;  and  the  bank,  until  it  returns  the 
checks,  has  been  said  to  hold  them  only  as  agent  of  the 
drawer.^  In  the  case  of  over-checks,  it  would  doubtless  be 
different,  for  they  might  be  the  only  conclusive  evidence 
that  the  bank  possessed  of  the  advance  to  the  drawer,  and 
this  it  would  not  be  just  to  require  it  to  part  with.^ 

§  1650.  When  a  suit  is  brought  for  money  lent  by  a 
check,  it  has  been  held  that  the  statute  of  limitations  runs 
from  the  time  the  money  was  paid  by  the  drawee,  and  not 
from  the  time  the  check  was  drawn,  as  otherwise  it  would 
follow  that  if  an  action  had  been  brought  by  the  drawer  for 
money  lent,  he  would  be  able  to  recover  the  amount, 
although  the  check  might  be  subsequently  dishonored.* 

•  Aubert  v.  Walsh,  4  Taunt.,  293. 

="  Morse  on  Banking,  291  ;  see  Regina  v.  Watts,  2  Den.  C.  C,  14. 
'  Matter  of  Brown,  2  Story,  512. 

*  Burton  v.  Payne,  2  Car.  &  P.,  520 ;  Grant  on  Banking,  72,  75  ;   Morse,  291, 

*  Grant  on  Banking,  73  ;  INIorse  on  Banking,  293. 

•  Garden  v.  Bruce,  L.  R.,  3  C.  P.,  300. 


§  1652.   NEGOTIABILITY  AND  TRANSFER  OF  CHECKS.      663 

SECTION  XIII. 

NEGOTIABILITY  AND   TRANSFER   OF   CHECKS. 

§  165 1.  Negotiability  of  checks. — A  check,  like  a  bill  or 
note,  in  order  to  be  negotiable,  must  be  payable  absolutely 
and  at  all  events  to  a  certain  person  or  order,  or  to  bearer, 
in  money.  If  expressed  to  be  payable  "in  bank  bills,"  or 
"in  currency,"^  or  if  it  lack  words  of  negotiability,^  or  be 
deficient  in  any  of  the  characteristics  which  impart  negotia 
bility  to  bills  and  notes,  it  will  not  be  a  negotiable  instru 
ment.  Checks  are  sometimes,  although  by  no  means 
usually,  intended  for  temporary  circulation ;  but  their 
principal  object  and  purpose  is  to  enable  the  holder  to  de- 
mand and  receive  immediately  the  amount  called  for.  Ne- 
gotiability in  its  full  sense  is,  therefore,  not  of  their  essence, 
but  an  optional  quality.'^ 

§  1652.  Whenever  a  check  is  negotiable,  it  is  undoubtedly 
subject  to  the  same  principles  which  govern  ordinary  bills 
of  exchange  in  respect  to  the  rights  of  the  holder.  I  n  t\\t  first 
place,  it  is  evidence  of  a  valuable  consideration  as  between 
the  immediate  parties  thereto,  and  between  the  plaintiff  and 
the  drawer  when  payable  to  bearer.^     In  the  second  place, 

•.Bank  of  Mobile  v.  Brunn,  42  Ala.,  108  ;  Little  v.  Phoenix  Bank,  2  Hill  (N. 
Y.).425. 

'  Partridge  v.  Bank  of  England,  9  O.  B.,  396.  In  Virginia  checks  are  regu- 
lated by  the  statutory  provisions  which  apply  alike  to  bills  and  notes,  even  as 
respecting  protest,  and  negotiable,  if  payable  (i)  at  a  particular  bank,  or  C2)  at 
a  particular  place  thereof,  for  discount  or  deposit,  or  (3)  at  the  place  of  business 
of  a  savings  institution  or  savings  bank,  or  (4)  at  the  place  of  business  of  a 
licensed  broker.     Code,  chap.  144,  §  7,  Acts  1866,  p.  149. 

*  Mohawk  Bank  v.  Broderick,  10  Wend.,  304. 

*  In  Morse  on  Banking,  p.  312,  it  is  said  :  "  Possession  is  prima  facie  proof  of 
title  ;  but  the  plaintiff  in  a  suit  upon  the  check  (payable  to  bearer)  must  show 
that  he  received  it  for  value,  and  in  the  due  course  of  business."  The  cases 
cited  by  the  author  do  not  sustain  this  proposition.  On  the  contrary,  they  ac- 
cord with  the  text,  which  states  correctly  the  doctrine  which  prevails  in  respect 
to  checks  whether  payable  to  bearer  or  to  order,  and  in  respect  to  all  other  nego- 
tiable instruments.  In  Conroy  v.  Warren,  3  Johns'  Cas.,  259,  the  check  was 
payable  to  "  No.  912  or  bearer."  It  was  declared  on  as  given  by  defendant  to 
plaintiff.     Thompson,  J.,  said,  in  answer  to  the  objection  that  where  a  check  ig 


664  CHECKS.  §  1653. 

it  may  be  transferred  by  indorsement,  or  by  delivery  with- 
out indorsement  when  payable  to  bearer.^  In  the  third 
place,  when  sued  upon,  the  possession  is  priina  facie  evi- 
dence of  title,  and  the  plaintiff  is  presumed  to  be  a  bona  fide 
holder  for  value  without  notice  of  any  defence  existing  be- 
tween prior  parties,  and  such  defences  can  not  be  pleaded 
against  him.^  In  the  fourth  place,  even  when  it  is  proved 
that  the  real  owner  parted  with  it,  or  that  the  drawer  drew 
it  without  consideration,  the  burden  of  proving  bona  fide 
ownership  for  value  without  notice  will  not  devolve  upon 
the  holder  ;^  but  when  shown  to  have  been  drawn  for  an 
illes'al  consideration,  or  to  have  been  obtained  from  the 
drawer  by  fraud  or  theft,  the  burden  of  proof  is  thrown 
upon  the  holder,  and  he  must  show  a  bona  fide  title  in  or- 
der to  recover.^ 

§  1653.  Indorsement  of  checks  payable  to  bearer — Eng- 
lish ciistom. — Even  a  check  payable  to  bearer  may  be  trans- 
ferred by  indorsement,  though  such  checks  are  more  gen- 


payable  to  bearer  it  is  incumbent  on  the  holder  to  prove  a  valuable  considera- 
tion :  "  I  take  it  to  be  well  settled  that  with  respect  to  bills  of  exchange  and 
promissory  notes,  they  in  this  respect  stand  on  the  same  footing  with  specialties, 

and /r/w«/^«V  hnport  a  consideration The  reason  of  the  rule  is  equally 

applicable  whether  the  bill  or  note  be  made  payable  to  bearer  or  order,  and  I 
can  see  no  good  reason  why  it  should  not  apply  to  bank  checks."  Hoyt  v. 
Seeley,  18  Conn.,  357,  Waite,  J. :  "  Here  the  plaintiff  has  declared  upon  this 
check  as  payable  to  bearer,  and  has  averred  that  he  is  the  lawful  bearer  thereof, 
and  entitled  to  the  payment  of  the  money  therein  specified.  This  is  enough  to 
show  a  right  of  action  in  the  plaintiff.  The  circumstances  under  which  he  be- 
came bearer  are  immaterial."     Mauran  v.  Lamb,  7  Cow.,  176. 

'  Conroy  v.  Warren,  3  Johns'  Cas.,  259 ;  Merchants'  Bank  v.  Spicer,  6  Wend., 
445  ;  Woods  v.  Schroeder,  4  Har.  &  J.,  276  ;  Hoyt  v.  Seeley,  18  Conn.,  353  ; 
Keene  v.  Beard,  8  C.  B.  N.  S.,  380  (98  E.  C.  L.  R.) 

^  Cruger  v.  Armstrong,  3  Johns'  Cas.,  7.  The  check  was  payable  to  W.  &  J. 
C.  or  bearer.  Radcliff,  J.,  said  :  "  The  holder  mnsi  pr/ma  facie  be  deemed  the 
rightful  owner,  and  it  has  accordingly  been  held  that  he  need  not  prove  a  con- 
sideration, except  where  circumstances  of  suspicion  appear."  Murray  v.  Judah, 
6  Cow.,  484;  Mauran  v.  Lamb,  7  Cow.,  176;  Harbeck  v.  Craft,  4  Duer,  131  ; 
Merchants'  Nat.  Bank  v.  New  Brunswick  Sav.  Inst.,  33  N.  J.  Law  (4  Vrooin), 
172  ;  Kuhns  v.  Gettysburg  Nat.  Bank,  68  Penn.  St.,  445  ;  Cecil  Bank  v.  Heald, 
25  Md.,  563  ;  Stewart  v.  Smith,  17  Ohio  St.,  82. 

=  See  chapter  xxiv,  section  vil,  §§  810  et  seq.,  vol.  i. 

*  Fuller  V.  Hatchings,  10  Cal,  523  ;  Merchants'  Nat.  Bank  v.  New  Brunswick 
Sav.  Inst.,  33  N.  J.  Law  (4  Vroom),  172  ;  Kuhns  v.  Gettysburg  Nat.  Bank,  68 
Penn.  St.,  445, 


§    1 654-  FORGERIES    OF    CHECKS.  665 

erally  passed  by  delivery  merely.  It  is  not,  however,  a 
necessary  inference  from  the  fact  that  a  person  has  written 
his  name  on  the  back  of  a  check  payable  to  bearer  that  he 
intended  to  indorse  it,  as  his  name  may  have  been  written 
thereon  for  very  different  purposes.  Thus  it  is  customary 
in  England  for  the  holder  of  a  check  payable  to  bearer, 
upon  receiving  payment,  to  write  his  name  on  the  back, 
and  the  usage  of  business  gives  to  this  simply  the  significa- 
tion of  his  receipt  for  the  money.^  Such  an  indorsement 
creates  no  liability.  And  whenever  a  check  payable  to 
bearer  has  a  party's  name  so  written  thereon,  it  has  been 
held  in  England  necessary  to  prove  the  animo  indorsandi 
in  order  to  bind  him.'^  When  this  is  done  he  is  undoubt- 
edly bound  as  an  indorser,  and  it  was  answered  by  Byles, 
J.,  in  England,  to  counsel  that  argument  to  the  contrary 
"  would  have  been  deserving  of  more  attention  if  it  had 
been  addressed  to  the  court  a  hundred  years  ago."  ^ 

A  bank  is  not  subject  to  charge  for  interest  on  sums  de- 
posited subject  to  check  until  payment  is  demanded,  unless 
by  special  contract.* 


SECTION  XIV. 

FORGERIES  OF  CHECKS. 


§  1654.  In  another  portion  of  this  volume  we  have 
treated  of  forgeries  of  bills  and  notes,  and  also  of  alterations, 
but  it  is  desirable  to  keep  distinct  the  various  classes  of 
commercial  paper  affected  by  such  frauds,  and  checks  are 
governed  to  some  extent  by  principles  peculiar  to  them 
alone. 


'  Morse  on  Banking,  312. 

""  Ancona  v.  Marks,  7  Hurlst.  &  N.,  686  (1862). 

»  Keene  v.  Beard,  8  C.  B.  N.  S..  372  (98  E.  C.  L.  R.) 

*  Parkersburg  Nat.  Bank  v,  Als,  5  West  Va.  (Hagans),  50. 


666  CHECKS.  §  1654^. 

§  i654<2.  Bank  chargeable  with  knowledge  of  check- 
drawers  signature. — We  have  seen  that  the  drawee  of  a 
bill  is  bound  to  know  the  drawer's  signature.  In  like  man- 
ner, a  bank  is  bound  to  know  the  signature  of-  a  depositor 
who  draws  a  check  upon  it  ;  and  it  has  been  said  that  the 
bank  "  is  even  more  bound "  to  know  such  depositor's 
handwriting  than  a  drawee  is  bound  to  know  a  drawer's.^ 
And  this  view  is  founded  on  reason,  for,  as  a  general  rule, 
a  deposit  is  made  for  the  very  purpose  of  being  checked 
out,  while  a  drawer  has  no  right  to  require  a  drawee  to 
accept  or  pay  his  drafts. 

But  a  bank  is  not  bound  to  know  more  than  the  signa- 
ture of  the  drawer  of  the  check  ;  for  in  the  ordinary  course 
of  business  the  body  of  the  check  is  as  often  as  otherwise 
filled  up  by  a  clerk,  and  it  is  by  no  means  a  matter  of 
suspicion  that  it  is  not  filled  up  in  the  handwriting  of  the 
drawer.^  If  the  rule  were  otherwise,  a  bank  could  never 
safely  pay  a  check  filled  up  in  a  handwriting  not  the 
drawer's,  until  it  had  inquired  of  the  drawer  whether  it  was 
properly  filled  up.  And  to  require  this  would  greatly  em- 
barrass commercial  transactions.^ 

§  1655.  As  a  bank  must  know  its  customer's  signature, 
it  has  been  held,  and  as  a  general  rule  the  doctrine  prevails, 
that  if  it  pays  out  money  on  a  forged  check  it  can  not  re- 
cover back  the  amount  from  the  party  to  whom  it  was 
paid;^  and  unless  the  drawer  whose  name  be  forged  is, 
by  negligence  or  acquiescence,  rightfully  responsible,  the 


»  Smith  V.  Mercer,  6  Taunt.,  76  ;  see  People's  Sav.  Bank  v.  Capps,  91  Penn. 
St.,  315. 

s  National  Bank  of  Commerce  v.  National  Mechanics'  Banking  Ass'n,  55  N. 
Y,  213;  Bank  of  Commerce  v.  Union  Bank,  3  Coms.,  230;  Redingion  v. 
Wood,  45  Cal.,  406  ;  National  Park  Bank  v.  Ninth  National  Bank,  55  Barb., 
124  ;  46  N.  Y.,  ^^  ;  Bigelow  on  Estoppel,  435,  436. 

'  Redington  v.  Wood,  45  Cal,  406. 

'Levy  V.  Bank  U.  S.,  4  Dall.,  234;  Bank  U.  S.  v.  Bank  of  Ga.,  10  Wheat., 
333;  see  chapter  XLII,  on  Forger>-,  §  1359;  First  National  Bank  v.  Kicker,  71 
111.,  439. 


§    l655^-  FORGERIES    OF   CHECKS.  ^^"J 

bank  can  not  charge  the  amount  paid   in  account  against 
him.^ 

§  1655^.  Right  of  bank  to  recover  money  paid  o?i  forged 
checks. — Ordinarily  money  paid  under  a  mistake  of  fact 
may  be  recovered  back,  however  negligent  the  party  pay- 
ing.^ But  that  rule  has  not  been  generally  deemed  applica- 
ble in  such  cases  as  this,  for,  as  is  said,  "the  fact  in  this 
case  is  one  in  which  the  drawee  has  no  right  to  mistake. 
The  law  refuses  to  hear  him  say  he  has  mistaken  it.  The 
money  is  paid  through  the  failure  to  fulfil  his  acknowl- 
edged duty,  inasmuch  as  he  has  failed  to  detect  this  very 
non-existence  of  the  merely  supposed  fact  of  signature  by 
a  certain  person."  ^  No  doubt  there  are  cases  which  bear 
out  this  view.  But  where  the  bank  discovers  the  forgery 
immediately,  and  demands  restitution,  offering  to  return 
the  check,  before  the  holder  has  lost  anything  by  regarding 
the  matter  as  all  right,  we  can  not  help  thinking  that  it 
should  be  entitled  to  recover  back  the  amount.  Air.  Chitty 
seems  to  have  had  the  same  opinion.*  And  Professor 
Parsons  has  expressed  it   in   favorable   terms.^     And  the 

'Hardy  v.  Chesapeake  Bank,  51  Md.,  562,  Alvey,  J.:  "  If  the  bank  pays 
money  on  a  forged  check,  no  matter  under  what  circumstances  of  caution,  or 
however  honest  the  belief  in  its  genuineness,  if  the  depositor  himseU'  be  free 
of  blame,  and  has  done  nothing  to  mislead  the  bank,  all  the  loss  must  be  borne 
by  the  bank,  for  it  acts  at  its  peril  and  pays  out  its  own  funds,  and  not  those  of 
the  depositor.  It  is  in  view  of  this  relation  of  the  parties,  and  of  their  rights 
and  obligations,  that  the  principle  is  universally  maintained,  that  banks  and 
bankers  are  bound  to  know  the  signatures  of  their  customers,  and  that  they  pay 
checks  purporting  to  be  drawn  by  them  at  their  peril." 

*  See  vol.  2,  §  1369.  "Morse  on  Banking,  296. 

*  Chitty  on  Bills  (13  Am.  ed.)  [*43i],  485  ;  see  ante,  chapter  XLll,  on  Forgery, 
§§  1 361  el  seq.  ;  also  Irving  Bank  v.  Wetherald,  36  N.  Y.,  335. 

^  2  Parsons  N.  &  B.,  80,  where  it  is  said :  "  It  is  obvious  that  it  (the  bank)  can 
reclaim  the  money  from  the  payee,  if  the  payee  were  in  fault.  But  a  more  diffi- 
cult question  arises  where  a  bank  pays  a  forged  check  to  an  innocent  holder. 
The  cases  on  this  subject  are  few  and  indecisive ;  but  we  think  the  law  must  be 
this  :  The  bank  can  recover  it  from  the  payee,  if  the  payee  were  in  fault,  or  if  an 
innocent  payee  will  then  be  in  no  worse  condition  than  if  the  bank  had  refused 
to  pay  it.  Still,  the  bank,  rather  than  the  holder,  is  bound  to  know  whether  the 
signature  be  genuine  ;  and  if  by  any  change  of  accounts,  by  any  consideration 
paid  which  might  have  been  recovered  had  payment  been  refused,  but  can  not 
be  recovered  now,  or  by  any  loss  of  opportunities  to  get  security  or  indemnity 
from  the  transferrer  which  the  holder  would  have  had  but  for  the  payment  to 
him,  the  payee  can  not  be  replaced  in  as  good  a  position  alter  he  returns  the 


668     .  CHECKS.  §  1656. 

better  doctrine,  as  we  think,  is,  that  the  bank  should  have 
the  rio-ht  to  recover,  unless  the  circumstances  of  the  holder 
had  been  changed  so  as  to  render  it  unjust.^  Forgeries 
often  deceive  the  eye  of  the  most  cautious  and  practiced 
expert  ;  and  when  a  bank  has  been  so  deceived,  it  is  a 
harsh  rule  which  compels  it  to  suffer,  although  no  one  has 
suffered  by  its  being  deceived.  It  is  also  a  rule  which 
tends  to  render  those  who  trade  for  checks  incautious,  if 
by  any  means  they  can  procure  their  payment  by  the  bank. 
Parties  often  pronounce  forgeries  of  their  own  signatures 
genuine.^  Why  blame  a  third  party  so  severely?  And 
why  make  an  exception  to  a  rule  so  just  in  its  universal 
application  ? 

§  1656.  The  doctrine  that  a  bank  is  bound  to  know  its 
customer's  signature  has  been  very  strictly  applied  by  the 
Supreme  Court  of  the  United  States.  Where  the  plaintiff 
deposited  in  the  bank  a  check  purporting  to  be  drawn  by 
one  of  its  customers,  and  it  was  at  once  passed  to  the 
plaintiff's  credit  on  his  cash  book,  but  on  the  same  day  it 
was  discovered  by.  the  bank  to  be  a  forgery  and  instantly 
returned  to  him,  the  court  held  that  the  plaintiff  was  enti- 
tled to  refuse  to  take  it  back,  and  hold  the  bank  liable  for 
the  amount  in  account  with  him.  And  it  was  said  :  "  It  is 
our  opinion  that  when  the  check  was  credited  to  the  plaintiff 
as  cash,  it  was  the  same  thing  as  if  it  had  been  paid  ;  it  is 
for  the  interest  of  the  bank  that  it  shall  be  so  taken."  ^  The 
case  in  which  this  view  is  taken  has  been  quoted  with  ap- 
proval,^ but  it  does  not  commend  itself,  as  we  humbly  think, 
to  favor. 


money  to  the  bank,  then  we  say  he  is  not  bound  to  return  it.  Perliaps  injury  to 
the  payee,  by  the  demand  of  repayment,  would  be  so  far  presumed,  as  matter  of 
law,  as  to  cast  upon  the  bank  the  burden  of  proof." 

'See  chapter  XLll,  on  Forgery,  §  1361,  and  p.  358,  note  3;  see  also  Am,  Re- 
view, April,  1S75,  p.  433. 

^  Morse  on  Banking,  310. 

^  Levy  V.  Bank  of  U.  S.,  4  Dal.,  234 ;  I  Bin.,  27.  It  is  not  stated  in  the  report 
that  it  was  a  customer's  check,  but  this  inferentially  appears. 

♦  Bank  U.  S.  v.  Bank  of  Georgia,  10  Wheat.,  333. 


s 


V 


^  1657.  FORGERIES  OF  CHECKS.  669 

§  1657.  Exceptions  to  rule  holding  bank  responsible  when 
it  pays  forged  checks.— Y.vq^  where  the  general  doctrine, 
that  the  bank  has  no  remedy  where  it  has  certified  or  paid 
a  forged  check  against  the  holder,  is  recognized  as  a  fixed 
principle  of  law,  there  are  some  exceptions  which  are  in- 
sisted upon  as  reasonable  and  just.  As  the  responsibility 
of  the  bank  is  based  upon  the  presumption  that  it  has 
greater  means,  and  better  opportunities  to  become  familiar 
with  the  handwriting  of  depositors  than  are  afforded  the 
holder,  it  is  declared  to  be  decisive  alone  when  the  party 
holding  the  check  has  in  no  way  contributed  to  the  success 
of  the  fraud.  And  if  the  loss  can  be  traced  to  the  fault  or 
negligence  of  any  party  it  will  be  fixed  upon  him.^  In  the 
absence  of  actual  fault  or  negligence  on  the  part  of  the 
drawee  bank,  its  constructive  fault  in  not  knowing  the  sig- 
nature of  the  drawer,  and  detecting  the  forgery,  will  not 
preclude  its  recovering  back  the  amount,  or  recalling  its 
certificate,  as  against  one  who  has  received  the  money,  or 
taken  the  check  with  knowledge  of  the  forgery  ;  or  who 
took  the  check  under  circumstances  of  suspicion  without 
proper  precaution,  or  whose  conduct  has  been  such  as  to 
mislead  the  bank,  or  to  induce  payment  or  certification  of 
the  check,  without  the  usual  scrutiny  or  precautions  against 
mistake  or  fraud.^ 

Accordingly,  it  has  been  held,  that  where  a  bank  paid  a 
check  on  which  its  depositor's  name  was  forged,  and  which 
was  presented  by  another  bank,  to  which  it  was  paid  in  ac- 
cordance with  a  custom  to  rely  upon  the  bank  holding  the 
check  to  assure  its  genuineness,  the  amount  might  be  recov- 
ered back.3  ^^^  SQ  where  the  payees  took  from  a  stranger 
a  check  payable  to  their  order,  and  put  it  in  circulation  with 
their  indorsement  thereon,  thus  giving  it  currency  and  credit, 

'  Gloucester  Bank  v.  Salem  Bank,  17  Mass.,  33,  42. 

"  National  Bank  of  N.  A.  v.  Bangs,  106  Mass.,  445  ;  Ellis  v.  Ohio  Ins..  etc., 
Co.,  4  Ohio  St.,  628  ;  First  National  Bank  v.  Kicker,  71  111.,  439. 

'  Ellis  V.  Ohio  Life  Ins.,  etc.,  Co.,  4  Ohio  St.,  628  ;  see  chapter  XLII.  on  For- 
gery, §  1 361. 


670  CHECKS.  §   1657 

it  was  likewise  held  that  the  amount  might  be  recovered 
back.^  So  where  the  holder  of  a  check  havinsf  reason  to 
question  its  genuineness,  presented  it  to  the  drawee  bank 
and  demanded  payment  without  disclosing  his  suspicions, 
and  the  bank  teller,  doubting  its  genuineness,  refused  to 
pay  it  unless  the  holder  indorsed  it, — it  was  held  that  on 
discovering  that  it  was  a  forgery  of  the  drawer's  name,  the 
bank  might  recover  back  the  amount  paid  from  the  party 
who  presented  it  for  payment.^  The  payee  or  indorsee  of 
a  check  whose  indorsement  is  forged  upon  it,  and  upon 
which  forged  indorsement  the  bank  has  paid  the  check, 
may  recover  the  amount  of  the  check  from  the  bank,  which 
is  regarded  in  judgment  of  law  as  holding  it  for  the  lawful 
owners  ;  and  it  can  not  exonerate  itself  from  its  obligation 
by  showing  that  it  paid  the  amount  to  others,  who.  had  not 
been  authorized  to  receive  it.^ 

'  National  Bank  of  N.  A.  v.  Bangs,  106  Mass.,  444,  Wells,  J.,  saying :  "  In  the 
present  case  the  check  had  not  gone  into  circulation,  and  could  not  get  into  cir- 
culation until  it  was  indorsed  by  the  defendants.  Their  indorsement  would  cer- 
tify to  the  public,  that  is,  to  every  one  who  should  take  it,  the  genuineness  of 
the  drawer's  signature.  Without  it  the  check  could  not  properly  be  paid  by  the 
plaintiffs.  Their  indorsement  tended  to  divert  the  plaintiffs  from  inquir}^  and 
scrutiny,  as  it  gave  to  the  check  the  appearance  of  a  genuine  transaction,  to  the 
inception  of  which  the  defendants  were  parties.  Their  names  upon  the  check 
were  apparently  inconsistent  with  any  suspicion  of  a  forgery  of  the  drawer's 
name.  But  to  the  defendants,  the  presentation,  by  a  stranger  or  third  party, 
of  a  check  purporting  to  be  drawn  to  their  own  order,  which  such  third  party 
proposed  to  negotiate  for  them  for  value,  was  a  transaction  which  should  have 
aroused  their  suspicions.  It  ought  to  have  put  them  on  inquiry  for  explana- 
tions ;  and  if  inquiry  had  been  properly  made  it  would  have  disclosed  the  fraud 
and  prevented  its  success.  The  case  finds  that  they  acted  in  good  faith.  But 
that  does  not  exclude  such  omission  of  due  precautions,  as  to  deprive  them  of 
the  right  to  throw  the  loss  upon  another  party  who  acted  in  like  good  faith,  and 
also  without  fault  or  want  of  due  care.  It  is  possible  that  the  defendants  m.iy 
have  received  the  check  under  circumstances  which  would  exonerate  them  from 
the  imputation  of  any  actual  fault  or  neglect.  But  the  agreed  statement  fails  to 
disclose  any  such  explanation.  A  majority  of  the  court  are  therefore  of  opinion 
that  judgment  must  be  for  the  plaintiffs,  for  the  amount  of  the  check  and  inter- 
est from  the  time  it  was  paid,"  See  Carpenter  v.  Northborough  National  Bank, 
123  Mass.,  69. 

^  First  National  Bank  v.  Ricker,  71  111.,  439. 

^Johnson  v.  First  National  Bank,  13  N.  Y.  S.  C.  (6  Hun),  126.  See  also 
Talbot  v.  Bank  of  Rochester,  i  Hill,  295. 


^   1658.  ALTERATIONS  OF  CHECKS  AFTER  ISSUE.  67 1 

SECTION  XV. 

ALTERATIONS   OF   CHECKS   AFTER   ISSUE. 

§  1658.  The  general  principles  as  to  alteration  which  ap- 
ply to  bills  and  notes,  and  which   have  been   hereinbefore 
discussed,  apply  as  well  to  checks.     It  was  not  long  since 
seriously  argued  in  the  English  Court  of  Appeal,  Exchequer 
Division,  that  the  alteration  of  the  date  of  a  check  from  the 
"  2d  "  to  the  "  26th "of  March  was  not  material,  and  that  it 
was  valid  in  the  hands  of  a  bona  fide  holder  without  notice, 
and  who  had  been  guilty  of  no  negligence  in  taking  it,  and 
the  inferior  court  had  so  held.     The  Court  of  Appeal  over- 
ruled this  decision  and  held  the  check  vitiated.^     It  not  in- 
frequently happens  that  a  check  genuine  in  its  inception  is 
altered  after  it  leaves  the  hands  of  the  drawer  to  a  much 
larger  amount  ;  and  that  the  bank,  relying  on  the  genuine- 
ness of  the  signature,  pays  such  increased  amount  to  the 
holder,  and  charges  up  the  check  in  account  with  the  drawer. 
The  questions  then  arise:  First,  When  and  under  what  cir- 
cumstances may  the  bank  credit  the  drawer  with  the  entire 
amount  ?  and  second,  when  may  it  recover  back  the  amount 
in   excess  of  the  original  and  genuine  amount  from  the 
party  to  whom  it  was  paid  ? 

As  to  t\-\Q  first  question,  as  a  general  rule  the  bank  can 
only  charge  the  original  amount  against  the  drawer,  for  that 
limits  the  extent  of  his  authority  to  it  to  pay  out  his  de- 
posit ;2  and  if  his  check  has  been  altered  by  any  party,  such 
alteration  is  a  forgery  of  his  name,  for  which  he  is  by  no 

'Vance  v.  Lowther,  i  Exchequer  Division,  176  (1876);  16  Moak's  Enelish 
Rep..  583.  ^ 

^  Robarts  v.  Tucker,  16  Q.  B.,  560;  Smith  v.  Mercer,  6  Taunt.,  76;  Hall  v. 
i-uller,  5  B.  &  C,  750,  Bayley,  J.,  said :  "  If.  unfortunately,  he  (the  banker)  pays 
money  belonging  to  the  customer  upon  an  order  which  is  not  genuine,  he  must 
sutler  ;  and  to  justify  the  payment  he  must  show  that  the  order  is  genuine,  not 
in  signature  only,  but  in  every  respect."  Byles  (Sharswood's  ed.)  \*\2x\,  400: 
Chitty  (13  Am.  ed.)  ^430],  485.  ;  L  J  jj.  4yv, 


672  CHECKS.  §   1659. 

means  responsible,  provided  he  afforded  no  opportunity  for 
its  commission.^ 

§  1659.  When  checks  carelessly  drawn  afford  opportu  n  ity 
for  alteration. — But  when  the  drawer  has  drawn  his  check  in 
such  a  careless  or  incomplete  manner  that  a  material  altera- 
tion may  be  readily  accomplished  without  leaving  a  percepti- 
ble mark,  or  giving  the  instrument  a  suspicious  appearance, 
he  himself  prepares  the  way  for  fraud,  and  then,  if  it  is  com- 
mitted, he  and  not  the  bank  should  suffer.  Thus,  a  depositor 
on  leaving  home  gave  his  wife  several  checks  signed  in  blank  ; 
and  she  filled  up  one  for  fifty-two  pounds,  two  shillings,  but 
began  the  word  "  fifty  "  with  a  small  "  f,"  and  wrote  it  in 
the  middle  of  a  blank  line ;  and  also  in  writing  the  mar- 
ginal figures,  left  a  considerable  space  between  the  "  £ " 
mark  and  the  figures  "  52."  The  check  in  this  form  was 
handed  to  her  husband's  clerk  to  get  the  money,  and  he, 
after  inserting  "  three  hundred  "  before  the  word  "  fifty," 
and  "3"  before  the  figures  "52,"  presented  it  and  drew 
three  hundred  and  fifty-two  pounds.  It  was  held  that  the 
whole  amount  was  chargeable  against  the  drawer,  as  the 
careless  drawing  of  the  check  had  made  the  forgery  easy 
and  simple.^  It  has  been  thought  that  if  the  body  of  the 
check  had  been  in  the  drawer's  handwriting,  and  the  addi- 
tions had  been  made  in  a  stranger's,  the  bank  would  have  been 
put  upon  inquiry.^  But  the  two  different  hands  appearing 
in  the  case  cited,  the  wife's  and  the  clerk's,  were  not  con- 
sidered to  have  that  effect ;  and  it  has  been  held  in  the 
United  States  that  the  difference  in  handwriting  does  not 
alter  the  question.^ 


'Anie,  §  1344. 

^  Young  V.  Grote,  4  Bing.,  253.  The  case  of  Bank  of  Commerce  v.  Union 
Bank,  3  Corns.,  230,  might  seem  to  conflict  with  this,  but  the  alteration  there 
was  in  words,  and  was  not  attributable  to  the  drawer's  negligence.  The  criti- 
cism upon  this  latter  case  made  in  Redfield  &  Bigelow's  Lead.  Cas.,  62,  was  af- 
terward corrected  in  Bigelow  on  Estoppel,  435,  note  2. 

°  Grant  on  Banking,  17,  18 ;  Morse  on  Banking,  303. 

*  Bank  of  Commerce  v.  Union  Bank,  3  Coras.,  230;  anie,  §  1654. 


§    I  66  I.  ALTERATIONS  OF  CHECKS  AFTER  ISSUE.  673 

§  1660.  Sometimes  the  check  is  altered  in  other  respects 
than  in  the  amount  after  it  has  been  issued  by  the  drawer ; 
as,  for  instance,  in  the  name  of  the  payee.  In  such  cases 
the  bank  is  not  entitled  to  charge  the  check  against  the 
drawer,  unless  he  drew  the  check  so  caielessly  as  to  afford 
an  opportunity  for  the  fraud.  Thus,  in  Massachusetts,  two 
checks  were  filled  up  by  the  plaintiffs,  payable  to  the  order 
of  two  payees,  and  after  being  examined  by  the  book- 
keeper, they  were  sent  to  the  post-office  by  a  clerk  in  sealed 
envelopes,  addressed  to  the  payees  respectively.  The  clerk 
opened  the  envelopes,  withdrew  the  checks,  cancelled  the 
words  "or  order"  in  lead  pencil,  and  inserted  the  words 
"or  bearer"  in  ink,  and  then  obtained  the  money  for  them 
from  the  bank.  The  court  held  that  the  depositors  were 
clearly  entitled  to  recover  their  deposit  from  the  bank 
which  had  paid  it  out  on  the  altered  checks.^  Thus,  it 
seems  that  unless  the  drawer  has  made  open  the  way  for  an 
alteration,  the  bank  takes  an  altered  check,  whether  the  al- 
teration be  openly  done,  as  in  this  case,  or  skilfully  con- 
cealed, as  in  others,  at  its  peril.  The  words  "or  order" 
are  frequently  replaced  by  the  words  "or  bearer,"  and  the 
reverse.  And  the  lesson  of  caution  and  prudence  on  the 
part  of  the  bank  can  not  be  too  well  learned  or  too  closely 
followed.  Its  only  safeguard  is  to  scrutinize  checks  severe- 
ly, and  never  to  pay  one  at  all  mutilated  in  its  appearance 
until  after  inquiry. 

§  1 66 1.  As  to  recovery  of  excess  paid  by  the  bank 
upon  ail  altered  check. — Where  money  is  paid  by  the  bank 
upon  a  "raised  "  or  altered  check  by  mistake,  the  general 
rule  is  that  it  may  be  recovered  back  from  the  party  to 
whom  it  was  paid,  as  having  been  paid  without  considera- 
tion ;  but  if  either  party  has  been  guilty  of  negligence  or 
carelessness,  by  which  the  other  has  been  injured,  the  neg- 
ligent party  must  bear  the  loss.     This  doctrine  is  clear,  and 

'  Belknap  v.  Nat.  Bank  of  N.  A.,  100  Mass.,  379. 

Vol.  11.-4; 


674  CHECKS.  §  1662. 

is  sustained  by  authority.  The  bank  is  not  bound  to  know 
anything  more  than  the  drawer's  signature,  and  in  the  ab- 
sence of  any  circumstance  which  inflicts  injury  upon  an- 
other party,  there  is  no  reason  why  the  bank  should  not  be 
reimbursed.^  Its  certification  of  the  check  does  not  pre- 
clude it  from  showing  an  alteration  ;  ^  nor  does  its  teller's 
declaration,  after  he  has  examined  it,  that  it  is  right  in 
every  particular.^ 

§  1662.  In  the  transfer  of  bills,  notes,  and  checks  by  the 
holder  to  another  party,  the  very  act  of  transfer  makes  the 
transferrer  an  implied  warrantor  of  the  genuineness  of  the 
instrument  ;  and  the  transferee  may  recover  on  the  instru- 
ment against  the  transferrer,  as  an  indorser,  if  he  indorses  it ; 
or  may  recover  back  the  consideration,  if  he  transferred  it 
without  indorsement.^  But  when  the  bank  takes  a  forged 
check,  its  right  of  recovery  does  not  seem  to  depend  on 
any  indorsement  by  the  holder.  It  is  its  duty  to  know  the 
drawer's  signature.  And  if  he  takes  a  forged  check  from 
the  holder  (and  he  is  not  himself  involved  in  the  fraud), 
its  right  to  recover  back  the  amount  is  regarded  as  turning 
solely  on  the  question  whether  or  not  the  holder  would  be 
placed  in  a  worse  position  than  if  -payment  had  been  re- 
fused. Such  at  least  is  the  result  of  the  authorities  which 
recognize  the  right  of  the  bank  to  recover.^ 

§  1663.  Bank  not  bonnd  to  know  indorser  s  signature.^ 
A  bank  is  not  bound  to  know  the  signature  of  an  indorser. 
And  besides,  the  holder  of  the  check,  whether  he  indorses 
it   or  not,  warrants  the  genuineness  of   all  prior  indorse- 

'  Espy  V.  Bank  of  Cincinnati,  18  Wall.,  614;  Reddington  v.  Wood,  45  Gal., 
406;  Nat.  Park  Bank  v.  Ninth  Nat.  Bank,  46  N.  Y.,  ^^  ;  55  Barb.,  124;  Bank 
of  Commerce  v.  Union  Bank,  3  Corns.,  230 ;  Marine  Nat.  Bank  v.  Nat.  City 
Bank,  55  N.  Y.,  211  ;  59  N.  Y.,  67 ;  Third  Nat.  Bank  v.  Allen,  59  Mo. ;  Parker 
V.  Roser,  67  Ind.,  500. 

"  Marine  Nat.  Bank  v.  Nat.  City  Bank,  59  N.  Y.,  67.  See  a7tte,  §  1606,  Secu- 
rity Nat.  Bank  v.  Nat.  Bank,  67  N.  Y.,  461. 

'  Security  National  Bank  v.  National  Bank,  67  N.  Y.,  461. 

*  See  §§  672,  673,  731,  732,  vol.  I.  '  Ante,  §  1655. 


§   1663.  ALTERATIONS  OF  CHECKS  AFTER  ISSUE.  675 

ments.  Therefore,  if  the  bank  pay  a  check  upon  which 
the  name  of  a  prior  indorser  is  forged,  it  may  recover  back 
the  amount  from  the  party  to  whom  rt  was  paid,  or  from 
any  party  who  indorsed  it  subsequent  to  the  forgery.^ 
When  the  bank  is  in  doubt  as  to  the  genuineness  of  an 
indorser's  signature,  it  is  entitled  to  demand  a  reasonable 
time  for  inquiry  before  making  payment.^ 

There  is  no  doubt  that  if  the  bank  pays  a  check  upon 
the  forged  indorsement  of  the  payee's  or  special  indorsee's 
name,  the  payee  or  such  indorsee  may  recover  back  the 
amount,  if  the  check  had  been  delivered  to  him  ;  and  the 
drawer  may  recover  it  back  if  he  had  not  issued  it.^ 


'  Morse  on  Banking,  308,  310.  See  also  Canal  Bank  v.  Bank  of  Albany,  i 
Hill,  287  (a  bill).     See  ante,  §  538,  vol.  i. 

^  Robarts  v.  Tucker,  4  Eng.  L.  &  Eq.,  236,  Maule,  J. :  "I  conceive  that  if  a 
bill  were  presented  to  a  banker  by  a  stranger,  with  an  indorsement  on  it  of  a 
person  necessary  to  make  out  the  title,  but  unknown  to  the  banker,  the  banker 
would  be  justified  in  refusing  to  pay  at  once."  Parke,  B. :  "  Probably,  in  such 
a  case,  the  obligation  would  be  to  pay  in  a  reasonable  time." 

'  Morgan  v.  Bank,  i  Duer,  434  ;  i  Kern,  404  ;  Dodge  v.  Nat.  Exchange  Bank, 
20  Ohio  N.  S.,  246 ;  Seventh  Nat.  Bank  v.  Cook,  73  Penn.  St.,  483. 


CHAPTER    L. 

BANK       NOTES. 


SECTION    I. 
DEFINITION,   NATURE,   AND   FORMAL   ELEMENTS  OF  BANK  NOTES. 

§  1664.  Bank  notes  or  bank  bills  (as  they  are  equally 
as  often  called)  are  the  promissory  notes  of  incorporated 
banks,  designed  to  circulate  like  money,  and  payable  to 
bearer  on  demand.^ 

The  terms  "  bank  notes  "  and  "  bank  bills  "  are  of  the  like 
signification,  and  for  the  purposes  of  interpretation,  both  in 
criminal  and  civil  jurisprudence,  are  equivalent  and  inter- 
changeable.^ 

In  form  and  substance  they  are  promissory  notes,  and 
they  are  governed  by  very  many  of  the  principles  which 
apply  to  the  negotiable  notes  of  individuals  given  in  the 
course  of  trade.  But  they  are  designed  to  constitute  a  cir- 
culating medium,  and  this  circumstance  imparts  to  them 
peculiar  characteristics,  and  essentially  varies  the  rules  which 
govern  promissory  notes  in  general. 

A  bank  bill  may  be  described,  in  an  indictment  for  utter- 
ing forged  and  counterfeit  paper,  as  a  promissory  note.^ 

§  1665.  Bank  bills  are  usually  made  payable  to  bearer, 
though  sometimes  expressed  to  be  payable  to  a  certain  per- 
son or  bearer.  But  in  effect  the  two  forms  are  identical,  and 
though  the  person  named  be  incompetent  to  sue  in  one  of 

'  See  2  Parsons  N.  &  B.,  88.  "  Eastman  v.  Commonwealth,  4  Gray,  416. 

°  Commonwealth  v.  Simonds,  14  Gray,  59 ;  Commonwealth  v.  Thomas,  10 
Gray,  483. 

(676) 


§   1669.    DEFINITION,   NATURE,  AND   iOKMAL  ELEMENTS.         6"] J 

the  Federal  courts  of  the  United  States,  yet,  if  the  bearer  be 
competent  he  may  sue  ;  for  a  note  payable  to  bearer  is 
payable  to  anybody,  and  unaffected  by  the  disabilities  of 
the  nominal  payee. ^ 

§  1666.  Banknotes  are  invariably  payable  on  demand. — 
It  is  essential  to  enable  them  to  circulate  as  currency,  that 
they  be  redeemable  in  money  at  any  time,  and  therefore  they 
are  made  payable  whenever  demanded.  Banks  have  often 
issued  their  notes  payable  at  a  future  day,  but  such  instru- 
ments are  called  "  post-notes,"  and  are  not  bank  notes  in 
the  accepted  use  of  the  term. 

§  1667.  Style  of  execution. — It  would  matter  not  upon 
what  kind  of  paper  the  bank  note  was  executed,  or  whether 
it  were  printed  or  written.  But,  being  designed  to  circulate 
as  money,  they  are  generally  printed  on  paper  of  fine  fabric, 
and  elaborated  with  vignettes  and  fanciful  lettering,  which, 
besides  being  ornamental,  subserves  the  principal  purpose 
of  rendering  counterfeits  difficult.  And  private  marks  are 
often  inserted  in  the  texture  of  the  paper,  which  enhance 
the  facility  of  identification  and  the  difficulties  of  forgery. 

§  1668.  Issuing  notes  a  cojnmon  law  right. — The 
privilege  of  issuing  bank  notes  was,  prior  to  the  national 
banking  act,  regulated  by  statutes  of  the  several  States,  and 
generally  was  confined  to  incorporated  institutions,  or  per- 
sons acting  under  a  general  banking  law  ;  and  none  but 
such  companies  or  persons  could  issue  notes  designed  for 
the  purposes  of  a  circulating  medium.  But  this  restriction 
was  purely  statutory  ;  for,  in  the  absence  of  a  statute,  the 
right  of  banking  pertains  to  every  private  citizen,  and  any 
one  may  issue  his  obligations  in  whatsoever  form  he 
pleases.^ 

§  1669.  How  signed. — The  execution  of  bank  notes 
should  conform  to  the  provisions  of  the  statute  authorizing 

'  Bank  of  Kentucky  v.  W^ister,  2  Pet.,  318.  '^  Morse  on  Banking,  i. 


6^^  BANK   NOTES.  §   167O. 

their. issue.  They  are  usually  required  to  be  signed  by  the 
president  and  cashier  of  the  bank,  and  when  this  is  requisite, 
no  note  will  be  valid  unless  so  signed.  Where  bank  notes 
prepared  for  the  official  signatures  were  stolen  from  the 
bank's  possession,  and  the  signatures  forged,  it  was  contended 
that  the  negligence  of  the  bank  should  render  it  liable  for 
their  payment.  But  it  was  held  otherwise,  because  the 
crime  had  been  committed  after  the  notes  had  left  the  bank. 
Had  they  been  complete  when  they  were  stolen,  it  would 
have  been  different.^  If  signed,  but  incomplete,  at  the 
time  of  the  theft,  it  is  conceived  that  they  would  not  be 
binding  on  the  bank.^ 

The  date  of  bank  notes  is  not  evidence  of  the  time  they 
were  issued,  because  they  are  often  held  by  the  bank  for  a 
long  time  after  being  prepared  for  circulation,  and  are  con- 
stantly paid  into  the  bank  and  reissued  ;  and  the  date  in- 
dicates rather  the  series  to  which  the  notes  belong  than  the 
actual  day  of  issue.^ 

§  1670.  Bankers'  cash  notes  are  the  promissory  notes  of 
bankers,  and  they  were  formerly  called  goldsmiths'  notes, 
because  the  goldsmiths  acted  as  bankers  and  gave  these 
notes  for  money  deposited  with  them.  They  are  drawn 
like  bank  notes,  payable  to  bearer  on  demand  ;  and  they 
generally  pass  as  cash,  and  are  legal  tender,  unless  objected 
to.  The  use  of  checks  upon  deposits  has  to  a  great  extent 
superseded  them  in  England.  They  are  so  far  like  ordinary 
promissory  notes  that  they  may  be  indorsed,  and  then 
operate  like  bills  drawn  upon  the  bank.  They  are  not 
money,  like  Bank  of  England  notes  ;  and  if  the  bank  has 
stopped  payment  when  they  are  transferred,  the  loss  is 
thrown  upon  the  transferrer,  unless  the  transferee,  by  laches, 


-  Gloucester  Bank  v.  Salem  Bank,  17  Mass.,  i  ;  Id.,  33. 

^  See  §§  839,  840,  841,  842,  vol.  I,  and  notes. 

'  F.  &  M.  Bank  v.  White,  2  Sneed,  482  ;  Greer  v.  Perkins,  5  Humph.,  588  ; 
Wrig-ht  V.  Douglas,  3  Barb.,  554;  Selfridge  v.  Northampton  Bank,  8  Watts  & 
S.,  320  ;  Long  v.  Bank,  81  N.  C,  46. 


§  1672.     HOW  FAR  BANK  NOTES  ARE  SIMILAR  TO  MONEY.       679 

fails  to  present  them,  or  to  notify  the  transferrer  that  they 
are  bad.^ 

§  1 67 1.  T\\t  post  notes  of  a  bank  are  promissory  notes, 
payable  on  time,  and  yet  designed  to  circulate  as  money. 
A  bank  authorized  to  issue  paper  for  circulation  may  issue 
them ;  ^  and  being  issued  for  the  purpose  of  circulating  like 
money,  they  are  subject  to  the  rules  which  govern  ordinary 
bank  notes  payable  on  demand,  rather  than  to  those  which 
govern  negotiable  promissory  notes  ;^  and  the  rules  of  de- 
mand and  notice  do  not  apply  to  them."*  But  it  seems 
that  they  are  entitled  to  grace  like  other  promissory  notes.* 


SECTION  II. 

now    FAR    BANK  NOTES    ARE    SIMILAR    TO   MONEY. 

§  1672.  In  an  early  case,  it  was  said  by  Lord  Mansfield, 
that  bank  notes  "  are  not  goods,  nor  securities,  nor  docu- 
ments for  debts,  nor  are  so  esteemed,  but  are  treated  as 
money — as  cash  in  the  ordinary  course  and  transaction  of 
business — by  the  general  consent  of  mankind,  which  gives 
them  the  credit  and  currency  of  money  to  all  intents  and 
purposes.  They  are  as  much  money  as  guineas  themselves 
are,  or  any  other  current  coin  that  is  used  in  common  pay- 
ment as  money  oi"  cash,  ....  and  are  never  considered 
as  securities  for  money,  but  as  money  itself.  On  payment 
of  them,  whenever  a  receipt  is  required,  the  receipts  are 
always  given  as  for  money,  not  as  for  securities  or  notes."  * 

'  See  on  this  subject  Chitty  on  Bills  [*522],  591. 

^  Campbell  v.  Mississippi  Union  Bank,  6  How.  (Miss.),  625. 

'  Fulton  Bank  v.  Phoenix  Bank,  i  Hall,  562. 

*  Key  V,  Knott,  9  Gill  &  J.,  342. 

'  Sturdy  v.  Henderson,  4  B.  &  Aid.,  592  ;  Chitty,  Jr.,  11 10  ;  Staples  v.  Franklin 
Bank,  i  Met.,  43  ;  Perkins  v.  Franklin  Bank,  21  Pick.,  483  ;  Edwards  on  Bills, 
522. 

'  Miller  v.  Race,  l  Burr.,  452  ;  Tancil  v.  Seaton,  28  Grat.,  605. 


68o  BANK  NOTES.  §  1672a; 

These  remarks,  however,  could  only  apply  in  their  full  sig- 
nificance to  Bank  of  England  notes,  which,  by  statute,  take 
the  place  of  coin  ;  for  other  bank  notes,  while  in  the  ordi- 
nary transactions  of  business,  take  the  place  of,  and  are 
treated  as,  cash  or  money,^  are  nevertheless  essentially  dis- 
tinguishable from  it. 

But  they  are  so  far  money,  in  the  usual  acceptance  of  the 
word  in  common  parlance,  that  they  will  pass  by  will  be- 
queathing testator's  money  or  cash  ;^  and  it  has  been  said 
that  a  sheriff  may  receive  them  when  current  in  discharge 
of  an  execution.^  But  this  does  not  seem  correct  ;  and 
the  officer  who  takes  this  responsibility  acts  at  his  own 
risk.'* 

In  short,  bank  notes  are  not,  legally  speaking,  money, 
but  in  a  popular  sense  are  often  spoken  of  as  money,  and 
are  conventionally  used  in  its  stead  with  the  like  effect. 

§  16^ 2a.  Bank  notes  not  legal  tender  if  objected  to. — 
Thus,  it  is  a  settled  principle  that  current  bank  notes  are 
a  lawful  tender  in  payment  of  debts,  unless  objected  to  be- 
cause they  are  not  money.  But  if,  when  tendered  in  dis- 
charge of  any  contract  for  the  payment  of  money,  the  cred- 
itor objects  to  receiving  them,  because  they  are  not  money, 
the  tender  is  unavailable,  and  he  may  insist  on  payment  in 
the  current  coin,^  And  w^hen  judgment  has  been  obtained 
for  the  payment  of  money,  bank  notes  are  not  ordinarily 
so  far  cash  or  legal  tender  that  they  may  be  brought  into 
court  and  tendered  in  satisfaction.^ 

'  Morrill  v.  Brown,  15  Pick.,  173  ;  Pierson  v.  Wallace,  2  Eng.  (Ark.),  282  ;  \  d- 
munds  v.  Digges,  i  Grat.,  359  ;  Bullard  v.  Bell,  i  Mason,  243  ;  Bayard  v.  Shu.ik, 
I  Watts  &  S.,  92  ;  U.  S.  Bank  v.  Bank  of  Georgia,  10  Wheat.,  333  ;  Bradley  v. 
Hunt,  5  Gill  &  J.,  58. 

^  Stuart  V.  Bute,  11  Ves.,  662  ;  Miller  v.  Race,  i  Burr.,  457. 

^  Scott  V.  Commonwealth,  5  J.  J.  Marsh,  643  ;  Governor  v.  Carter,  3  Hawks,  3  «S. 

*  Armsworth  v.  Scotten,  29  Ind.,  495. 

^Jefferson  Co.  Bank  v.  Chapman,  19  Johns,  322;  Thomas  v.  Todd,  6  Hdl, 
340;  Morse  on  Banking,  397;  Wright  v.  Reed,  3  T.  R.,  554;  Owenscn  v. 
Morse,  7  T.  R.,  64;  Codman  v.  Lubbock,  5  Dowl.  &  R.,  289;  Chitty  on  Bills 
[*523],  524. 

*  Armsworth  v.  Scotten,  29  Ind.,  495 ;  Hallowell,  etc..  Bank  v.  Howard,  13 
Mass.,  235;  Coxe  v.  State  Bank,  3  Halst.,  172. 


6  I  6  74-     IIO^^'  FAR  BANK  NOTES  ARE  SIMILAR  TO  MONEY.       68 1 

§  1673.  Instruments  payable  in  bank  notes  not  negotiable. 
— The  difference  between  bank  notes  and  money  is  again 
observable  in  the  cases  which  maintain  that  a  bill  or  note 
payable  in  bank  notes  is  not  negotiable,  for  its  medium  of 
payment  has  no  fixed  value.^  In  England,  it  has  been  held 
that  a  promissory  note  is  not  negotiable,  even  though  it  be 
payable  in  Bank  of  England  notes ;  but  in  the  United 
States  a  note  payable  in  legal  tender  notes  would  doubtless 
be  considered  negotiable.^ 

§  1673^.  May  be  taken  in  execution. — By  statute  in  Eng- 
land, and  in  most  of  the  United  States,  bank  notes  may  be 
taken  in  execution.  At  common  law  they  could  not  be ; 
but  by  custom  in  this  country,  it  would  seem  that  the 
common  law  has  been  changed,  and  that  they  may  be  taken 
in  execution,  or  on  attachment  or  garnishee  process.^ 

§  1674.  Bank  notes  are  negotiable  like  money ,  ^iwA  pass 
from  hand  to  hand  by  delivery,  possession  in  itself  being 
sufficient  evidence  of  title.  This  doctrine  was  established 
in  the  leading  case  of  Miller  v.  Race,**  where  a  bank  note, 
payable  to  bearer,  was  stolen  from  the  mail,  and  on  the 
next  day  was  acquired  by  the  plaintiff  for  full  value,  in  the 
usual  course  of  business,  and  without  any  notice  of  the  cir- 
cumstance. The  bank  clerk  detained  the  note  when  pre- 
sented for  payment ;  and  it  was  held  that  the  plaintiff 
could  recover  it,  because  such  notes  were  universally  treated 
as  cash,  and  it  was  necessary  for  the  purposes  of  commerce 
that  their  currency  should  be  established  and  secured. 
These  views  are  now  universally  entertained.  It  may  be 
observed  also,  that  while  the  finder  of  a  bank  note  ac- 
quires no  title  as  against  the  owner,  he  has  such  a  posses- 
sory interest  in  it,  as  to  enable  him  to  recover  it  from  a  de- 

'  See  chapter  I,  §§  55  et  seq.,  vol.  i.  'See  ante,  § 57,  vol.  i. 

'Spencer  v.  Blaisdell,  4  N.  H.,  198  ;  Morrill  v.  Brouii,  15  Pick.,  173  ;  Wildes 
V.  Nahant  Bank,  20  Pick.,  352  ;  Lovejoy  v.  Lee,  35  Vt.,  430. 
*■  I  Burr.,  452. 


6S2  BANK    NOTES.  §   1 675. 

positary,  to  whom  he  has  confided  its  care,  in  the  absence 
of  any  claim  by  the  rightful  owner ;  but  he  must  show  its 
genuineness,  and  the  value  claimed.^ 


SECTION  III. 

LIABILITY  OF   TRANSFERRER   OF   BANK   NOTES. 

§  1675.  Transfer  warrants  genuineitess,  but  not  sol- 
vency.— Bank  notes  being  payable  to  bearer  are  transferred 
by  mere  delivery  ;  and  although  it  has  been  thought  that 
the  transferrer  may  indorse  them,  with  like  effect  as  the  in- 
dorsement of  other  negotiate  promissory  notes,^  it  would 
be  exceedingly  singular  to  do  so,  for  bank  notes  are  in 
their  nature  designed  to  circulate  like  money,  not  upon  the 
credit  of  the  transferrer,  but  upon  their  own  credit  as  obli- 
gations redeemable  in  money  at  any  time.  Being  used  as 
money,  it  is  quite  clear  and  well  settled  that  the  person 
who  transfers  a  bank  note  in  payment  of  a  debt,  or  other- 
wise for  value  in  the  course  of  business,  warrants  it,  in  like 
manner  as  his  transfer  imports  a  warranty  of  current  coin, 
that  is.  that  it  is  genuine,  and  not  counterfeit.  If  it  be 
counterfeit  and  spurious,  it  is  not  what  his  very  act  of  trans- 
fer represents  it  to  be.  It  is  a  mere  nullity,  instead  of 
money  or  cash  ;  and  the  debt  remains  undischarged.^ 

But  the  party  who  receives  counterfeit  bank  notes  is  not 
without  a  duty  on  his  part.  In  order  to  recover  the  debt 
for  which  they  were  given  in  payment,  or  receive  genuine 

'Tancil  v.  Seaton,  28  Grat.,  601  (1877).  See  also  New  York,  etc.,  R.R.  Co. 
V.  Haws,  56  N.  Y.,  175  (1874)  ;  Bridges  v.  Hawkesworth,  7  E.  C.  L.  &  Eq.  R., 
424. 

^  Corbet  v.  Bank  of  Smyrna,  2  Harr.  (Del.),  235  ;  Thomson  on  Bills  (Wilson's 
ed.),  123. 

'Pindall  V.  N.  W.  Bank,  7  Leigh,  617  ;  Ramsdale  v.  Horton,  3  Penn.  St.,  330; 
Young  V.  Adams,  6  Mass.,  182;  Markle  v.  Hatfield,  2  Johns,  455  ;  Mudd  v. 
Reeves,  2  H.  &  J.,  368  ;  Edmunds  v.  Digges,  i  Grat.,  359  ;  Eagle  Bank  v. 
Smith,  5  Conn.,  71  ;  Jones  v.  Ryde,  5  Taunt.,  488  ;  see  §§  731  ei  seq.,  vol.  I. 


)   16/6.        LIABILITY  OF  TRANSFERRER  OF  BANK  NOTES.  683 

notes  in  their  stead,  he  must  exercise  diligence,  by  giving 
notice  that  they  are  counterfeit,  and  offering  to  return  them 
within  a  reasonable  time.^  And  what  such  reasonable  time 
is  must  depend  upon  all  the  facts  and  circumstances  of  each 
particular  case.^  If  the  forgery  be  discovered  immediately, 
the  transferrer  should  be  notified  immediately  ;  for  he  may 
have  recourse  against  some  antecedent  transferrer,  and  lose 
his  opportunity  of  asserting  it  by  delay.  A  delay  by  the 
transferee  for  six  months,  after  discovering  that  bank  notes 
were  counterfeit,  to  give  notice,  has  been  held  unreason- 
able, and  to  forfeit  his  right  of  restitution ;  ^  and  so  a  delay 
from  "Slay  25th  to  the  4th  of  July  following;''  so  a  delay 
for  four  months,  where  the  parties  resided  within  one 
hundred  miles  from  each  other  ;^  and  even  as  short  a  delay 
as  fifteen  days,  where  a  bank  received  its  own  notes  upon 
which  the  name  of  its  president  was  forged.*^ 

§  1676.  As  to  the  warranty  of  solvency  of  the  bank,  by 
the  transferrer  of  its  notes,  a  more  difficult  question  is  pre- 
sented. The  parties  may,  of  course,  bind  themselves  by 
any  express  agreement  which  they  may  choose  to  make. 
If  the  transferrer  represents  or  warrants  that  the  notes  are 
worth  par,  he  is  responsible  if  it  turn  out  otherwise  ; '''  and 
if  the  transferee  stipulates  that  the  risk  shall  be  taken  by 
himself,  he  can  not  recover  of  the  transferrer,  if  they  turn 
out  to  be  worthless.^  But  when  bank  notes  are  offered  and 
received  in  payment  of  a  prior  debt,  or  in  exchange  for 
goods,  or  other  notes,  the  courts  differ  as  to  the  implied 
contract  of  the  parties. 

'  See  anfe,  §1371.  '  Simms  v.  Clark,  1 1  111.,  137. 

^Raymond  v.  Baar,  13  Sergt.  &  R.,  318. 

♦Thomas  v.  Todd,  6  Hill,  340.  'Pindall  v.  N.  W.  Bank,  7  Leigh,  617. 

"  Gloucester  Bank  v.  Salem  Bank,  17  Mass.,  44. 

'  Commonwealth  v.  Stone,  4  Mete,  43  ;  Corbet  v.  Bank  of  Smyrna,  2  Harr. 
(Del.),  235  ;  Oilman  v.  Peck,  11  Vt.,  516  ;  Aldrich  v.  Jackson,  5  R.  L,  218 ;  Hel- 
Jings  V.  Hamilton,  4  Watts  &  S.,  462;  Wainwright  v.  Weber,  11  Vt.,  1576; 
Frontier  Bank  v.  Morse,  22  Me.,  88. 

*  Story  on  Promissory  Notes,  §  389. 


684  BANK    NOTES.  §   1676^. 

§  16  J 6a.  View  that  ti^ansfei'rer  warrants  solvency  of  the 
bank. — Many-  judges  and  jurists  hold  that  the  risk  of  the 
solvency  of  the  bank  lies  upon  the  transferrer,  upon  the 
ground  that  the  transfer  imports  that  the  notes  ^re  redeem- 
able on  demand  at  the  bank  ;  and  that  if  thev  are  not  re- 
deemed  because  of  the  bank's  insolvency,  the  transferrer 
should  redeem  them  himself.  And  also  upon  the  ground 
that  it  is  equitable  for  the  loss  to  fall  on  the  party  who  held 
the  notes  when  the  loss  occurred.^ 

§  1677.  View  that  transferrer  does  not  warrant  solvency 
of  the  bank. — On  the  other  hand,  high  authorities  consider 
that  the  transferrer  warrants  nothing  but  the  genuineness 
of  the  bank  notes,  and  that  the  risk  of  their  value  is  upon 
the  transferee.^  And  this  seems  to  us  the  correct  view, 
whether  they  are  transferred  in  payment  of  a  prior  debt,^ 

'  Lightbody  v.  Ontario  Bank,  11  Wend.,  9  ;  13  Id.,  loi  ;  Houghton  v.  Adams, 
18  Barb.,  545  ;  Harley  v.  Thornton,  2  Hill  (S.  C),  509  ;  Fogg  v.  Sawyer,  9  N. 
H.,  365  ;  Gilman  v.  Peck,  11  Vt.,  516  ;  Thomas  v.  Todd,  6  Hill,  340  ;  Westfall 
V.  Braley,  10  Ohio  St.,  188  ;  Frontier  Bank  v.  Morse,  22  Me.,  88 ;  Townsends  v. 
Bank  of  Racine,  7  Wise,  185  ;  2  Parsons  N.  &  B.,  102-105,  191-195,  197  ;  Wil- 
liams V.  Smith,  2  Barn.  &  Aid.,  496 ;  as  to  English  rule,  see  §  1679(2. 

-  Bayard  v.  Shunk,  i  Watts  &  S.,  92  ;  Edmunds  v.  Digges,  i  Grat.,  359 ; 
Lowery  v.  Murrell,  2  Port.  (Ala.),  286  ;  Corbet  v.  Bank  of  Smyrna,  2  Harr. 
(Del.),  235;  Ware  v.  Street,  3  Head,  609;  Scruggs  v.  Gass,  8  Yerg.,  175; 
Morse  on  Banking,  421,  422  ;  see  ante,  §§  737  et  seq.,  vol.  i. 

^  Bayard  v.  Shunk,  i  Watts  &  S.,  92.  In  this  case  the  plaintiff's  attorney 
received  bank  notes  in  payment  of  a  judginent,  both  parties  being  ignorant  of 
the  failure  of  the  bank  which  occurred  several  days  previous.  The  notes  were 
worthless,  but  the  payment  was  held  good,  Gibson,  C.  J.,  saying  :  "  The  asser- 
tion that  it  is  always  an  original  and  subsisting  part  of  the  agreement  that  a 
bank  note  shall  turn  out  to  have  been  good  when  it  was  paid  away,  can  be  con- 
ceded no  further  than  regards  its  genuineness.  That  genuine  notes  are  sup- 
posed to  be  equal  to  coin  is  disproved  by  daily  experience,  which  shows  thj^t 
they  circulate  by  the  consent  of  the  whole  communities  at  their  nominal  value 
when  notoriously  below  it.  But  why  hold  a  payor  responsible  for  a  failure  ui 
the  bank  only  when  it  has  been  ascertained  at  the  time  of  the  payment,  and  not 
for  insolvency  ending  in  an  ascertained  failure  afterward  ?  As  the  bank  may 
have  been  actually  insolvent  before  it  chose  to  let  the  world  know  it,  we  must 
carry  his  responsibility  back  beyond  the  time  when  it  ceased  to  redeem  its  notes, 
if  we  carry  it  back  at  all.  Were  it  not  for  the  conventional  principle  that  the 
purchaser  of  a  chattel  takes  it  with  its  defects,  the  purchaser  of  a  horse,  with  the 
seeds  of  mortal  disease  in  him,  might  refuse  to  pay  for  him,  though  his  vigor 
and  usefulness  were  yet  unimpaired  ;  and  if  we  strip  a  payment  in  bank  notes  of 
the  analogous  cash  principle,  why  not  treat  it  as  a  nullity,  by  showing  that  the 
bank  was  actually,  although  not  ostensibly,  insolvent  at  the  time  of  the  transac- 
tion ?  It  is  no  answer  to  say  the  note  of  an  unbroken  bank  may  be  instantly 
converted  into  coin  by  presenting  it  at  the  counter.     To  do  that  may  require  a 


§    1 6/ 7-        LIABILITY  OF  TRANSFERRER  OF  BANK  NOTES.  685 

or  contemporaneously  in  exchange  for  goods  or  other  bank 
notes.^    When  they  are  offered  in  payment,  they  are  offered 


journey  from  Boston  to  New  Orleans,  or  between  places  still  further  apart,  and 
the  bank  may  have  stopped  in  the  meantime  ;  or  it  may  stop  at  the  instant  of 
presentation,  when  situated  at  the  place  where  the  holder  resides.  And  it  may 
do  so  even  when  it  is  not  solvent  at  all,  but  perfectly  able  eventually  to  pay  the 
last  shilling.  This  distinction  between  previous  and  subsequent  failure,  evinced 
by  stoi)ping  before  the  time  of  the  transaction  or  after  it,  is  an  arbitrary  and  im- 
practicable one.  To  such  a  payment  we  must  api)iy  the  cash  principle  entire,  or 
we  must  treat  it  as  a  transfer  of  negotiable  paper,  imposing  on  the  transferee  no 
more  than  the  ordinary  mercantile  responsibility  in  regard  to  presentation  and 
notice  of  dishonor.  There  is  no  middle  ground.  But  to  treat  a  bank  note  as  an 
ordinary  promissory  note  would  introduce  endless  confusion,  and  a  most  dis- 
tressing state  of  litigation.  We  should  have  reclamations  through  hundreds  of 
hands,  and  the  inconvenience  of  having  a  chain  of  disputes  between  successive 
receivers  would  more  than  counterbalance  the  good  to  be  done  by  hindering  the 
crafty  man  from  putting  off  his  worthless  note  to  an  unsuspecting  creditor.  No 
contrivance  can  prevent  the  accomplishment  of  fraud,  and  rules  devised  for  the 
suppression  of  petty  mischiefs  have  usually  introduced  greater  ones.  The  case 
of  a  counterfeit  bank  note  is  entirely  different.  The  laws  of  trade  extend  to  it 
only  to  prohibit  the  circulation  of  it.  They  leave  it,  in  all  besides,  to  what  is 
the  rule  both  of  the  common  and  the  civil  law,  which  requires  a  thing  parted 
with  for  a  price  to  have  an  actual,  or  at  least  a  potential,  existence  (2  Kent,  468), 
and  a  forged  note,  destitute  as  it  is  of  the  quality  of  legitimate  being,  is  a  non- 
entity. It  is  no  more  a  bank  note  than  a  dead  horse  is  a  living  one  ;  and  it  is 
an  elementary  principle  that  what  has  no  existence  can  not  be  the  subject  of  a 
contract.  But  it  can  not  be  said  that  the  genuine  note  of  an  insolvent  bank  has 
not  an  actual  and  legitimate  existence,  though  it  be  little  worth  ;  or  that  the  re- 
ceiver of  it  has  not  got  the  thing  he  expected.  It  ceases  not  to  be  genuine  by 
the  bank's  insolvency  ;  its  legal  obligation  as  a  contract  is  undissolved  ;  and  it 
remains  a  promise  to  pay,  though  the  promisor's  ability  to  perform  it  be  impaired 
or  destroyed.  But  as  the  stockholders  of  a  broken  bank  are  the  last  to  be  paid, 
it  is  seldom  unable  in  the  end  to  pay  its  note  holders  and  depositors  ;  and  even 
where  nothing  is  left  for  them,  its  notes  may  be  parted  with  at  a  moderate  dis- 
count to  those  who  are  indebted  to  it.  We  seldom  meet  with  so  bad  a  case  as 
the  present,  in  which  everything  like  effects,  and  even  the  vestiges  of  the  bank, 
disappeared  in  a  few  hours  after  the  first  symptoms  of  its  failure.  But,  inde- 
pendent of  that,  the  difference  between  forgery  and  insolvency  in  relation  to  the 
transfer  of  a  bank  note,  is  as  distinctly  marked  as  the  difference  between  title 
and  quality  in  relation  to  the  sale  of  a  chattel."  Lowrey  v.  Murrell,  2  Port. 
(Ala.),  280. 

'  In  Edmunds  v.  Digges,  I  Grat.,  359,  it  appeared  that  Digges,  the  sheriff  of 
Fauquier  Countv,  Virginia,  was  starting  to  Richmond  to  deposit  $400  in  notes 
of  the  Virginia  banks,  when  Edmunds  applied  to  him  to  e;:change  them  for  the 
same  amount  in  notes  of  the  Mechanics'  Bank  of  Alexandria.  Digges  first  ob- 
jected, but  finally  consented.  On  that  very  day  the  Mechanics'  Bank  stopped 
payment.  It  was  held  that  Digges  could  not  recover  from  Edmunds,  but  must 
bear  the  loss,  and  said  Baldwin,  J. :  "  The  court  is  of  opinion  that  there  is  no 
implied  warranty  of  the  value  of  the  current  money  of  the  country,  passing  Irom 
hand  to  hand  in  the  course  of  trade,  commerce,  and  business.  This  is  true,  not 
only  of  the  money  made  by  law  a  good  tender  in  the  payment  of  debts,  and  per- 
formance of  contracts,  but  is  equally  so  in  regard  to  the  notes  of  banks  and 
bankers,  payable  to  bearer,  and  circulated  by  delivery.  These  are  not  merely 
the  representative  of  money,  but  in  the  course  of  business  and  by  common  usage 
are  substantially  employed  and  treated  by  most  persons  as  actual  money  or 
cash Those  who  circulate  them  are  not  understood  as  thereby  giving 


686  BANK    NOTES.  §   1 678. 

(and  if  received,  receipted  for)  as  money  or  cash.  And 
the  transferee  takes  them  of  his  own  free  will,  and  with  his 
eyes  open.  If  he  does  not  choose  to  take  them,  he  may  re- 
fuse to  do  so,  or  he  may  require  that  their  payment  shall 
be  guaranteed.  And  if,  under  such  circumstances,  he  re- 
ceives them  unconditionally,  we  can  perceive  no  more  pro- 
priety in  allowing  him  to  return  them,  if  the  bank  is  totally 
or  partially  insolvent,  than  in  allowing  the  purchaser  of 
goods  to  return  them,  and  demand  back  his  money  or  cash, 
when  it  turns  out  that  their  market  price  was  much  less 
than  the  price  he  paid,  or  that  they  were  in  fact  without 
any  market  value  at  all. 

§  1678.  Exception  to  general  rule. — ^There  is  properly 
excepted  from  these  conclusions  all  cases  in  which  the  trans- 
ferrer knows  of  the  insolvency  of  the  bank  at  the  time  of 
the  transfer,  and  the  transferee  does  not.  And  this  excep- 
tion does  not  arise  from  the  contract  of  the  parties,  but  is 
rather  referable  to  considerations  of  fraud.  To  conceal 
from  the  transferee  that  the  notes  are  wholly  or  partially 
worthless,  when  they  are  passed  as  money,  would  be  in 
violation  of  good  faith  and  fair  dealing,  and  the  transferee  . 
would  justly  be  entitled  to  recover  against  the  transferrer.^ 
But  in  all  other  cases,  the  conclusion  that  the  risk  is  upon 
the  transferee  seems  to  us  clearly  logical,  and  any  other  in- 
volves inextricable  complications.  The  bank  may  be  deemed 
insolvent,  and  yet  may  finally  redeem  its  notes  at  par ;  or 
it  may  be  only  partially  insolvent,  and  redeem  them  in  part. 
Such  cases  differ  essentially  from  the  transfer  of  forged 
notes  and  counterfeit  coin,  which  are  nullities  ;  for  while  it 
is  true  that  the  metal  of  counterfeit  coin  has,  as  has  been 


any  assurance  of  the  credit,  punctuality,  or  solvency  of  the  makers,  in  regard  to 
all  of  which  the  receiver  exercises  his  own  judgment,  or  relies  upon  that  of 
others  in  whom  he  has  confidence.  There  is  but  a  single  guaranty  which  those 
who  circulate  the  money  of  that  or  any  other  kind  can  be  understood  to  give,  to 
wit,  that  it  is  what  it  purports  to  be,  genuine,  and  not  counterfeit." 

'  Thomson  on  Bills  (Wilson's  ed.),  123  ;  Camidge  v.  Allenby,  6  B.  &  C,  373 ; 
9  Dow.  &  R.,  391  ;  Penn  v.  Harrison,  3  T.  R.,  759  ;  see  chapter  XXII,  on  Trans- 
fer by  Assignment,  §  736,  vol.  i. 


§   I  679-        LIABILITY  OF  TRANSFERRER  OF  BANK  NOTES.         68/ 

suggested,  some  value, ^  such  bogus  currency  never  has  any 
legal  value  as  currency,  whereas  all  genuine  bank  notes 
generally  have  some  value  as  bank  notes.^  Nor  is  payment 
in  bank  notes  analogous  to  payment  in  the  promissory  notes 
of  an  individual  payable  in  future.  The  latter,  when  passed 
without  indorsement  for  an  antecedent  debt,  are  regarded 
by  some  authorities  as  conditional  payment  only,  and  if  not 
paid,  they  hold  that  the  debt  revives.  Even  if  this  be  cor- 
rect (and  we  think  otherwise),^  it  is  because  they  are  not 
offered  as  cash,  or  its  representative.*  But  bank  notes  are 
presumed  to  be  offered  as  cash,  and  are  legal  tender  unless 
objected  to  ;  and  for  this  reason  the  very  opposite  pre- 
sumption, that  they  were  received  in  absolute  payment, 
would  arise. 

§  1679.  DiLty  of  transfei^ee  when  ti'ansferi'er  war- 
rants solvency  of  baiik. — Where  the  view  obtains  that 
the  transferrer  warrants  the  solvency  of  the  bank 
which  issued  the  note,  that  warranty  is  not  regarded 
as  so  absolute  and  unconditional  as  to  require  no  duty 
on  the  part  of  the  transferee.  If,  for  instance,  the 
note  would  have  been  paid  if  punctually  presented 
after  the  transfer,  but  the  holder  neglected  for  a  con- 
siderable time  to  present  it,  and  when  he  finally  did  so, 
the  bank  had  failed,  the  loss  would  then  fall  on  the  trans- 
feree, who,  by  diligence,  might  have  prevented  it.  The 
principle  is,  that  the  transferee  must  either  put  the  note  in 
circulation,  or  he  must  present  it  within  a  reasonable  time 
at  the  counter  of  the  bank,  and  notify  the  transferrer 
within  a  reasonable  time  if,  by  reason  of  insolvency,  it  is 
not  paid  ;  and  what  is  "reasonable  time  "  is  a  question  for 
the  court  to  determine  under  all  the  circumstances  of  the 
case.'^ 

'  Fogg  V.  Sawyer,  9  N.  H.,  365,  Parker,  C.  J.  ;  2  Parsons  N.  &:  B.,  193,  note  m. 
'  Bayard  v.  Shunk,  i  Watts  &  S.,  92,  Gibson,  C.  J. 
^  See  §  740,  vol.  I.  *  Ibid. 

^  Camidge  v.  Allenby,  6  B.  &  C,  373;  6  Dow.  &  R.,  39,  Bayley,  J.,  saying: 
'  Then  the  question  is,  what  was  it  the  duty  of  the  plaintiff  to  do  in  order  to  ob- 


688  BANK    NOTES.  §   1679^^. 

§  1679^.  Rule  in  England. — In  England,  the  view  is 
taken  thiat  if  the  bank  be  insolvent  at  the  time  of  transfer, 
the  loss  is  upon  the  transferrer  ;  but  the  transferee  must,  in 
order  to  recover,  present  the  notes  at  the  bank  immediately, 
or  pass  them  off  in  circulation.^ 


SECTION    IV. 

RIGHTS,   DUTIES,   AND   REMEDIES   OF    THE    HOLDER    OR    OWNER 

OF   BANK   NOTES. 

§  1680.  Mere  possession  being  sufficient  prima  facie 
evidence  of  bona  fide  ownership  for  value  of  a  bank  note, 
the  holder  may  enforce  its  payment,  unless  his  position  as 

tain  payment  of  these  notes  (bankers'  cash  notes)  ?  They  were  intended  for  cir- 
culation. But  I  think  that  he  was  not  bound  immediately  to  circulate  them,  or 
send  them  into  the  bank  for  payment ;  but  he  was  bound,  within  a  reasonable 
time  after  he  had  received  them,  either  to  circulate  them  or  to  present  them  for 
payment.  Now  here  it  is  conceded  that,  if  there  had  not  been  any  insolvency  ot 
the  bankers,  the  notes  should  have  been  circulated  or  presented  for  payment  on 
Monday"  (the  next  business  day  after  they  were  received) "If  pre- 
sentment was  unnecessary,  he  (the  holder)  had  another  duty  to  perform 

The  law  requires  that  the  party  on  whom  the  loss  is  to  be  thrown  shall  have  no- 
tice of  non-payment,  in  order  to  enable  him  to  exercise  his  judgment  whether 
he  will  take  legal  measures  against  other  parties  to  the  bill  or  note."  2  Parsons 
N.  &  B.,  197. 

1  Owenson  v.  Morse,  7  T.  R.,  64 ;  Beeching  v.<}ower.  Holt  N.  P.,  313;  Ward 
V.  Evans,  12  Mod.,  521  ;  Camidge  v.  Allenbv,  6  B.  &  C,  373  ;  Williams  v.  Smith, 
2  Barn.  &  Aid.,  496 ;  Timmins  v.  Gibbons,  18  O.  B.,  722  ;  14  E.  L.  &  Eq.,  64  ; 
Rogers  v.  Langford,  i  Cromp.  &  M.,  637  ;  Turner  v.  Stones,  i  Dow.  &  L.,  122. 
The  plaintiff  in  this  case  changed,  late  on  Saturday,  a  £i)  note  for  defendant. 
The  bank  had  then  virtually  stopped  payment.  Held,  that  the  loss  was  the 
transferrer's.  In  England,  this  question  has  been  presented  in  cases  of  bankers' 
cash  notes,  which  differ  from  ordinary  bank  notes ;  and  a  distinction  has  been 
taken  by  Bayley,  J.,  in  Camidge  v.  AUenby,  6  B.  &  C,  373.  between  prior  and 
contemporaneous  debts.  Corn  was  sold  to  defendant  on  the  morning  of  Septem- 
ber loth  ;  and  in  the  afternoon  the  bankers'  cash  notes  were  delivered,  and 
proved  bad,  the  bank  having  stopped  payment.  Bayley,  J.,  said  :  "  If  the  notes 
had  been  given  to  the  plaintiff  at  the  time  when  the  corn  was  sold,  he  could 
have  no  remedv  upon  them  against  the  defendant.  The  plaintiff  might  have 
insisted  on  payment  in  money.  But  if  he  consented  to  receive  them  as  money, 
they  would  have  been  taken  by  him  at  his  peril.  Here  the  notes  were  given  to 
liim  in  payment  subsequently,  and  the  question  is  whether  they  operate  as  a  dis- 
charge of' the  debt  due  to  the  plaintiff."  The  case  seems  to  have  been  decided 
on  the  ground  of  laches  in  reporting  that  the  notes  were  bad.  But  this  distinc- 
tion was  not  assented  to.     The  other  judges  considering  that,  if  the  notes  were 


§   l68o.         RIGHTS,   DUTIES,  AND  REMEDIES  OF  HOLDER.         689 

a  bona  fide  holder  be  successfully  combated.  It  will  not 
be  a  sufficient  defence  to  show  that  the  holder  was  neirli- 
gent  in  inquiry  when  he  received  it,  and  that  he  took  it 
under  circumstances  which  would  excite  the  suspicions  of  a 
man  of  ordinary  prudence.^  In  the  cases  of  bills  of  ex- 
change and  negotiable  promissory  notes  the  same  principle 
prevails  ;  but  when  it  is  shown  that  such  a  bill  or  note  was 
lost  or  stolen,  or  obtained  by  fraud  or  felony,  the  burden 
of  proof  is  shifted  upon  the  holder,  who  must  show  in  an- 
swer that  he  acquired  it  bona  fide  in  the  usual  course  of 
business,  and  without  notice.^  But  in  favor  of  the  holder 
of  a  bank  note  the  law  goes  a  step  further,  and  to  exonerate 
him  from  any  such  burden.  And  he  can  rest  secure  in  its 
possession,  as  the  evidence  of  his  right  to  rpcover,  until  the 
defendant  shows  that  he  was  in  privity  with  the  fraud,  or 
acquired  the  note  mala  fide,  or  with  notice. 

This  distinction  between  bank  notes  and  other  neofotia- 
ble  instruments  is  not  admitted  in  England;^  but  in  the 
United  States  it  is  upheld  by  high  authority,*  and  seems  to 
us  clearly  the  correct  doctrine.  Bank  notes  pass  as  cash, 
and  are  seldom  identified  by  any  peculiar  earmarks  ;  and  it 
is  next  to  impossible  for  a  trader  to  remember  where,  or 
w^hen,  or  from  w^hom,  or  for  what  consideration,  he  received 

money,  they  were  payment ;  if  common  promissory  notes,  there  was  negligence. 
And  Littledale,  J.,  said:  "I  think  that  there  is  no  guaranty  implied  by  law  in 
the  party  passing  a  note  payable  on  demand  to  bearer  that  the  maker  is  solvent 
at  the  time  when  it  is  so  passed."  Lord  Campbell,  in  Timmins  v.  Gibbons, 
18  O.  B.,  722,  says  he  could  never  see  any  distinction  between  the  cases  of 
prior  and  contemporaneous  debts,  for  even  in  payments  over  the  counter  some 
time  must  elapse  between  the  debt  and  payment,  which  makes  the  debt  a 
precedent  one. 

'  Raphael  v.  Bank  of  England,  17  C.  B.,  161  ;  33  E.  L.  &  Eq.,  276 ;  Solomons 
V.  Bank  of  England,  13  East.,  135  ;  Lowndes  v.  Anderson,  13  East.,  130  ;  City 
Bank  v.  Farmers'  Bank,  Taney  C.  C.,  Dec,  119. 

"  See  §§  810  ^/  seq.,  vol.  i. 

'  De  La  Chaumette  v.  Bank  of  England,  9  B.  &  C,  208,  where  it  was  held 
that  the  holder  of  a  bank  note  which  had  been  stolen  must  show  that  he  had 
given  value  for  it.     See  also  Solomons  v.  Bank  of  England,  13  East.,  135. 

*  Worcester  Co.  Bank  v.  Dorchester,  etc..  Bank,  10  Cush.,  488  ;  Wyer  v.  Dor- 
chester, etc..  Bank,  11  Cush.,  51  ;  Louisiana  Bank  v.  Bank  U.  S.,  9  Mart.  (La.), 
398.  See  Crawford  v.  Royal  Bank,  Ross  Lead.  Cas.,  229  ;  Morse  on  Banking, 
416;  2  Parsons  N.  &  B.,  93,  281-283. 

Vol.  1 1. — 44 


690  BANK    NOTES.  §   l68o<^. 

any  particular  bank  notes  in  his  cash  drawer.     And  to  re^ 
quire  him  to  do  so  would  be  an  intolerable  burden. 

§  1 6Soa.  The  holder  is,  in  fact,  regarded  as  in  effect  the 
original  promisee  of  the  bank,  and  not  as^  taking  by  as- 
signment only  the  title  of  the  transferrer ;  and  a  payment 
to  him  by  the  bank  will  discharge  the  debt,  unless  it  knows, 
or  has  reason  to  know,  that  he  acquired  the  note  by  fraud,^ 
or  with  notice  of  fraud  on  the  part  of  his  transferrer,  which 
equally  impeaches  his  title.* 

§  168 1.  Usual  course  of  business. — The  bill  holder,  in 
order  to  enjoy  the  full  privileges  of  a  bona  fide  holder  for 
value,  must  have  acquired  the  bills  in  the  usual  course  of 
business  ;  and  if  they  have  been  pledged  to  him  as  collat- 
eral security  by  the  bank,  with  the  understanding  that  they 
are  not  to  be  put  in  circulation,  tliey  are  not  currency,  and 
the  holder  stands  merely  in  the  position  of  an  ordinary 
creditor.^ 

The  holders  of  bank  notes  have  no  preference  to  the 
assets  of  the  bank  over  other  creditors,  unless  it  be  accord- 
ed them  by  statute  ;  *  but  this  is  sometimes  done  in  order 
to  stimulate  their  credit  as  a  circulating  medium.^  But,  in 
other  cases,  statutes  specially  provide  that  all  creditors  not 
having  specific  liens  shall  stand  on  the  same  footing  and 
share  the  assets  ratably.^ 

§  1682.  Amou7itof  recovery. — The  holder  is  entitled  to 
recover  of  the  bank  the  full  amount  of  the  bank  note,  or  to 
receive  a  proportionate  share  of  its  assets,  without  regard 
to  the  amount  which  he  gave  for  it.''     Such  seems  to  be 


'  New  Hope,  etc.,  Bridge  Co.  v.  Perry,  1 1  111.,  467- 
"  Olmstead  v.  Winstead  Bank,  32  Conn.,  278. 

*  Davenport  v.  City  Bank,  9  Paige,  12. 

*  Cochituate  Bank  v.  Colt,  i  Gray,  382. 

*  Morse  on  Banking,  418. 

«  Robinson  v.  Gardiner,  18  Grat.,  509;  Exchange  Bank  v.  Knox,  19  Grat., 

739. 

'  Robinson  v.  Beall,  26  Ga.,  17  ;  Morse  on  Banking,  398. 


^   16S3.      RIGHTS,  DUTIES,  AND  REMEDIES  OF  HOLDER.  69 1 

the  accepted  doctrine  and  true  principle  uf  the  question, 
in  the  absence  of  any  statutory  provision.  But  the  view 
has  been  taken,  in  allotting  the  assets  of  an  insolvent  bank, 
that  the  bill  holders  should  receive  amounts  proportioned 
to  the  sums  actually  paid  for  the  bills.^ 

The  holder  may  also  be  entitled  to  recover  interest.  But 
interest  does  not  run  upon  bank  notes  from  their  date,* 
which  we  have  already  seen  is  not  a  true  index  of  the  time 
at  which  they  were  issued ;  but  only  from  the  time 
at  which  demand  of  payment  was  made  at  the  banking- 
house,  or  other  place,  if  it  were  specified.  For  then  alone 
did  the  bank  become  in  default.^  Such  is  the  current  of 
authority,  and  it  matters  not  that  the  note  is  not  expressed 
to  be  payable  "  with  interest  'V  but  it  has  been  held  that  in- 
terest runs  from  the  date  of  suspense  of  specie  payments 
when  a  bank  has  failed.^  Incidental  damages  arc  not  al- 
lowed.® 

§  1683.  Bank  notes  do  not  become  overdice. — Bank  notes 
do  not  grow  stale  by  mere  lapse  of  time,  as  do  other  species 
of  negotiable  instruments.  Indeed,  it  is  generally  to  the  in- 
terest of  the  bank  that  they  should  remain  in  circulation, 
and  they  are  designed  for  the  very  purpose  of  being  a  con- 
tinuing circulating  medium.  Therefore,  they  do  not  be- 
come overdue  or  liable  to  any  equities  between  the  bank 
and  subsequent  holders,  but  the  bank  is  absolutely  bound 
to  pay  them  on  presentment  by  the  bearer  at  any  distance 
of  time.'^  They  are  not  barred  (in  general)  like  ordinary 
promissory  notes,  by  statutes  of  limitation.^     And  they  are 


»  Griffin  v.  Central  Bank,  3  Kelly,  371  ;  Collins  v.  Central  Bank,  i  Kelly,  435. 
'  Ringo  V.  Trustees,  8  Eng.,  583. 

'  Bank  of  Kentucky  v.  Thornsberry,  3  B.  Mon.,  519;  Bank  Commissioners  v. 
Lafayette  Bank,  4  Edw.  Ch.,  287. 

*  Estate  Bank  of  Pennsylvania,  60  Penn.  St.,  471. 

*  Atwood  V.  Bank  of  Chillicothe,  10  Ohio,  526. 
"  Bank  of  St.  Mary's  v.  St.  John,  25  Ala.,  566. 

^  Bullard  v.  Bell,  i  Mason,  243  ;  Solomons  v.  Bank  of  England,  13  East.,  135. 

*  2  Parsons  N.  &  B.,  95  ;  Morse  on  Banking,  402. 


692  BANK    NOTES.  §   1 684. 

not  fimcti  officio  when  once  redeemed  by  the  bank,  but, 
unhke  ordinary  promissory  notes,  are  designed  to  be  re- 
issued again  and  again. ^  These  seem  to  us  correct  doctrines, 
and  are  sustained  by  the  authorities  cited.  But  it  has  been 
'held  that  bank  notes  may  be  protested  for  non-payment,  and 
that  a  party  acquiring  them  after  dishonor,  whether  he  knows 
of  the  dishonor  or  not,  is  subject  to  equities.^ 

§  1684.  How  far  statutes  of  limitation  are  applicable  to. 
— While  the  general  rule  is  that  statutes  of  limitation  do 
not  apply  to  bank  bills,  because  they  are  by  the  consent  of 
mankind  and  course  of  business  considered  as  money,  and 
that  their  date  is  no  evidence  of  the  time  when  they  were 
issued,  as  they  are  being  continually  returned  to  and  re- 
issued by  the  bank  ;  yet  if  the  bills  have  ceased  to  circulate 
as  currency,  and  have  ceased  to  be  taken  in  and  reissued  by 
the  banks,  they  no  longer  have  that  distinctive  character 
from  other  contracts,  which  excepts  them  from  the  opera- 
tion of  the  statutes  of  limitation.^ 

§  1685.  Presentment  and  demand. — Ordinarily  the  debt- 
or must  seek  his  creditor,  and  pay  the  debt ;  and  if  he  does 
not,  the  latter  may  sue  without  any  previous  demand,  the 
suit  being  deemed  in  itself  a  demand.  The  same  principle 
(as  has  been  held)  prevails  as  to  bank  notes,  which  are 
generally  made  payable  at  the  counter  of  the  bank,  or  some 
one  of  its  branches,  at  specified  places  ;  but  if  the  bank 
tenders  the  amount  in  court,  and  shows  that  it  was  ready 
and  wiUing  to  have  paid  at  the  place  named,  then  it  is  not 
liable  for  interest  or  costs.*  There  is  authority,  however, 
for  the  doctrine  that  demand  at  the  place  named  must  be 
averred  and  proved  to  sustain  a  suit  on  a  bank  note.^    And 

'  2  Parsons  N.  &  B.,  95.  ^  Burroughs  v.  Bank  of  Charlotte,  70  N.  C,  284. 

'  Kimbro  v.  Bank  of  Fulton,  49  Ga.,  419. 

^Haxtun  v.  Bishop,  3  Wend.,  13;  Bank  of  Niagara  v.  McCracken,  18  Johns, 
495  (qualified  in  Jefferson  Bank  v.  Chapman,  19  Johns,  322)  ;  Br>'ant  v. 
Damariscotta  Bank,  18  Me.,  240;  Caldwell  v.  Cassidy,  8  Cow.,  271;  State 
Bank  v.  Van  Horn,  i  South.,  382;  Greer  v.  Perkins,  5  Humph.,  588. 

"Doughty  V.  Western  Bank,  13  Ga.,  287  ;  Hinsdale  v.  Larned,  16  Mass.,  68 
(semble)  ;  tower  v.  Appleton  Bank,  3  Allen,  387  (semble) ;  Bank  of  Memphis  v. 


§   1 686.      RIGHTS,   DUTIES,  AND  REMEDIES  OF  HOLDER.  693 

this  doctrine  is  certainly  reasonable  and  well  founded,  as  is 
shown  in  a  recent  work  on  Bills  and  Notes.^  When  no 
place  of  payment  is  specified  in  the  bank  note,  the  demand 
should  be  made  at  the  bank,  where  it  is  to  be  presumed 
that  provision  has  been  made  for  its  payment ;  but  if 
another  place  be  specified,  demand  should  be  made  there, 
and  not  at  the  bank.^ 

Demand  should  be  made  during  the  usual  hours  of  busi- 
ness, according  to  the  custom  of  banks ;  for  at  their  ter- 
mination the  bank  has  a  right  to  close  its  doors.  But  if 
bills  were  presented  just  before  the  end  of  business  hours 
for  redemption,  the  bank  could  not  excuse  itself  by  show- 
ing that  there  were  so  many  that  the  transaction  could  not 
have  been  completed  before  the  closing  hour  arrived.'^ 

§  1686.  Each  bank  note  being  a  separate  debt,  the  bank 
may  treat  it  as  such  in  determining  in  what  description  and 
denominations  of  coin  payment  may  be  legally  tendered  ;  ■* 
but  the  notes  may  be  presented  in  packages  by  the  holder, 
it  not  being-  necessary  that  he  should  make  separate  pre- 
sentment of  each  note.^  The  demand  being  made,  it  is  the 
duty  of  the  bank  to  respond  to  it  with  reasonable  prompt- 
ness, without  employing  devices,  such  as  the  slow  and  mi- 
nute inspection  of  each  bill,  or  other  unnecessary  formalities, 

White,  2  Sneed,  482  ;  Thurston  v.  Wolfborough  Bank,  18  N.  H.,  391  ;  Wilks  v. 
Robinson,  3  Rich.,  182.  In  Kentucky  it  must  be  made,  but  need  not  be  averred. 
Bank  of  Ky.  v.  Mickey,  4  Littell,  225. 

'In  2  Ames  B.  &  N.,  6r,  it  is  said  :  "It  is  a  noteworthy  fact  that  the  notion 
that  negotiable  paper,  payable  on  demand,  is  payable  without  a  demand,  is 
traceable  to  the  decisions  in  Capp  v.  Lancaster,  Cro.  Eliz.,  548 ;  Rumball  v. 
Ball,  10  Mod.,  38;  Collins  v.  Denning,  3  Salk.,  227,  in  which  cases,  however, 
the  instruments  declared  on  were  not  negotiable,  and  where,  accordingly,  the 
rule  that  the  debtor  must  seek  the  creditor  was  properly  applied.  The  absurditv 
of  applying  this  rule  to  any  negotiable  paper  is  sufficiently  obvious,  and  in  the 
case  of  bank  notes  is  so  glaring  that  the  courts  have  felt  obliged  to  make  an  ex- 
ception to  the  rule,  and  to  hold  that  a  bank  note  is  not  payable  without  a  de- 
mand." 

'King  V.  Dedham  Bank,  15  Mass.,  447  ;  Ware  v.  Street,  2  Head,  609. 
'  Suffolk  Bank  v.  Lincoln  Bank,  3  Mason,  i  ;  People  v.  State  Treasurer,  24  111., 
433- 

*Boatmans'  Sav.  Inst.  v.  Bank  of  Missouri,  33  Mo.,  497. 
'  Reapers'  Bank  v.  Williard,  24  111.,  433. 


694  BANK    NOTES.  §   1 68  7. 

to  secure  delay  ;  and  if  it  be  evident  that  such  means  are 
used  to  delay  or  evade  payment,  the  bank  will  be  regarded 
as  having  refused  payment.^ 

§  1687.  Remedies  against  Jinder. — Trover  will  lie  against 
the  finder  of  bank  notes  by  the  owner.^  But  assumpsit  will 
not  lie  against  the  finder  for  money  had  and  received,  un- 
less the  bank  notes  found  have  been  turned  into  money.^ 
In  England  it  has  been  held  that  assumpsit  will  lie  for 
country  bank  notes  and  checks  even,  which  have  been 
treated  like  money.*  And  when  money  may  be  presumed 
to  have  been  actually  received  upon  negotiable  notes,  or 
other  securities,  the  action  of  assumpsit  may  in  general  be 
maintained.'^  The  identity  of  the  note  must  be  clearly 
made  out.^  If  the  finder  has  passed  the  note  to  a  bona 
fide  transferee  for  value,  the  owner  can  not  recover  against 
such  transferee.'*' 

§  1688.  Bank  receiving  its  own  cotmterfeit  notes. — If  a 
bank  receive  in  payment  or  on  deposit  counterfeit  bank 
notes  purporting  to  be  of  its  own  issue,  the  person  who 
innocently  pays  or  deposits  them  is  not  liable.^  "  The  true 
rule  is  that  the  party  receiving  such  notes  must  examine 
them  as  soon  as  he  has  opportunity,  and  return  them  im- 
mediately.    If  he  does  not,  he  is  negligent,  and  negligence 


'  Ibid. ;  People  v.  State  Treasurer,  4  Mich.,  27  ;  Suffolk  Bank  v.  Lincoln  Bank, 
3  Mason,  i. 

''Noyes  v.  Price,  Chitty  on  Bills  [*S24],  593  ;  Mason  v.  Warte,  17  Mass.,  560; 
2  Parsons  N.  &  B.,  93,  note. 

^  Ainslie  v.  Wilson,  7  Cow.,  662 ;  Kellogg-  v.  Budlong,  7  How.  (Miss.),  340 ; 
Houx  V.  Russell,  10  Mo.,  246  ;  Muir  v.  Rand,  2  Ind.,  291  ;  Murray  v.  Pate,  6 
Dana,  335  ;  Mason  v.  Waite,  17  Mass.,  560  ;  Arms  v.  Ashley,  4  Pick,,  71. 

*Spratt  V.  Hobhouse,  4  Bing.,  173  ;  12  J.  B.  Moore,  395  ;  Pickard  v.  Bankes, 
13  East.,  20.  Perhaps  the  receipt  of  their  value  may  be  presumed.  Longchamp 
V.  Denny,  i  Doug.,  137. 

'  Spratt  V.  Hobhouse,  supra ;  M'Lachlan  v.  Evans,  i  Yonge  &  J.,  380  ; 
Hatten  v.  Robinson,  4  Blackf.,  479;  Tuttle  v.  Mayo,  7  Johns,  132;  Muir  v. 
Rand,  2  Ind.,  291. 

*  Miller  v.  Race,  i  Burr.,  452. 

'Miller  v.  Race,  i  Burr.,  452  ;  Anon.,  I  Salkeld,  162. 

*  U.  S.  Bank  v.  Bank  of  Georgia,  10  Wheat.,  333. 


§   1689.         PAYMENT    IN    BANK    NOTES,  AND    SET-OFF.  695 

will  defeat  his  right  of  action.  This  principle  will  apply  to 
all  cases  where  forged  notes  have  been  received,  but  cer- 
tainly with  more  strength  when  the  party  receiving  them  is 
the  one  purporting  to  be  bound  to  pay.  For  he  knows 
better  than  any  other,  whether  they  are  his  notes  or  not ; 
and  if  he  pays  them  or  receives  them  in  payment,  and  con- 
tinues silent  after  he  has  sufficient  opportunity  to  examine 
them,  he  should  be  considered  as  having  adopted  them  as 
his  own."  ^ 


SECTION  V. 

PAYMENT   IN    BANK   NOTES,   AND   SET-OFF. 

§  1689.  Nothing  but  money  being  a  positive  legal"  ten- 
der, bank  notes  are  not  by  the  common  law  a  valid  tender, 
even  in  payment  of  debts  due  to  the  bank  itself,  by  their 
holder.^  But  by  statute  in  many  of  the  States,  the  banks 
are  required  to  receive  their  own  notes  in  payment.^  But 
although  a  statute  may  require  that  the  bank  shall  receive 
its  notes  in  payment  of  debts  due  to  it,  yet  if  the  bank 
make  an  assignment  to  trustees  of  all  its  debts  and  assets 
for  the  equal  benefit  of  its  creditors,  the  weight  of  author- 
ity is  to  the  effect  that  bank  notes  acquired  after  and  with 
notice  of  the  assignment,  are  not  a  valid  tender  to  the  as- 
signee. The  statute,  as  it  is  said,  no  longer  applies,  for  the 
debt  is  then  not  due  to  the  bank,  but  to  the  assignee.*  But 
the  contrary  view  has  been  taken   in  some  cases,  and  im- 

'  Gloucester  Bank  v.  Salem  Bank,  17  Mass.,  133. 

'  Coxe  V.  State  Bank,  3  Halst.,  172;  Hallowell,  etc..  Bank  v.  Howard,  13 
Mass.,  235  ;  Suffolk  Bank  v.  Lincoln  Bank,  3  Mason,  i  ;  Morse  on  Banking,  397  ; 
2  Parsons  N.  &  B.,  91. 

'  Exchange  Bank  v.  Knox,  19  Grat.,  746  ;  Niagara  Bank  v.  Roosevelt,  9  Cow., 
409;  Moise  V.  Chapman,  24  Geo.,  249;  Dunlap  v.  Smith,  12  111.,  399;  Union 
Bank  v.  Ellicott,  6  Gill  &  J.,  363. 

*  Exchange  Bank  v.  Knox,  19  Grat.,  746;  Housum  v.  Rogers,  40  Penn. ; 
Saunders  v.  White,  20  Grat.,  327  ;  Farmers'  Bank  v.  Goddin,  19  Grat.,  739. 


696  BANK    NOTES.  §    169O. 

pressed  with  a  force  of  logic  which  seems  to  us  unanswer- 
able.^ 

§  1690.  The  time  when  the  bank  is  compellable  to  re- 
ceive its  own  notes  in  payment,  or  to  allow  them  as  assets, 
ceases,  according  to  the  view  of  Mr.  Morse,  a  discriminating 
writer,^  when  the  note  ceases  to  pass  as  current  money,  and 
are  only  subjects  of  traffic  on  special  terms.  And  this  cri- 
terion is  supported  by  strong  considerations  ;  for  the  holder 
who  receives  them  under  such  circumstances  is  conscious, 
from  the  mere  fact  of  their  depreciated  value,  that  the  bank 
is  not  regarded  as  solvent.  Where  the  bank  has  closed  its 
doors,  and  suspended  business  altogether,  it  is  clear  that  the 
taker  of  its  notes,  with  knowledge  of  such  circumstances, 
could  not  avail  of  them  as  tender  or  as  offsets ;  ^  but  it  has 
been  held  that  the  mere  suspension  of  specie  payments 
would  not  have  the  like  effect,  as  it  might  indicate  a  mere 
temporary  embarrassment,  and  not  an  absolute  deficiency 
of  assets."*  When  there  has  been  an  assignment  made  by 
the  bank  to  trustees,  the  taker,  with  knowledge  thereof, 
could  not,  as  we  have  already  seen  by  some  authorities, 
plead  the  notes  as  offsets,  or  tender  them  in  payment.^ 

'  Blount  V.  Windley,  68  N.  C,  2  (1873).  In  1866,  the  assets  of  the  Bank  of 
Washington  were  placed  by  order  of  court  in  the  hands  of  a  commissioner  for 
the  benefit  of  creditors.  The  commissioner  Blount  obtained  judgment  against 
Reddett,  and  Windley,  as  his  surety,  for  Si,735-5o.  and  execution  issued.  Wind- 
lev,  subsequent  to  issue  of  execution,  obtained  bills  of  the  bank,  and  tendered 
them  in  payment.  It  was  held  a  good  tender  ;  that  the  bank  was  bound  by  the 
very  fact  of  issuing  a  currency  to  receive  it  in  payment ;  that  the  legislature  could 
not' deprive  the  holder  of  this  right,  which  was  part  of  the  obligation  of  the  con- 
tract of  the  bank,  nor  could  the  bank  deprive  him  of  it  by  an  assignment  of  its 
effects.  The  court  said,  in  the  course  of  its  opinion,  per  Pearson,  C.  J.,  that  it 
would  not  "  enter  into  a  consideration  of  the  point  in  respect  to  the  law  of  set- 
off, whether  the  defendant  must  hold  the  '  mutual  demand,'  at  the  time  of  the 
assignment,  or  at  the  commencement  of  the  action,  or  at  the  time  of  plea  pleaded, 
or  at  the  trial ;  for  ours  is  not  a  question  of  set-off,  but  a  question  as  to  the  right 
of  a  bill  holder  to  use  the  bills  of  the  bank  as  a  legal  tender,  equivalent  to  gold 
and  silver  coin,  in  satisfaction  of  a  debt  due  to  the  bank."  "  The  neglect  of  ad- 
vertence to  those  diversities  is  the  cause,  as  it  seems  to  us,  of  the  obscurity  and 
confusion  in  which  the  question  is  involved  in  many  of  the  cases.  See  Exchange 
Bank  of  Virginia,  for  Camp,  Trustee  v.  Knox,  19  Grat.,  739;  3  Wend.,  13;  8 
Watts  &  Serg.,  311  ;  I  Ohio,  381.  It  certainly  is  the  main  fallacy  ot  the  very 
labored  argument  of  the  plaintiff's  counsel  in  this  case."  Bank  of  Charlotte  v 
Hart,  67  N.  C,  264;  Exchange  Bank  v.  Tiddy,  67  N.  C,  169. 

-  Morse  on  Banking,  401,  402.  '  Diven  v.  Phelps,  34  Barb.,  224. 

*  Jefferson  Co,  Bank  v.  Chapman,  19  Johns,  322.  "  Ante,  §  1689. 


}  1 69 1.    PAYMENT  IN  BANK  NOTES,  AND  SET-OFF.       697 

§  1 69 1.  As  long  as  a  bank  is  solvent  there  is  no  doubt 
that  a  debtor  is  entitled  to  plead  as  offsets  any  of  its  notes 
of  which  he  is  the  holder,  according  to  principle,  and  to  the 
weight  of  adjudicated  cases,^  although  the  contrary  view  has 
been  taken  in  Massachusetts,  where  it  has  been  held  that 
the  debtor  must  get  a  judgment  against  the  bank  on  his 
bills  before  he  can  avail  himself  of  them  as  set-off.^  When 
the  bank  is  insolvent,  the  note  holder  can  set  off  the 
amount  of  notes  held  by  him  for  their  full  face  value,  pro- 
vided he  came  into  possession  of  them  prior  to  the  insol- 
vency.^ And  it  is  said  that  he  may  do  this  as  long  as  the 
bank  has  control  of  its  assets.  As  a  general  rule,  how- 
ever, it  is  considered  that  when  a  bank  has  become  insol- 
vent, and  especially  if  it  has  made  an  assignment  to 
trustees  for  the  benefit  of  all  its  creditors,  or  a  receiver  has 
been  appointed  by  court  to  take  them  in  charge,  its  assets 
are  regarded  as  being  appropriated  iox prorata  distribution 
amongst  them  ;  and  bank  notes  acquired  after  such  assign- 
ment, or  appointment  of  a  receiver,  can  not  be  pleaded  as 
offsets,  for  the  reason  that  the  assignees  are  bona  fide 
holders  of  the  subject  in  controversy  for  the  purpose  of 
making  such  distribution,  and  to  allow  offsets  would  create 
preferences.^ 

*  Exchange  Bank  v.  Knox,  19  Grat.,  746. 

*  Hallowell,  etc..  Bank  v.  Howard,  13  Mass.,  235. 

'Exchange  Bank  v.  Knox,  19  Grat.,  746;  Diven  v.  Phelps,  34  Barb.,  224; 
Haxtun  v.  Bishop,  3  Wend.,  13 ;  Bruyn  v.  Receiver,  9  Cow.,  413,  note  ;  Clarke 
V.  Hawkins,  5  R.  I.,  219;  a7ite,  §  1689. 

^  Finney  v.  Bennett,  27  Grat.,  379 ;  Exchange  Bank  v.  Knox,  19  Grat.,  746. 
In  this  case  it  appeared  that  by  act  of  the  Virginia  General  Assembly  of  Feb- 
ruary 1 2th,  1866,  the  banks  of  the  State  being  insolvent,  were  required  to  go 
into  liquidation  and  to  execute  deeds  conveying  all  their  property,  including 
debts,  to  trustees  for  the  payment  of  their  debts.  It  was  held  (i)  that  the  act 
forbade  all  preferences  of  creditors  ;  (2)  that  although  the  charters  of  the  banks 
required  them  to  take  their  notes  in  payment  of  debts  due  them,  this  did  not 
authorize  debtors  of  the  bank  to  pay  their  debts  with  notes  of  the  bank  bought 
up  after  execution,  and  the  recordation  of  the  deeds ;  and  (3)  that  a  debtor  of 
the  bank  could  not  set  oft  notes  of  the  bank  bought  up  by  him  after  execution, 
and  recordation  of  the  deed,  and  notice  thereof  to  the  creditor.  Christian,  J., 
delivering  the  opinion  of  the  court,  said :  "  It  must  not  be  forgotten  that  when, 
in  conformity  with  the  act  of  February,  1866,  those  banks  executed  their  re- 
spective deeds  of  assignment,  they  had  ceased  to  exist  for  the  purposes  for  which 


698  BANK    NOTES.  §   1 692 

§  1692.  When  the  note  is  payable  in  bank  bills,  the 
holder  is  entitled  to  recover  its  face  value  ;^  but  judgment 
and  execution  should  express  the  fact  that  a  payment  in 
the  notes  of  the  bank  will  discharge  it,  inasmuch  as  process 
for  money  could  not  be  so  satisfied.^ 


SECTION  VI. 

LOST  OR  DESTROYED  BANK  NOTES. 

§  1693.  When  the  whole  or  part  of  a  bank  note  has  been 
lost  or  destroyed,  the  rights  of  the  owner  are  purely  of  an 

they  were  created.  A  resumption  of  their  operations  as  banks  was  simply 
impossible.  The  stockholders  had  no  longer  any  interest  in  them.  It  only 
remained  to  wind  them  up  for  the  benefit  of  their  creditors.  Robinson  v.  Gard- 
iner, 18  Grat,,  509.  In  this  view  the  grantees  in  said  deeds  were  not  trustees  for 
the  banks,  but  for  the  creditors  only.  Haxtun  v.  Bishop,  3  Wend.,  13  ;  Diven  v. 
Phelps,  34  Barb.,  224.  The  true  principle  I  conceive  to  be  this  :  These  corpora- 
tions being  insolvent  under  the  statute,  and  the  deeds  made  in  pursuance  thereof, 
the  rights  of  all  the  creditors  attach  equally  to  all  their  assets,  and  whoever  takes 
their  bills  afterward  (being  indebted  to  such  corporations)  takes  them  subject  to 
the  right  of  all  the  creditors  to  share  equally  in  their  assets.  His  claim  is  upon 
the  assets  for  his  proportionate  share.  The  statute,  as  well  as  the  deeds  of 
assignment,  virtually  secures  to  the  creditors  collectively  the  entire  and  exclusive 
right  to  all  the  assets.  The  debtor,  therefore,  must  pay  his  debt  and  take  his 
dividend  for  his  claim  arising  from  his  ownership  of  the  bills  acquired  under 
such  circumstances.  It  is  true  that  a  bank,  as  long  as  it  is  solvent,  or  rather  as 
long  as  it  has  control  of  its  assets,  is  bound  to  take  its  own  bills  in  payment  of 
debts  due  to  it.  But  when  it  becomes  insolvent  and  goes  into  liquidation, 
making  an  assignment  of  all  its  assets  for  the  benefit  of  its  creditors,  the  rights 
of  all  its  creditors  attach  equally,  and  a  debtor  then  takes  the  bills  of  the  bank 
subject  to  the  rights  of  other  creditors  to  enforce  his  obligation  against  him  for 
the  equal  benefit  of  all.  Diven  v.  Phelps,  34  Barb.,  224  ;  9  Cow.,  408,  notes;  i 
Paige,  585  ;  3  Wend.,  13.  But  independently  of  the  act  of  February  12th, 
1866,  the  obligation  enforced,  and  the  rights  established  under  it,  according  to 
the  construction  I  have  given  it,  it  must  be  conceded  on  general  principles,  that 
these  notes  of  the  banks,  acquired  after  notice  of  the  assignment,  can  not  be 
pleaded  as  set-offs  in  actions  brought  by  the  assignees  of  banks,  unless  the  cases 
are  taken  out  of  the  operation  of  the  general  and  well-settled  principles  of  law, 
in  consequence  of  the  provisions  of  the  charters  of  these  corporations,  or  of  the 
general  law  regulating  them.  To  this  question  I  shall  advert  presently.  It  is  a 
principle  of  law,  too  well  settled  to  admit  of  doubt  or  argument  now,  that  a  set- 
off, as  between  original  parties,  acquired  after  the  assignment  for  2,  bona  fide 
purpose  of  the  subject  in  controversy  and  notice  thereof,  can  not  be  set  off  against 
a  holder  for  value."  See  also  Farmers'  Bank  v.  Goddin,  19  Grat.,  739;  Saun- 
ders v.  White,  20  Grat,,  327 ;  Finney  v.  Bennett,  27  Grat.,  379 ;  Haxtun  v. 
Bishop,  3  Wend.,  1 3  ;  Bank  of  Niagara  v.  Roosevelt,  9  Cow.,  409  ;  i  Hopk 
Ch.,  579. 

'  Abbott  v.  Agricultural  Bank,  11  Smedes  &  M.,  401;. 

'  Morse  on  Banking,  403. 


§   1 694*  LOST    OR    DESTROYED    BANK    NOTES.  699 

equitable  nature.  The  contract  of  the  bank  is  to  pay  the 
amount  upon  surrender  of  the  note,  and  when  the  rightful 
owner  can  not  comply  with  that  condition,  his  claim  can 
only  address  itself  to  equitable  considerations.  And  in 
order  to  do  justice,  the  courts  will  only  permit  him  to  re- 
cover when  he  can  assure  the  bank  against  the  possibility 
of  a  demand  of  payment  by  some  one  else,  as  securely  as  if 
he  himself  were  to  surrender  the  note. 

(i)  When  the  whole  note  has  been  lost,  it  is  obvious  that 
the  owner  can  not  place  himself  within  this  rule.  It 
is  payable  to  bearer  on  demand,  and  passing  by  delivery,  it 
may  at  once  be  found  by  some  one  else,  and  be  again  put 
in  circulation.  The  owner  can  not  frame  a  clearly  sufficient 
indemnity  against  its  payment  by  the  bank  ;  for  even  though 
he  be  able  to  identify  it  by  its  number  or  other  mark,  the 
bank  would  still  be  bound  to  pay  it  to  a  bona  fide  holder 
who  gave  value  for  it,  without  notice  of  the  loss.  And  a 
notice  of  the  loss,  even  though  published  in  the  newspapers, 
would  be  unlikely  to  reach  the  general  public  ;  and  it  would 
be  difficult,  indeed  next  to  impossible,  to  show  that  it 
reached  a  particular  person.  For  these  reasons,  one  who 
loses  the  whole  of  a  bank  note  must  bear  the  loss,  and  is 
without  remedy  against  the  bank.* 

§  1694.  (2)  When  the  whole  note  has  been  destroyed,  it 
is  obvious  that  the  bank  incurs  no  danger,  as  in  the  case  of 
its  loss,  of  paying  it  to  another  party.  And,  therefore, 
when  the  true  owner  produces  clear  proof  of  the  destruction 
of  a  particular  bank  note,  he  is  permitted  to  recover  the 
amount  of  the  original  indebtedness  from  the  bank.  It 
will  be  necessary,  however,  that  the  owner  should  accurately 
identify  the  particular  notes  destroyed.  It  will  not  do  to 
show  that  notes  of  a  certain  amount  were  destroyed,  for 
this  would  not  identify  them,  or  enable  the  bank  to  protect 

'  Hinsdale  v.  Bank  of  Orange,  6  Wend.,  378.  But  see,  contra,  Waters  v. 
Bank  of  Georgia,  Charlt.,  193;  Robinson  v.  Bank  of  Darien,  18  Ga.,  65.  See 
also  2  Parsons  N.  &  B.,  308. 


700  BANK    NOTES.  ^   1 695. 

itself  by  taking  a  bond  of  indemnity  against  their  future 
appearance,  in  the  event  that  the  destruction  was  not  fully 
accomplished.^ 

This  bond  of  indemnity  is  usually  require"d,  even  where 
there  is  distinct  proof  of  destruction  of  specific  notes,  out 
of  an  abundance  of  caution  to  prevent  imposition  upon 
banks,  which  generally  are  without  the  means  of  disprov- 
ing the  destruction  of  the  notes.^  But  there  is  authority 
to  the  effect  that  in  such  cases  it  is  needless.^ 

§  1695.  Whe7i  part  of  a  bank  note  has  been  lost. — It  has 
been  held,  in  a  number  of  cases,  that  when  half  of  a  bank 
note  has  been  lost,  no  action  at  law  can  be  maintained  upon 
the  returned  half,  but  that  suit  must  be  brought  in  equity 
to  establish  the  facts  ;  and  that  then  a  bond  of  indemnity 
"  to  secure  the  bank  against  future  loss  from  the  appear- 
ance and  setting  up  of  the  other  half  of  such  note."*  And 
Judge  Story  concurs  in  this  view.^  In  others,  it  has  been 
held  that  action  at  law  may  be  maintained,  the  court  having 
power  to  require  a  bond  of  indemnity,  which,  in  such  a 
case,  is  deemed  necessary.^  But  Prof.  Parsons  says,  as  to 
the  view  that  an  indemnity  is  necessary,  "  From  this  conclu- 
sion, unless  it  be  so  directed  by  statute  provision,  we  must 
dissent.  For  the  payor  will  never  be  liable  again,  since 
the  holder  takes  the  missing  half  with  notice  of  prior 
equities,  and,  therefore,  no  indemnity  should  be  required."' 
Of  course,  if  no  indemnity  were  requisite,  there  could  be 
no  objection  to  an  action  at  law.  Payment  in  such  an  ac- 
tion would  be  a  good  plea  against  an  action  on  the  other 


1  Tower  v.  Appleton,  3  Allen,  387  ;  Carey  v.  Green,  7  Ga.,  79. 

""  Wade  V.  N.  O.  Canal,  etc.,  Co.,  8  Rob.  (La.),  142  (1844)  ;  Morse  on  Bank- 
ing, 410.  The  same  rule  is  applied  to  a  certificate  of  deposit.  Welton  v. 
Adams,  4  Cal.,  38. 

^  Bank  of  Mobile  v.  Meagher,  33  Ala.,  622. 

*  Bank  of  Virginia  v.  Ward,  6  Munf.,  169  (1818) ;  Farmers'  Bank  v.  Reynolds, 
4  Rand.,  186  (1826). 

'  Story  on  Bills,  §448.  *  Commercial  Bank  v.  Benedict,  18  B.  Mon.,  311 

^  2  Parsons  N.  «&  B.,  313.     See  Byles  (Sharswood's  ed.)  [*365],  543. 


§  1696.      LOST  OR  DESTROYED  BANK  NOTES.  7OI 

half,  as  the  holder  would  take  it  subject  to  any  such  de- 
fence ;  and  the  cases  sustahiing  Prof.  Parsons'  view,  which 
are  quoted  below,  seem  to  us  correct.^  Lord  Ellenborough 
held  the  contrary  doctrine ;  ^  but  his  decision  has  been 
criticised  as  "an  Homeric  nod."^ 

§  1696.  To  guard  against  the  loss  of  bank  notes  sent  by 
mail,  the  sender  often  cuts  them  in  halves,  and  transmits 
the  halves  by  different  mails.  This  plan  is  practiced  both 
in  England  and  the  United  States,  and,  according  to  the 
principles  of  the  text,  is  one  which  secures  the  true  owner 
against  loss.*  He  is  entitled  to  recover  when  he  shows 
himself  entitled  to  both  halves  ;  and  the  bank  can  not  es- 
cape its  responsibility  by  publishing  notice  that  it  will  not 
be  liable  upon  severed  notes. 

It  has  been  said  of  such  a  notice  :  "  It  is  as  extraordinary 
as  it  is  novel,  and  is  probably  the  first  instance  of  a  debtor's 
undertaking  to  prescribe  terms  to  his  creditors."  ° 

'  Union  Bank  v.  Warren,  4  Sneed,  171  (1856) ;  Hinsdale  v.  Bank  of  Orange, 
6  Wend.,  379  (1831)  ;  Patten  v.  State  Bank,  2  Nott  &  M'Cord,  464  (1820).  In 
Bullet  V.  Bank  of  Pennsylvania,  2  Wash.  C.  C.  R.,  172  (1808),  there  was  an  ac- 
tion at  law  on  half  of  a  bank  note,  the  other  half  being- lost.  The  plaintiff  offered 
indemnity.  The  court  held  that,  as  the  holder  of  the  other  half  would  take  it 
subject  to  equities,  the  recovery  could  be  had,  taking  no  notice  in  its  opinion  of 
the  indemnity  offered.  This  view  was  reaffirmed  in  Martin  v.  Bank  of  U.  S.,  4 
Wash.  C.  C.  R.,  253  (182 1),  and  applied,  although  the  bank  had  given  notice 
previously  that,  in  such  cases,  they  would  not  pay  unless  both  parts  were  pro- 
duced.    See  an^c,  §  1479. 

"  Mayor  v,  Johnson,  3  Camp.,  325  (18 12),  Nisi  Prius. 

'  Bank  U.  S.  V.  Sill,  5  Conn.,  1 12  (1823).  In  this  case  action  at  law  was 
brought  on  a  half  note,  the  other  halt  having  been  lost.  It  does  not  appear  that 
any  indemnity  was  offered.  Peters,  J.,  said  :  "  The  case  of  Mayor  v.  Johnson,  3 
Camp.,  324,  is  directly  in  point.  In  that  case  judgment  was  rendered  for  the  de- 
fendant, by  Lord  Ellenborough,  on  the  ground  that  the  lost  half  of  a  bank  bill 
was  negotiable,  and  would  enable  a  bona  fide  holder  to  recover  of  the  bank  ; 
which,  with  all  due  deference  to  an  illustrious  Judge,  I  am  bound  to  say,  is  not 
law.  As  well  might  a  vignette,  or  any  other  fragment  torn  from  a  bill,  be  con- 
sidered negotiable.  The  only  apology  I  can  make  for  his  lordship  is,  that  he 
was  on  the  circuit,  where  business  is  done  in  haste,  without  time  and  means  for 
investigation  and  consideration,  and  where  the  greatest  judges  frequently  err. 
'  Quandoque  bonus  dor mz tat  Homerus.'  " 

*  Chitty  on  Bills  1*259],  294;  Morse  on  Banking,  415;  2  Parsons  N.  &  B., 
314;  Williams  v.  Smith,  2  B.  &  Aid.,  496 ;  Commercial  Bank  v.  Benedict,  18  B. 
Mon.,  307 ;  Redmayne  v.  Burton,  9  C.  B.  N.  S.,  quoted  in  2  Parsons  N.  &  B., 
313,  note  k. 

"  U.  S.  Bank  v.  Sill,  5  Conn.,  106  ;  Martin  v.  Bank  U.  S.,  4  Wash.  C.  C,  253 
2  Parsons  N,  &  B.,  314. 


702  BANK   NOTES.  §   1 697. 

But  courts  of  equity,  notwithstanding  the  plaintiff  may 
have  an  action  at  law,  still  entertain  jurisdiction  of  suits  on 
half  bank  notes/ 

§  1697.  The  owner  in  these  cases,  it  has  Seen  said,  "does 
not  recover  in  consequence  of  holding  the  half  merely  ;  but 
he  must  also  satisfy  the  bank  of  the  verity  of  the  facts  nec- 
essary to  his  case,  that  is,  of  the  severance,  the  transmission 
by  mail,  and  the  loss,  or  else  he  must  estabhsh  them  by  a 
judgment  of  the  court.  And,  furthermore,  the  half  notes 
sued  on  must  be  specifically  and  satisfactorily  identified  as 
the  counterpart  of  the  halves  transmitted,  or  no  recovery 
will  be  had.  "2 

'  Allen  V,  State  Bank,  I  Dev.  &  Bat.  Eq.,  3  (1734),  Gaston,  J.     See  ante, 
%  1479- 
*  2  Parsons  N.  &  B.,  313  ;  Bank  of  Va.  v.  Ward,  6  Munf.,  166. 


CHAPTER  LI. 

CERTIFICATES    OF    DEPOSIT. 


SECTION    I. 

DEFINITION,    ORIGIN,   AND    NATURE    OF    CERTIFICATES     OF    DE. 

POSIT. 

§  1698.  Definition. — A  certificate  of  deposit  is  a  receipt 
of  a  bank  or  banker  for  a  certain  sum  of  money  received 
upon  deposit,  and  it  is  generally  framed  in  such  a  form  as 
to  constitute  a  promissory  note,  payable  to  the  depositor, 
or  to  the  depositor  or  order,  or  to  bearer. 

§  \6<^Za.  Origi^i  and  natiLve. — It  appears  to  have  been 
at  an  early  day  the  practice  of  the  goldsmiths  in  England, 
who  generally  engaged  in  the  business  of  banking,  to  give 
receipts  to  their  customers  for  moneys  deposited  with  them, 
in  the  form  of  promissory  notes  payable  to  the  bearer  on 
demand,  or  to  the  depositor  or  order.^  And  the  statute  of 
Anne  placed  them,  as  other  promissory  notes,  on  the  same 
footing  as  bills  of  exchange.^  Thus  originated  the  instru- 
ment now  so  commonly  used,  and  called  a  certificate  of 
deposit,  which  is,  in  short,  generally  a  promissory  note  for 
the  payment  of  an  amount  which  it  certifies  to  be  deposited 
in  bank.  Such  at  least  is  our  idea  of  its  origin.  Certainly 
it  closely  resembles  the  receipt  given  by  the  goldsmiths  to 
their  customers,  and  which  was  called  a  banker's  cash  note. 
Mr.  Chitty  says  of  such  receipts  :  "  They  appear  originally 

'  Nicholson  v.  Sedgwick,  i  Ld.  Raym.,  180 ;  3  Salk.,  67  (1698)  ;  Thomson  on 
Bills  (Wilson's  ed.),  124;  Chitty  (13  Am.  ed.)  [*522],  591  ;  Byles  [*io],  81. 
*  3  &  4  Anne,  ch.  IX. 

(703) 


704  CERTIFICATES    OF    DEPOSIT.  §   1 699. 

to  have  been  given  by  bankers  to  their  customers,  as  ac- 
knowledgments for  having  received  money  for  their  use,' 
and  that  "  in  point  of  form  they  are  similar  to  common 
promissory  notes,  and  are  stated  in  pleading  as  such." 
Also  he  says,  "At  present  cash  notes  are  seldom  made  ex- 
cept by  country  bankers,  their  use  having  been  superseded 
by  the  introduction  of  checks." 

Now,  when  the  depositor  desires  to  have  his  funds  ready 
to  check  on  at  any  moment,  he  takes  no  certificate  of  de- 
posit, but  uses  his  own  check  as  the  mode  of  transfer. 
But  when  he  wishes  his  funds  to  be  running  on  interest, 
and  to  remain  for  any  extended  period  in  bank,  he  usually 
takes  a  certificate  of  deposit,  which  is  the  bank's  receipt, 
payable  at  a  future  day,  or  on  demand,  or  upon  ten  days' 
notice,  as  the  case  may  be.  The  very  nature  of  the  instru- 
ment and  the  ordinary  modes  of  business  show  that  a  cer- 
tificate of  deposit,  like  a  deposit  credited  in  a  pass-book,  is 
intended  to  represent  moneys  actually  left  with  the  bank 
for  safe  keeping,  which  are  to  be  retained  until  the  deposi- 
tor actually  demands  them.  And  it  is  not  dishonored  until 
presented.  V 

§  1699.  Power  of  banks  to  issue  certificates  of  deposit. — 
As  to  the  power  of  banks  to  issue  certificates  of  deposit, 
it  is  observed  by  Mr.  Morse  that  "  if  a  bank  can  not  issue 
its  negotiable  promissory  note,  neither  can  it  issue  a  nego- 
tiable certificate  of  deposit  of  this  description" — that  is, 
payable  otherwise  than  on  demand.  "  If  the  note  would 
be  void,  so  likewise  is  the  certificate.  If,  however,  the 
bank  is  empowered  to  issue  promissory  notes,  subject  only 
to  the  restriction  that  it  shall  issue  none  which  are  designed 
to  pass  into  circulation  as  currency,  but  only  such  as  be- 
come necessary  in  the  ordinary  course  and  conduct  of  its 
affairs,  and  are  strictly  business  paper,  then  it  may  issue  cer- 


-  National  Bank  of  Fort  Edward  v.  Washington  County  National  Bank,  12 
N.  Y.  S.  C.  (5  Hun).  605. 


<$.   I/OI.  DEFINITION,  ORIGIN,  AND  NATURE.  705 

tificates  of  deposit,  whether  payable  on  demand  or  other- 
wise, subject  only  to  the  same  restrictions."^ 

In  New  York,  where  the  statute  law  pronounced  a  draft 
or  note  issued  by  a  bank  payable  at  a  certain  time  after  date 
to  be  void,  it  was  held  thaf  a  certificate  of  deposit  payable 
to  the  order  of  a  particular  person  six  months  after  date 
came  within  its  prohibition  and  was  void.*^  And  it  would 
not  be  valid  even  in  the  hands  of  a  bona  fide  holder.^  If 
the  president  of  the  bank  give  to  the  depositor  his  personal 
certificate,  instead  of  that  of  the  bank,  parol  proof  is  ad- 
missible to  show  the  true  state  of  facts  and  to  bind  the 
bank.'' 

§  1 700.  A  bank  is  chargeable  with  knowledge  of  its  de- 
positor's signature,  and  if  it  issue  a  certificate  of  deposit 
payable  to  his  order,  and  his  name  be  forged  as  indorser, 
and  the  bank  pays  the  amount  to  a  bona  fide  holder,  it  has 
been  held  that  it  can  not  recover  back  such  amount  from 
him.^  The  fact  that  a  certificate  is  signed  by  the  bank 
president  in  his  own  name  does  not  preclude  the  depositor 
from  showing  that  the  bank  itself  is  bound. ^ 

§  1 701.  A  certificate  of  deposit  of  a  bank,  if  passed  for 
a  debt,  is  presumably  conditional  payment  only  ;  and  if  re- 
fused payment  the  creditor  may  resort  to  the  original  con- 
sideration.''' But  if  the  party  receiving  the  certificate  makes 
use  of  it  for  his  own  purposes,  not  punctually  requiring 
payment,  it  might  be  different. 

In  a  Maryland  case  it  appeared  that  on  the  i6th  of  Oc- 


'  Morse  on  Banking,  53. 

^Bank  of  Orleans  v.  Merrill,  2  Hill,  295  ;  Edwards  on  Bills,  348. 

"  Bank  of  Chillicothe  v.  Dodge,  8  Barb.,  233. 

*  Coleman  v.  First  Nat.  Bk.,  53  N.  Y.,  388.         *  Stout  v.  Benoist,  39  Mo.,  277. 

"  Coleman  v.  First  Nat.  Bk.,  53  N.  Y.,  388. 

'  Lindsey  v.  McClelland,  18  Wis.,  481.  In  Johnson  v.  Barney,  i  Clarke  (Iowa), 
531,  where  A.,  being  indebted  to  B.,  inclosed  him  C."D.'s  certificate  of  deposit 
for  $945,  and  said  in  his  letter,  "  please  collect  and  place  amount  to  my  credit," 
it  was  held  that  B.  received  it  only  as  agent  for  collection,  and  therefore  was  not 
an  indorsee,  save  in  that  limited  sense. 

Vol.  II.— 45 


706  CERTIFICATES    OF    DEPOSIT.  §   IJ02. 

tober,  i860,  Hoffman  of  Baltimore,  being  indebted  to  Bower 
of  Cincinnati,  deposited  in  a  banking  house  in  Baltimore  the 
amount  due  ($206,31),  and  took  a  certificate  of  deposit  run- 
ning :  "  Received  on  deposit  from  V.  Hoffman, Esq., $206,31, 
payable  to  the  order  of  G.  Bower,  Esq.,  indorsed  herein. 
(Signed)  Josiah  Lee  &  Co."  Bower  received  acknowledged 
receipt  of  the  certificate  on  i8th  of  October,  i860,  and  then 
transferred  it  to  other  parties,  who  demanded  payment  on 
the  20th  of  November,  i860.  Two  days  previous  Josiah 
Lee  &  Co.  had  failed  in  business,  and  it  was  sought  to 
make  Hoffman  liable  for  the  amount.  But  the  court  said  : 
"  Though  the  money  deposited  by  Hoffman  was  not  de- 
posited by  the  authority  of  Bower,  or  with  his  previous 
knowledge,  yet  upon  his  acknowledgment  of  receipt  of  the 
certificate,  he  sanctioned  the  deposit  as  a  payment  to  him- 
self, especially  as  he  made  use  of  the  certificate  for  his  own 
purposes,  and  thus  made  Josiah  Lee  &  Co.  his  agents  to 
hold  the  fund  subject  to  his  order.  Bower  thus  assuming 
control  of  the  fund,  it  must  be  regarded  as  a  payment  of 
the  debt  due  to  him  by  Hoffman."^ 


SECTION  II. 

THE    TRANSFER    AND    NEGOTIABILITY   OF   CERTIFICATES   OF 

DEPOSIT. 

§  1702.  As  to  the  transfer  of  certificates  of  deposit,  it 
must  be  governed  by  the  same  rules  which  control  other 
promissory  notes,  and  which  vary  according  to  the  instru- 
ment's form.  If  it  be  payable  to  bearer  it  may  be  trans- 
ferred by  delivery,  but  if  payable  to  order  it  should  be  in- 
dorsed. And  when  payable  to  order,  mere  manual  delivery 
without  indorsement  or  proof  of  a  valuable  consideration 
would  not  be  evidence  of  title.^     The  liability  of  an  in- 

'  Bower  v.  Hoffman,  23  Md.,  264.  "  Vastine  v.  Wilding,  45  Mo.,  89. 


I 


^   1 703.  THEIR  TRANSFER  AND  NEGOTIABILITY.  707 

dorser  is  the  same  as  upon  the  indorsement  of  any  other 
promissory  note.* 

§  1 702^.  Overdue  certificates  of  deposit.  Certificate  of 
deposit  a  continuing  security. — If  the  certificate  of  deposit 
be  transferred  when  overdue,  the  transferee  takes  it  subject 
to  equitable  defences."  But  the  certificate  of  deposit  is  not 
regarded  as  overdue  and  dishonored  until  actually  pre- 
sented for  payment,  when,  as  is  usual,  it  is  not  payable  at  a 
particular  time  ;  and  if  the  bank  pay  any  portion  of  the 
amount  due  upon  it  to  the  original  depositor  without  indors- 
ing the  credit  on  the  certificate,  a  bona  fide  holder  for  value 
without  notice  may  recover  the  whole  sum  from  the  bank. 
The  certificate  is  regarded  as  a  continuing  security,  and 
hence  this  doctrine  arises.  In  New  York  it  was  applied  to 
hold  the  bank  liable  to  the  holder  where  the  certificate  which 
bore  interest  was  transferred  seven  years  after  it  was  issued,' 
An  indorser  of  a  certificate  of  deposit  remains  liable  until 
an  actual  demand  is  made,  and  the  holder  is  not  chargeable 
with  neglect  for  omitting  to  make  such  demand  within  any 
particular  time,  for  the  instrument  is  a  continuing  security 
between  indorser  and  indorsee.* 

§  I  703.  As  to  the  negotiability  of  certificates  of  deposit. 
— It  has  been  questioned  whether  or  not  certificates  of  de- 
posit are  negotiable.  But  we  conceive  that  there  can  now 
be  no  doubt  that  they  are  negotiable  when  expressed  in 
negotiable  words.  And  this  view  is  sustained  by  au- 
thority of  experienced  judicial  writers  as  well  as   by  ad- 


•  Mills  V.  Barney,  22  Cal.,  240 ;  Coye  v.  Palmer,  16  Cal.,  158  ;  Ford  v.  Mitchell, 
15  Spoon.,  304;  Gate  v.  Patterson,  25  Mich.,  191  ;  Hazelton  v.  Union  Bank,  32 
Wis.,  35  ;  Pardee  v.  Fish.,  60  N.  Y.,  265. 

"Coye  V.  Palmer,  16  Cal.,  158;  Tripp  v.  Curtenius,  36  Mich.,  494. 

'National  Bank  of  Fort  Edward  v.  Washington  Co.  National  Bank,  12  N.  Y. 
S.  C.  (5  Hun),  605  (1875).     Contra,  Tripp  v.  Curtenius.  36  Mich.,  497  (1S77). 

'Pardee  v.  Fish,  60  N.  Y.,  271  (1875),  citing-  Merritt  v.  Todd,  23  N.  Y.,  28 
(see  ante,  609).  In  Pardee  v.  Fish,  the  certificate  bore  interest.  The  plaintiff 
retained  it  from  June  8th,  1872,  to  December  24th,  1872. 


7o8  CERTIFICATES    OF    DEPOSIT.  $   1 704» 

judlcated  cases.^  But  there  are  cases  to  the  contrary. 
The  Supreme  Court  of  the  United  States  held  a  certificate 
of  deposit  in  the  following  form  to  be  negotiable  :  "  I 
hereby  certify  that  H.  S.  has  deposited  in  this  bank, 
payable  twelve  months  from  ist  of  May,  1839,  with 
five  per  cent,  interest  till  due,  $1,500  for  the  use  of 
H.  M.,  and  payable  only  to  his  order  upon  the  return  of 
this  certificate."  ^  And  the  like  decision  was  rendered 
in  Connecticut,  where  the  certificate  ran  :  "  I  do  hereby 
certify  that  W.  T.  &  B.  have  deposited  in  this  bank  the 
sum  of  $10,608.75,  payable  on  the  first  day  of  December 
next,  to  their  order  and  the  return  of  this  certificate."^  In 
California  it  was  considered  that  the  statute  law  had  settled 
the  question  in  favor  of  the  negotiability  of  certificates  of 
deposit ;  but  it  was  thought  that  they  were  negotiable  at 
common  law.^ 

§  1704.  A  simple  certificate  of  deposit  containing  no 
words  of  promise  to  pay  the  amount  is  nothing  more  than 

'  Miller  V.  Austen,  13  How.,  218;  Bank  of  Peru  v.  Farnsworth,  18  111.,  563  ; 
Laughlin  v.  Marshall,  19  Id.,  390;  Carey  v.  McDougald,  7  Ga.,  84;  Lynch  v. 
Goldsmith,  64  Geo.,  42  ;  Kilgore  v.  Bulkley,  14  Conn.,  362  ;  Bank  of  Orleans  v. 
Merrill,  2  Hill,  295  ;  Johnson  v.  Barrey,  i  Iowa,  531  ;  Drake  v.  Markle,  21  Ind. 
(Kerr),  433  ;  Lafayette  Bank  v.  Ringel,  51  Ind.,  393  ;  Bean  v.  Briggs,  i  Clarke 
(Iowa),  488  ;  Fells  Point  Sav.  Inst.  v.  Weedon,  18  Md.,  528  ;  Welton  v.  Adams, 
4  Cal.,  37  ;  Brummagin  v.  Tallant,  29  Cal.,  503  ;  Mills  v.  Barney,  22  Cal.,  240 ; 
Gate  V.  Patterson,  25  Mich.,  191;  Poorman  v.  Mills,  35  Cal.,  118;  Blood  v. 
Northrup,  i  Kansas,  28  ;  Fultz  v.  Walters,  2  Montana,  165  ;  Frank  v.  Wessels, 
64  N.  Y.,  155;  Howe  V.  Hartness,  11  Ohio  St.,  449;  Bellows  Falls  Bank  v. 
Rutland,  40  Vt.,  377 ;  Pardee  v.  Fish,  60  N.  Y.,  265  ;  Tripp  v.  Curtenius,  36 
Mich.,  494  ;  Edwards  on  Bills,  348  ;  i  Parsons  N.  &  B.,  26 ;  Morse  on  Bank- 
ing, 54;  Dos  Passos  on  Stockbrokers,  554;  Lewis  on  Stocks,  66;  Benjamin's 
Chalmers'  Digest,  272. 

'  Patterson  v.  Poindexter,  6  Watts  &  S.,  227  ;  Charnley  v.  Dallas,  8  Watts  & 
S.,  353  ;  see  also  Sibree  v.  Tripp,  15  M.  &  W.,  23. 

'  Miller  V.  Austen,  13  How.,  918. 

*  Kilgore  v.  Bulkley,  14  Conn.,  363.  In  Pardee  v.  Fish,  60  N.  Y.,  268  (1875), 
where  the  amount  was  expressed  to  be  payable  "  on  the  return  of  this  certifi- 
cate," Miller,  J.,  said  :  "  Although  a  demand  was  necessary  upon  the  bank  before 
an  action  could  be  brought  against  it  on  the  instrument,  thus  distinguishing 
the  case  from  that  of  a  promissory  note,  where  the  maker  may  be  sued  without 
any  demand,  I  do  not  think  that  this  fact  takes  away  the  negotiable  character  of 
the  instrument  under  the  decisions  cited,  and  it  must  therefore  be  considered  as 
possessing  all  the  features  of  a  negotiable  promissory  note." 

^  Welton  V.  Adams,  4  Cal.,  37. 


§    I  705.  THEIR  TRANSFER  AND  NEGOTIABILITY.  709 

a  receipt,  and  could  not  be  the  basis  of  an  action  against 
the  bank,  nor  would  it  be  a  transferable  security.  Parol 
evidence  would  be  admissible  to  explain  it,  in  the  same 
manner  as  in  the  case  of  any  other  receipt ;  the  word  "  cer- 
tify "  adding  no  additional  force  to  the  instrument  as  pur- 
porting a  contract.^ 

§  1705.  In  those  cases  where  the  certificate  is  payable  to 
**  A.  B.,  or  order,"  or  to  bearer,  we  think  there  is  no  doubt 
of  its  negotiability,  and  the  cases  cited  bear  us  out  in  this 
view.  But  in  Pennsylvania,  Chief-Justice  Gibson,  render- 
ing the  opinion  of  the  court,  held  that  a  certificate  running 
as  follows,  "  I  hereby  certify  that  C.  S.  T.  has  deposited  in 
this  bank,  payable  twelve  months  from  ist  May,  1839,  with 
five  per  cent,  interest  till  due,  per  annum,  $3,691.93,  for 
the  use  of  R.  P.  &  Co.,  and  payable  only  to  their  order 
upon  the  return  of  this  certificate,"  was  not  a  negotiable 
note,  but  "  a  special  agreement  to  pay  the  deposit  to  any  one 
who  should  present  the  certificate  and  the  depositor's  order."  * 
And  in  England,  where  the  form  was,  "  Memorandum  : 
Mr.  Sibree  has  this  day  deposited  with  me  ^500  on  the 
sale  of  ^10,000  3/.  per  cent.  Spanish,  to  be  returned  on  de- 
mand," the  court  said  that  it  was  not  intended  to  be,  nor 
was  it,  a  promissory  note,  either  at  common  law  or  under 
the  statute  of  Anne,  but  the  evidence  of  an  agreement  re- 
specting the  deposit.^  This  latter  decision  does  not  mili- 
tate against  the  negotiability  of  certificates  drawn  in  nego- 
tiable form.  And  the  true  rule  seems  to  us  to  be  that 
expressed  by  a  learned  annotator,  who  says  that  "an  instru- 
ment merely  acknowledging  a  deposit  upon  whatsoever 
special  terms,  can  not  be  a  promissory  note";  and  considers 
only  such  certificates  to  be  notes  as  contain  evidence  that 


'  Hotchkiss  V.  Mosher,  48  N.  Y.,  482  (1872). 

"  Patterson  v.  Poindexter,  6  Watts  &  S.,  227  ;  confirmed  in  Charnley  v.  Dal- 
las, 8  Watts  &  S.,  353.     See  also  Lebanon  Bank  v.  Mangan,  28  Penn.  St.,  452 
London  Sav.  Society  v.  Savings  Bank,  36  Penn.  St.,  498. 

*  Sibree  v.  Tripp,  1 5  Mees.  &  Wels.,  23. 


7IO  CERTIFICATES    OF    DEPOSIT.  ^   1 706 

"  the  matter  continues  to  deposit,  or  is  converted  into  a 
loan,  or  that  a  present  debt  is  created,  accompanied  by  an 
undertaking  to  pay."^ 

§  1 706.  Requisites  of  7iegotiability. — In  order,  however, 
to  be  negotiable  a  certificate  of  deposit  must  possess  the 
requisite  features  of  certainty  in  respect  to  parties,  and  time 
and  mode  of  payment ;  and  the  same  causes  which  deprive 
bills  and  notes  of  negotiability  would  affect  it  in  like  man- 
ner. Thus,  if  payable  "  in  currency,"  it  would  not  be  ne- 
gotiable according  to  the  principles  which  prevail  as  to 
bills  and  notes  ;^  though  it  has  been  held  otherwise.^  So 
if  payable  in  "  United  States  six  per  cent,  interest-bearing 
bonds,"  it  is  a  mere  contract  to  deliver  such  bonds,  and  not 
negotiable.* 

§  1 706^.  Whether  negotiable  in  States  where  there  are 
certain  statutory  tests  of  negotiability, — In  some  of  the 
States  the  general  principles  of  the  law  merchant  which 
determine  negotiability  do  not  apply,  and  peculiar  words 
are  necessary  to  make  notes  negotiable.  The  words  "value 
received"  are  essential  to  the  negotiability  of  a  note  in  Mis- 
souri, and  a  certificate  of  deposit  without  such  words  has 
been  held  there  to  be  not  negotiable.^  Whether  or  not  in 
those  States  where  it  is  essential  to  the  negotiability  of  a 
note,  that  it  be  payable  at  a  bank  (as  is  the  case  in  Vir- 
ginia and  Indiana),  a  certificate  of  deposit  in  the  usual 
form  would  be  held  negotiable,  is  a  question  as  yet  unde- 
cided in  any  case  within  our  knowledge.  But  as  a  check 
is  regarded  as  payable  at  the  bank  on  which  it  is  drawn,  so 
a  bank  certificate  of  deposit  is  a  note  payable  at  the  bank 

'  I  Amer.  Lead.  Cas.,  307, 

^  Huse  V.  Hamblin,  29  Iowa,  501  ;  Rindskoff  v.  Barrett,  11  Iowa,  172  ;  Lind- 
say V.  McClelland,  18  Wise,  481  ;  Ford  v.  Mitchell,  15  Wise,  304  ;  London  S. 
C.  V.  Hagerstown  S.  Bank,  12  Casey,  498. 

'  Drake  v.  Markle,  21  Ind.  (Kerr),  433  ;  see  vol.  i,  §§  55  et  seq. ;  Pardee  v. 
Fish,  60  N.  Y.,  265  ;  Klauber  v.  Biggerstaff,  47  Wise,  551. 

*  Easton  v.  Hyde,  13  Minn.,  90. 

'  International  Bank  v.  German  Bank,  3  Mo.  App,,  367. 


%   IJOja.  THEIR  TRANSFER  AND  NEGOTIABILITY.  /H 

by  which  it  is  issued,  and  it  would,  as  it  seems  to  us,  come 
within  the  meaning  of  "  a  note  payable  at  a  bank." 

§  1707.  Conflicting  decisions  as  to  whether  a  certificate 
of  deposit  is  payable  without  previoics  dema?id.  When  stat- 
ute of  limitations  begins  to  riui. — Where  the  certificate 
states  that  the  amount  is  payable  "  on  the  return  of  this 
certificate,"  or  on  "  the  presentment  of  this  certificate,"  or 
uses  some  similar  phrase,  it  has  been  held  that  such  lan- 
guage does  not  alter  the  legal  effect  of  the  instrument ;  that 
the  holder  is  not  under  any  obligation  to  present  it  for  pay- 
ment before  suit  upon  it  ;  and  that  it  is  the  bank's  duty, 
like  the  maker  of  any  other  note,  to  find  out  the  payee  and 
pay  it.^  But  where  a  certificate  was  given  to  A.,  "  payable 
to  order  of  himself  on  presentation  of  this  certificate,  prop- 
erly indorsed,"  it  was  considered  so  far  like  an  ordinary  de- 
posit that  A.  could  not  sue  the  bank  upon  it  without  a 
previous  demand.^  It  has  been  held  in  Maryland  that 
where  a  certificate  of  deposit  is  expressed  to  be  payable 
"on  return  of  the  same,"  the  statute  of  limitations  only 
runs  from  the  time  of  actual  demand  and  notice.'^  It  is 
considered,  however,  in  some  cases,  that  if  the  certificate 
be  payable  on  demand  (which  is  substantially  the  same  as 
"on  return  of  this  certificate"),  the  statute  of  limitations 
begins  to  run  from  its  date,  and  no  special  demand  is  nec- 
essary to  put  the  statute  in  motion.^ 

§  I 'joy a.  True  principles  applicable  to  the  question, — 
Certificates  of  deposit  are  designed  to  subserve  with  con- 
venience the  purpose  of  temporary  investments  of  money  ; 
and  whether  the  expression  used  in  them  as  to  payability 
be  "  on  the  return  of  this  certificate,"  or  "  on  presentation 


'  Gate  V.  Patterson,  25  Mich.,  191  ;  Hunt  v.  Divine,  37  111.,  I37  ;  Bellows  Falls 
Bank  V.  Rutland  County  Bank,  40  Vt.,  377,  affirming  Smilie  v.  Stevens,  39  Vt., 

315- 

"  Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  Vt.,  377. 

'  Fells  Point  Savings  Inst.  v.  Weedon,  18  Md.,  320. 

*  Brummagin  v.  Tallant,  29  Cal.,  503  ;  Tripp  v.  Curtenius,  36  Mich,,  499. 


712  CERTIFICATES    OF    DEPOSIT.  §   I'JO'ja. 

of  this  certificate,"  or  "  on  return  or  surrender  of  this  cer- 
tificate properly  indorsed,"  the  substantial  meaning  is  the 
same  ;  that  is  to  say,  that  the  certificate  is  payable  when 
payment  is  demanded  by  the  party  entitled,  to  receive  the 
money,  and  who  avouches  the  fact  by  producing  the  instru- 
ment with  evidence  of  title.     If  the  statute  of  limitations 
begins  to  run  at  once,  suit  must,  of  course,  be  maintainable  at 
once,  and  therefore  no  prior  demand  would  be  necessary. 
But  such  is  not  the  usual  contemplation  of  either  the  de- 
positor or  the  bank.     The  former  seeks  an  indefinite  in- 
vestment of  his  funds.     The  bank  is  not  expected,  accord- 
ing to  the  usage  and  practice  of  such  institutions,  to  seek 
him  and  offer  payment,  as  in  the  ordinary  case  of  a  demand 
loan.     And  the  better  opinion  seems  to  us  to  be  that  the 
statute  of  limitations  only  begins  to  run  when  there  is  an 
actual  demand  of  payment  in  due  form,  and  that  such  de- 
mand must  precede  a  suit.^     The  bank   may,  indeed  we 
think  has  the  right  to,  pay  a  demand  certificate  at  any  time, 
for  the  reason  that  the  policy  of  the  law  interdicts  a  per- 
petual loan  ;  and  while  the  creditor  holding  the  certificate 
can  not  regard  the  bank  as  in  default,  and  is  not  himself  in 
default,  until  a  demand  has  been  made,  yet  these  circum- 
stances should  not  prevent  the  operation  upon  certificates 
of  deposit  of  the  ordinary  principle,  that  the  debtor  owing 
a  demand  loan  has  the  right  to  pay  at  any  time.     The  or- 
dinary principles  applicable  to  debts  due  on  demand  are 
only  modified  to  fit  the  nature  of  the  case,  the  policy  of  the 
law,  and  the  intention  of  the  parties  to  the  contract. 

'  Hunger  v.  Albany  City  N.  B.,  85  N.  Y.,  587  ;  Payne  v.  Gardiner,  29  N.  Y.. 
146  ;  Pardee  v.  Fish,  60  N.  Y.,  265.  Sec  also  Howell  v.  Adams,  68  N.  Y.,  314 ; 
Boughton  V.  Flint,  74  N.  Y.,  476  ;  Bellows  Falls  Bank  v.  Rutland  County  Bank, 
40  Vt.,  377  ;  Fells  Point  Sav.  Inst.  v.  Weedon,  28  Md.,  320 ;  see  ante,  §  1685 
and  note. 


CHAPTER  LII. 

CERTIFICATES    OF     STOCK  ;     AND     OTHER   QUASI    NEGOTIABLB 

INSTRUMENTS. 


\ 


SECTION   I. 

CERTIFICATES   OF   STOCK. 

§  1 708.  T/ie  certificates  of  stock  issued  to  shareholders 
by  incorporated  companies  are  not  regarded  as  coming 
within  the  classification  of  negotiable  instruments/ although 
they  generally  inure,  subject  to  certain  rules,  to  the  benefit 
of  the  bearer.^  Very  frequently  by  application  of  the  prin- 
ciples of  estoppel,  and  to  effectuate  the  ends  of  justice, 
and  the  intention  of  the  parties,  the  courts  decree  a  better 
title  to  the  transferee  than  actually  existed  in  his  trans- 
ferrer ;  and  as  the  result  reached  in  many  cases  is  the  same 
as  would  be  reached  if  the  certificate  were  negfotiable,  cer- 
tificates  of  stock  may  be  classed  amongst  instruments 
qtiasi  negotiable.  The  phrase  ''quasi  negotiable"  has 
been  termed  an  unhappy  one  ;  ^  and  certainly  it  is  far  from 
satisfactory,  as  it  conveys  no  accurate  well-defined  mean- 
ing. But  still  it  describes  better  than  any  other  shorthand 
expression  the  nature   of  those   instruments  which,   while 


'Pierce  on  Railroads,  in;  Dos  Passos  on  Stockbrokers,  596;  Biddle  on 
Stockbrokers,  149,  156;  Lewis  on  Stocks,  64,  71,  72,  et  seq. ;  i  Edwards  B.  & 
N.,  §  22,  p.  61  ;  Scliouler  on  Personal  Property,  606,  note  ;  2  Ames  B.  &  N  ,  784 ; 
Shaw  V.  Spencer,  100  Mass.,  383  ;  Bank  v.  Lanier,  11  Wall.,  377  ;  Railn^id  Co. 
V.  Howard,  7  Wall.,  415  ;  Mechanics'  Bank  v.  New  York  &  N.  H.  R.R.  Co.,  13 
N.  Y.  (3  Kernan),  599;  Jarvis  v.  Rogers,  13  Mass.,  105;  Sewall  v.  Boston 
Water  Power  Co.,  4  Allen,  277. 

*  Railroad  Co.  v.  Howard,  7  Wall.,  415. 

*  Lewis  on  Stocks,  82. 

(713) 


714  CERTIFICATES    OF    STOCK.  §    I'JoSa 

not  negotiable  in  the  sense  of  the  law  merchant,  are  so 
framed  and  so  dealt  with,  as  frequently  to  convey  as  good 
a  title  to  the  transferee  as  if  they  were  negotiable. 

In  a  case  before  the  United  States  Supreme  Court  it  was 
said  :  "  Written  contracts  are  not  necessarily  negotiable 
simply  because  by  their  terms  they  inure  to  the  benefit  of 
the  bearer.  Doubtless  the  certificates  were  assignable,  and 
they  would  have  been  so  if  the  word  bearer  had  been 
omitted,  but  they  were  not  negotiable  instruments  in  the 
sense  supposed  by  the  appellants.  Holders  might  transfer 
them,  but  the  assignees  took  them  subject  to  every  equity 
in  the  hands  of  the  original  owners."^ 

§  1708^.  Nature  of  certificates  of  stock. — A  share  in  the 
capital  stock  of  a  corporation  is  not  a  debt,  nor  money,  nor 
a  security  for  money,  but  it  is  a  species  of  incorporeal  per- 
sonal property.^  The  capital  stock  of  the  corporation  is  so 
much  money,  or  property  assessed  at  money  valuation, 
which  is  divided  into  a  number  of  shares,  which  shares  are 
the  holder's  interest  in  the  corporate  estate.  The  stock  of 
the  corporation  is  generally  raised  by  mutual  subscription 
of  the  members  in  the  first  instance,  and  its  amount  is 
regulated  by  the  statutory  provisions  by  or  under  which 
the  corporation  is  chartered.  The  persons  interested  in  the 
corporation  are  termed  shareholders,  or  stockholders  ;  and 
certificates  of  stock  are  generally  issued  to  them  by  the 
corporate  authorities  of  the  muniments  of  their  title  to  a 
proportionate  part  of  the  profits  of  the  corporation,  and  as 
evidence  of  their  right  to  participate  in  its  concerns. 
Unless  otherwise  provided  by  statute,  the  shares  in  the 
corporation  are  generally  deemed  personal  estate.^ 

The  certificate  of  stock  is  the  customary  and  convenient 

*  Railroad  v.  Howard,  7  Wall.,  415. 

*  Allen  V.  Pegram,  16  Iowa,  173,  Dillon,  J. ;  Lewis  on  Stocks,  19. 

'  Hutchins  v.  State  Bank,  12  Mete,  421  ;  Arnold  v.  Ruggles,  i  R.  I.,  165; 
Denton  v.  Livingston,  9  Johns,  100;  Johns  v.  Johns,  i  Ohio  St.,  350  ;  Payne  v. 
Elliot,  54  Gal.,  339;  Lewis  on  Stocks,  18;  Dos  Passos  on  Stockbrokers,  142, 
587,  589  ;  Biddle  on  Stockbrokers,  142. 


§    1708^.  CERTIFICATES    OF    STOCK.  715 

evidence  of  the  holder's  interest  in  the  corporation  which 
issues  it ;  but  in  the  absence  of  legal  provisions  requiring 
it,  no  certificate  of  stock  is  necessary  to  attest  the  rights  of 
the  shareholder.^  If  the  corporation  issues  certificates  to 
its  shareholders,  as  is  usual  to  do,  any  shareholder  may 
compel  it  by  legal  proceedings  to  issue  to  him  a  certificate 
for  the  number  of  shares  to  which  he  is  entitled.^  Cer- 
tificates of  stock  are  generally  deemed  choses  in  action,* 
and  as  the  holder  may  be  driven  to  an  action  to  recover 
the  proportionate  part  of  the  corporate  property  or  assets, 
or  the  interests  therein  which  his  shares  entitle  him  to,  they 
are  properly  within  the  classification  of  "choses  in  action." 
As  said  in  Massachusetts  by  Shaw,  C.  J.  :  "A  certificate  of 
stock  is  a  muniment  of  title  of  the  same  nature  with  the 
note  or  bond  of  a  private  person,  ordinarily  called  a  '  chose 
in  action,'  or  of  a  State  or  United  States  bond,  or  certificate 
of  debt."  ^ 

In  the  United  States  the  stockholder's  interest  in  the 
corporation  is  generally  deemed  liable  to  attachment,  and 
execution  at  the  suit  of  such  stockholder's  creditor,  and  to 
legal  process  of  the  like  kind,^  and  the  usual  method  of 

'Chester  Glass  Co.  v.  Dewey,  16  Mass.,  94;  Agricultural  Bank  v.  Burr,  24 
Me.,  256  ;  Angell  &  Ames  on  Corporations,  §  565  ;  Biddle  on  Stockbrokers, 
266  ;  Dos  Passos  on  Stockbrokers,  5S2  ;  Thompson  on  Stockholders,  §  106. 

^  Angell  &  Ames  on  Corjiorations,  §  565. 

3  City  of  Utica  v.  Churchill,  33  N.  Y.,  161  ;  DriscoU  v.  West  Bradley  &  C.  M. 
Co.,  59  N.  Y.,  105  ;  The  King  v.  Capper,  5  Price,  264  ;  Humble  v.  Mitchell,  il 
A.  &  E.  ;  Haseltine  v.  Siggers,  I  W.  PI.  &  G.,  856  ;  Hutchins  v.  State  Bank,  12 
Mete,  421,  Shaw,  C.  J.  :  "  If  a  share  in  a  bank  is  not  a  chose  in  action,  it  is  in 
the  nature  of  a  chose  in  action,  and,  what  is  more  to  the  purpose,  it  is  personal 
property."  In  Schouler  on  Personal  Property,  p.  32,  it  is  said  .  '  If  I  own  bank 
stock  and  draw  regular  dividends,  is  not  the  stock  a  chose  in  possession,  since  I 
occupy  and  enjoy  it  to  the  fullest  extent  ?  No,  is  the  reply,  for  this  is  never  any- 
thing more  than  a  chose  in  action."  Dos  Passos  on  Stockbrokers,  5S6,  762  ; 
Biddle  on  Stockbrokers,  145.  "  It  is  really  nothing  more  than  a  chose  in  action, 
and  trover  will  not  lie  for  it,  though  it  might  lor  the  certificate."  Lewis  on 
Stocks,  19  ;  Acraman  v.  Cooper,  10  M.  &  \V.,  585  ;  Neiler  v.  Kelley,  19  P.  F. 
S.,  403.  Confra,  that  trover  will  lie  for  stock  as  such,  see  Boylan  v.  Huguet,  8 
Neb.,  245  ;  Kuhn  v.  McAllister,  i  Utah,  273,  cited  in  Biddle  on  Stockbrokers, 
146,  note. 

*  Hutchins  v.  State  Bank,  12  Mete,  421. 

'  Chesapeake  &  Ohio  R.R.  v.  Paine,  29  Grat.,  502  ;  Foster  v.  Potter,  37  Mo., 
525;  Howe  V.  Starkweather,  17  Mass.,  243;  Lewis  on  Stocks,  20;  Dos  Passos 
on  Stockbrokers,  589;  Pierce  on  Railroads,  no. 


7l6  CERTIFICATES    OF    STOCK.  §   1 708^. 

levy  is  by  leaving  a  copy  of  the  writ  with  the  proper  officer 
of  the  corporation  in  which  the  shares  are  held,  with  notice 
that  such  shares  are  levied  upon.* 

§  1 708^.  The  transfer  of  certificates  of  stock. — Certifi- 
cates of  stock  represent  so  great  a  portion  of  the  wealth  of 
the  country,  and  the  transactions  in  them  are  so  numerous, 
that  all  questions  bearing  upon  their  validity,  and  upon  the 
forms  and  effect  of  transfers,  are  highly  important.  The 
full  discussion  and  elucidation  of  such  questions,  however, 
belong  rather  to  the  treatises  on  corporations  and  on  stock- 
brokers than  to  a  work  on  negotiable  instruments ;  and 
only  an  outline  of  the  general  principles  affecting  the  nego- 
tiation of  stock  certificates  seems  pertinent  here. 

(i)  As  between  the  transferrer  and  transferee  of  a  stock 
certificate,  it  is  very  well  settled  that,  in  the  absence  of  stat- 
utory restrictions,  the  beneficial  interest  passes  by  assign- 
ment, and  delivery  of  the  certificate,  as  in  the  case  of  any 
other  species  of  personal  property,  or  chose  in  action,  no 
particular  formality  being  necessary  to  invest  the  transferee 
with  the  riirht  and  title  of  the  transferrer,  as  between  the 
parties  to  the  transfer.*  The  equitable  title  passes  as  be- 
tween the  immediate  parties,  whatever  may  be  the  rights  of 
others  in  the  premises.^  And,  as  a  general  rule,  statutory 
restrictions  do  not  affect  the  immediate  parties  to  the  trans- 
fer, being  designed  for  other  purposes. 

§  i7oS(r.  (2)  As  between  the  corporation  a7id  the  trans- 
feree of  a  certificate  of  its  stock  the  rights  acquired  by 
the  latter  depend  upon  the  charter  and  general  laws  which 
control  the  matter;  a  corporation  being  the  creature  of 
statute  law  and  regulated  for  the  most   part  by  it.      It  is 

'  Freeman  on  Executions,  §  26212. 

'  Biddle  on  Stockbrokers,  268  ;  Dos  Passos  on  Stockbrokers,  591,  623,  628  ; 
Angell  &  Ames  on  Corporations,  §§  354,  564;  Morawetz  on  Private  Corpora- 
tions, §  326. 

8  Gilbert  v.  Iron  M'f'g  Co.,  11  Wend.,  628  ;  Utica  Bank  v.  Smalley,  2  Cowen, 
770;  Johnson  v.  Underhiill,  52  N.  Y.,  203;  Johnston  v.  Laflin,  103  U.  S.,  S04 ; 
Farmers'  Bank  v.  Wasson,  48  Iowa,  338. 


^   l'J02>d.  CERTIFICATES    OF    STOCK.  717 

frequently  provided  by  the  charter  or  general  statute  under 
which  the  corporation  is  organized  that  the  stock  shall  be 
transferable  only  in  a  prescribed  manner,  and  upon  certain 
conditions.  A  provision  of  this  nature  not  only  limits  the 
transferability  of  the  shares,  but  constitutes  a  part  of  the 
agreement  between  the  shareholders,  and  the  mutual  con- 
sent necessary  to  a  change  of  this  agreement  can  only  be 
satisfied  by  compliance  with  its  conditions.  Accordingly, 
it  has  been  held  by  the  Supreme  Court  of  the  United  States 
that  where  a  banking  corporation  had  by  its  charter  a  lien 
upon  the  shares  of  its  stockholders  for  debts  due  the  bank, 
it  could  not  be  deprived  of  this  lien  by  an  assignment  of 
the  shares  which  was  not  entered  upon  the  books  of  the 
bank  in  the  manner  required  by  law,  Justice  Story  saying: 
"  No  person  can  acquire  a  legal  title  to  any  shares  except 
under  a  regular  transfer,  according  to  the  rules  of  the  bank  ; 
and  if  any  person  takes  an  equitable  assignment  it  must  be 
subject  to  the  rights  of  the  bank  under  the  act  of  incorpo- 
ration, of  which  he  is  bound  to  take  notice."^  And  for 
the  like  reason,  as  the  transferee  of  the  stock  would,  in 
such  a  case,  acquire  only  the  equitable  interest,  and  not  be- 
come a  stockholder  until  the  conditions  of  transfer  were 
complied  with,  the  corporation,  it  has  been  held,  could  not 
claim  a  lien  upon  the  shares  on  account  of  the  indebted- 
ness of  such  transferee.^ 

§  1 708^.  Right  of  corporation  to  claim  a  lien  07i  stock 
against  a  transferee  for  debt  d7ie  by  transferrer. — When 
the  charter  of  the  corporation  creates  a  lien  on  its  stock 
for  debts  due  by  stockholders,  such  lien  can,  as  we  have  al- 
ready seen,  be  maintained  against  any  transferee.^  The 
corporation  may  assert  or  waive  it  according  to  its  interest 


'  Union  Bank  v.  Laird,  2  Wheaton,  390.  See  also  Brent  v.  Bank  of  Wash- 
in^on,  10  Peters,  596;  Rogers  v.  Huntingdon  Bank,  12  Sergt.  &  R.,  73;  Ger- 
man Security  Bank  v.  Jefferson,  10  Bush  (Ky.),  328  ;  Farmers'  Bank  v.  Iglehart, 
6  Gill,  50  ;  Angell  &  Ames  on  Corporations,  §§  571  et  seq. 

^  Helm  V.  Swiggett,  12  Ind.,  194.  ^  §  1708^. 


71 8  CERTIFICATES    OF    STOCK.  §   IJO^d 

and  pleasure,*  But  in  the  absence  of  some  legal  creation 
no  such  lien  exists  by  implication  in  favor  of  the  corpora- 
tion by  the  common  law.  And  if  it  grants  credit  to  a 
stockholder  it  has  no  prior  legal  claim  upon  his  stock  to 
satisfy  the  debt ;  and  it  is  under  obligation,  notwithstand- 
ing such  debt,  to  enter  on  its  books  the  transfer  of  such 
stock  in  pursuance  of  an  assignment  duly  made.^ 

Whether  a  corporation  without  express  authority  by 
statute  (and  when  no  statutory  lien  is  created)  has  the 
power  to  adopt  by-laws  creating  a  lien  on  stock  for  debts 
and  liabilities  of  the  stockholders,  and  to  refuse  to  transfer 
the  stock  upon  its  books  until  such  debts  and  liabilities  are 
satisfied,  is  a  question  upon  which  the  courts  differ.  Gen- 
eral authority  given  to  corporations  by  statute  to  adopt  by- 
laws prescribing  the  manner  in  which  stock  shall  be  trans- 
ferred, and  for  the  regulation  of  business,  has  been  con- 
sidered not  broad  enough  to  authorize  a  prohibition  upon, 
or  an  abridgment  of,  the  right  of  transfer  ;  but  simply  to 
direct  the  manner  in  which  it  shall  be  made ;  and  it  has 
been  held  accordingly  that  a  by-law  unauthorized  by  statute 
which  gives  the  corporation  a  lien  on  the  stock  of  members 
would  not  affect  a  bona  fide  purchaser  of  the  stock  without 
notice,  the  policy  of  the  law  being  opposed  to  secret  liens.* 


•  Reese  v.  Bank  of  Commerce,  14  Md.,  271  ;  Hill  v.  Pine  River  Bank,  45  N.  H., 
300  ;  Angell  &  Ames  on  Corporations,  §  571  ;  Morawetz  on  Corporations,  §  337 ; 
Morse  on  Banking,  444. 

^  Steamship  Co.  v.  Heron,  52  Penn.  St.,  280  ;  Farmers'  Bank  v.  Wasson,  48 
Iowa,  336  ;  Bates  v.  N.  Y.  Ins.  Co.,  3  Johns'  Cas.,  238  ;  Driscoll  v.  West  Brad- 
ley &  C.  M.  Co.,  59  N.  Y.,  96  ;  Sargent  v.  Franklin  Ins.  Co.,  8  Pick,  90 ;  Mass. 
Iron  Co.  V.  Hooper,  7  Cush.,  183  ;  Heart  v.  State  Bank,  2  Dev.  Eq.,  in  ;  Peo- 
ple V.  Crockett,  2  Cranch  C.  C,  188  ;  Dana  v.  Brown,  i  J.  J.  Marsh,  306;  Far- 
mers' Bank  v.  Wasson,  48  Iowa,  336 ;  Byon  v.  Carter,  22  La.  An.  ;  Angell  & 
Ames  on  Corporations,  §§355,  569;  Dos  Passos  on  Stockbrokers,  629;  Biddle 
on  Stockbrokers,  176;  Morawetz  on  Corporations,  §  332 ;  Field  on 'Corpora- 
tions, p.  345,  §  310  ;  Pierce  on  Railroads,  129  ;  Morse  on  Banking,  442  ;  Schou- 
ler  on  Personal  Property,  637  ;  Proffat's  note  11,  American  Decisions,  581. 

3  Driscoll  V.  West  Bradley  &  C.  M.  Co.,  59  N.  Y.,  96.  See  also  Wain  v.  Bank, 
8  S.  &  R.,  73 ;  Farmers'  Bank  v.  Wasson,  48  Iowa,  338 ;  Evansville  N.  B.  y. 
Metropolitan  N.  B.,  2  Biss.,  527 ;  Dos  Passos  on  Stockbrokers,  630 ;  Green's 
Brice's  Ultra  Vires,  15,  note  a  (2d  ed.) 


I 

I 


^   i;o8^/.  CERTIFICATES    OF    STOCK,  719 

And  the  United  States  Supreme  Court  has  adopted  these 
views,  and  appHed  them  to  stoek  in  the  national  banks.* 

That  the  stockholders  may  agree  amongst  themselves 
that  such  a  lien  shall  exist ;  that  they  may  adopt,  or  au- 
thorize the  adoption  of,  by-laws  prohibiting  the  transfer  of 
stock  until  the  debts  and  liabilities  of  the  stockholder  are 
discharged  ;  and  that  such  a  by-law  will  be  effectual  as  be- 
tween the  stockholder  and  the  corporation,  and  all  persons 
who  have  notice  of  its  existence,  are  propositions  which 
seem  to  us  to  rest  on  sound  principles,  and  to  be  sustained 
by  creditable  authority.^  When  the  certificate  of  stock 
expresses  on  its  face  the  reservation  of  such  a  lien,  a  pur- 
chaser would  be  put  upon  inquiry,  and  constructively  noti- 
fied if  any  debt  existed  as  a  lien  upon  the  stock  ;  and  in 
such  cases  the  lien  should  be  recognized/^  And  it  is  said 
in  Angell  &.  Ames  on  Corporations  that  "  a  by-law  of  a 
bank  o-ivina:  to  the  institution  a  lien  upon  the  shares  of  a 
stockholder  for  debts  due  from  him  to  the  bank  is  a  reason- 
able and  valid  by-law."  *     Charter  and  statutory  provisions 

'  Schouler  on  Personal  Property,  490 ;  Bullard  v.  Bank,  18  Wall.,  589.  In 
this  case  it  appeared  that  under  the  National  Banking  Act  of  1863,  no  stock- 
holder in  a  national  bank  could  sell  any  share  held  by  him  in  his  own  right  so 
long  as  he  was  indebted  to  the  bank;  but  the  act  of  1864  abolished  this  pro- 
vision and  declared  that  no  national  banking  association  should  make  any  loan 
or  discount  on  the  credit  of  the  shares  of  its  own  capital  stock.  The  act  ot 
1864  also  provided  that  such  associations  might  adopt  by-laws  not  inconsistent 
with  its  provisions  to  define  and  regulate  the  manner  in  which  stock  should  be 
transferred,  and  its  general  business  conducted.  The  Supreme  Court  of  the 
United  States  decided  that  no  authority  was  given  a  national  bank  by  the  pro- 
visions quoted  to  adopt  a  by-law  giving  it  a  lien  on  stock  of  its  debtors ;  and 
that  such  a  by-law  was  not  "  a  regulation  of  the  business  of  the  bank,  or  a  reg- 
ulation for  the  conduct  of  its  affairs,"  nor  such  regulation  as  a  national  bank 
might  make  under  the  act  of  1864,  to  the  spirit  of  which  such  by-law  was  op- 
posed. 

^  Leggett  V.  Bank  of  Sing  Sing,  24  N.  Y.,  183  ;  Bank  of  Attica  v.  Manufac- 
turers' Bank,  20  N.  Y.,  501  ;  Driscoll  v.  West  Bradley  &  C.  M.  Co.,  59  N.  Y., 
105-109  (semble) ;  Tuttle  v.  Walton,  i  Ga.,  43 ;  Morgan  v.  Bank  of  N.  A.,  8 
Sergt.  &  R.,  73  ;  Child  v.  Hudson's  Bay  Co.,  2  P.  Wms.,  207  ;  Morse  on  Bank- 
ing, 442 ;  Green's  Brice's  Ultra  Vires  (2d  ed.),  15,  note  «;  Field  on  Corpora- 
tions, p.  346,  §  311  ;  Angell  &  Ames  on  Corporations,  §  355. 

^  Van  Sands  v.  Middlesex  Co.  Bank,  26  Conn.,  144;  Driscoll  v.  West  Bradley 
&  C.  M.  Co.,  59  N.  Y.,  96 ;  Proffat's  note  11,  American  Decisions,  582. 

"  Angell  &  Ames  on  Corporations,  §355,  p.  3S0;  Pierce  on  Railroads.  129; 
Morse  on  Banking,  442 ;  Green's  Brice's  Ultra  Vires,  note  a  (2d  ed.)  ;  see  also 
Lockwood  V.  Mechanics'  N.  B.,  9  R.  I.,  308;  Mechanics'  Bank  v.  Merchants' 


720  CERTIFICATES    OF    STOCK.     ,  §   1708^. 

that  stock  shall  only  be  transferable  upon  the  books  of  the 
corporation  are  chiefly  designed  for  the  protection  of  the 
corporation ;  and  when  authorized  to  adopt  by-laws  regu- 
latins:  the  transfer  of  stock  it  would  seem  that  a  rcQ-ulation 
made  creating  the  lien  for  debts  due  the  institution  would 
be  a  reasonable  exercise  of  such  authority.  A  purchaser 
acquires  by  proper  transfer  of  the  certificate  of  stock  all 
the  rights  of  the  transferrer.  He  can  protect  himself  from 
possible  loss  by  inquiry  as  to  the  status  of  the  stock  ;  and 
there  are  well-considered  authorities  which  sustain  the  view 
that  the  corporation  when  authorized  to  regulate  the  trans- 
fer of  stock  has  an  incidental  power  to  pass  a  by-law  fixing 
a  lien  upon  its  stock  for  debts  due  by  the  stockholder.^ 
But  the  weight  of  authority  is  in  favor  of  the  doctrine  that 
a  purchaser  for  value  in  the  usual  course  of  business  with- 
out notice  is  not  affected  by  a  secret  lien  of  the  corporation 
on  the  stock.^ 

§  1708^.  (3)  As  between  the  transferee  of  a  certificate 
of  stock  and  a  creditor  of  the  transferrer,  it  would  seem  that 
any  bona  fide  assignment  of  the  stock  for  value  would 
effectually  pass  the  transferrer's  interest  therein,  so  far  as  to 
supersede  the  right  of  an  attachment  or  execution  creditor 
to  levy  upon  it  for  a  debt  due  by  the  transferrer.  For 
whether  such  assignment  vest  the  legal  or  equitable  interest 
of  the  assignor  in  the  assignee,  no  property  right  of  the  as- 
signor remains  that  is  subject  to  legal  process  ;  and  the  pro- 
visions of  corporate  charters  that  no  transfer  of  stock  shall 
be  valid  or  effectual  until  entered  or  registered  upon  the 
books  of  the  corporation,  are  manifestly  designed  for  the 
security  of  the  corporation  itself,  and  of  third  persons  tak- 
ing transfers  of  stock  without  notice  of  any  prior  equitable 
transfer,  and  are  not  made  with  reference  to  the  rights  of 

Bank,  45  Mo.,  513;  St.  Louis  Perpetual  Ins.  Co.  v.  Goodfellow,  9   Mo.,  149; 
Pendergast  v.  Bank  of  Stockton,   2  Sawyer,  108 ;  McDowell  v.  Bank,   i  Harr. 
(Dei.),  27,  369 ;  in  re.  Dunkerson,  6  Biss.,  227. 
'  Farmers'  Bank  v.  Wasson,  48  Iowa,  338,  and  cases  cited  supra.  '  Id. 


§   I708/C  CERTIFICATES    OF    STOCK.  72 1 

creditors  of  a  stockholder.^  This  is  in  accordance  with  the 
general  principles  applicable  to  all  manner  of  equitable  as- 
signments of  personal  property  ;  but  there  are  cases  which 
hold  that  there  can  be  no  valid  transfer  of  stock  as  against 
a  creditor  of  the  transferrer,  unless  the  regulations  provided 
by  the  charter  or  general  statutes  are  complied  with.^ 

§  I  /oSy!  (4)  As  between  the  transferee  of  a  certificate  of 
stock,  and  a  third  party  who  has  purchased  the  shares,  the 
better  opinion  is  that  a  bona  fide  transfer  of  the  certificate 
carries  with  it  the  transferrer's  interest  in  the  stock,  and 
that  a  subsequent  purchaser  who  simply  relies  on  the  books 
of  the  corporation  for  information  as  to  who  are  stock- 
holders, and  who  buys  the  shares  without  taking  the  certifi- 
cate, does  so  at  his  peril.  The  certificate  is  the  muniment 
of  title.  It  is  generally  dealt  with  as  the  representative 
of  the  proportionate  interest  it  assures  ;  and  if  not  in  pos- 
session of  the  parts  offering  to  sell  the  shares,  a  purchaser 
would  be  put  upon  inquiry  to  ascertain  the  true  condition 
of  things.  And  on  the  other  hand,  a  purchaser  of  the  cer- 
tificate from  one  whom  it  testifies  to  be  a  shareholder,  would 
have  a  right  to  suppose  that  no  one  would  have  bought  the 
shares  without  taking  the  customary  evidence  of  title.^  If 
the  corporation  should  actually  transfer  the  shares  upon  its 
books  to  a  subsequent  purchaser  without  surrender  of  the 
certificate,  it  would  act  wrongfully  and  would  be  bound  to 

'  Black  V.  Zacharie,  3  Howard,  483 ;  Western  v.  Bear  River,  etc.,  Co.,  6  Cal., 
425  ;  Newberry  v.  Detroit,  etc.,  Iron  Co.,  17  Mich.,  141  ;  Commonwealth  v. 
Watmough,  6  Whart.,  139  ;  Bank  of  Utica  v.  Smalley,  2  Cowen,  770;  Stebbins 
V.  Phoenix  Ins.,  Co.,  3  Paige,  350  ;  Gilbert  v.  Manchester  Man.  Co..  11  Wend., 
627  ;  Farmers'  Bank  v.  Iglehart,  6  Gill,  50 ;  Sargent  v.  Essex  Marine  R.R.,  9 
Pick.,  202 ;  Continental  N.  B.  v.  Eliot  N.  B.,  cited  in  37  Am.  Rep.,  353  ;  Dos 
Passos  on  Stockbrokers,  624,  628,  and  cases  cited.  Angeil  &  Ames  on  Cor- 
porations, §  354. 

-  Sabin  v.  Bank  of  Worcester,  21  Maine,  353  ;  Pinkerton  v.  Manchester  &  L. 
R.R.,  42  N.  H.,  424 ;  Foster  v.  Essex  Bank,  5  Gray,  373  (but  see  Sargent  v. 
Essex  Marine  R.R.,  9  Pick.,  202) ;  People's  Bank  v.  Gridley,  91  111.,  457. 

'  DriscoU  V.  West  Bradley  &  C.  M.  Co.,  59  N.  Y.,  96.  See  also  Holbrook  v, 
N.  J.  Zinc  Co.,  57  N.  Y.,  616  ;  Bank  v.  Lanier,  11  Wall.,  369 ;  Dos  Passos  on 
Stockbrokers,  629.  This  does  not  seem  to  be  the  xiew  taken  in  England.  See 
Shropshire  Union  R.  &  C.  Co.  v.  The  Queen,  L.  R.,  7  H,  L.  Cas.,  496. 

Vol.  II.— 46 


722  CERTIFICATES    OF    STOCK.  §   1 7o8^ 

issue  certificates  to  the  prior  purchaser,  who  had  acquired 
the  stock  by  transfer  of  the  certificate  in  due  course.^ 

§  1708^.  Usual  method  of  transferring  stock.  Transfers 
under  powers  of  attorney  in  blank. — Conimercial  corpo- 
rations generally  encourage  the  assignment  of  their  shares,  as 
their  value  is  increased  by  the  facility  of  transfer  ;  and  it  is 
generally  provided  in  the  face  of  their  certificates  of  stock 
by  virtue  of  their  charters,  by-laws,  or  regulations,  that  the 
shares  "  are  transferable  on  the  books  of  the  company,  in 
person  or  by  attorney,  on  the  surrender  of  this  certificate." 
And  on  the  back  of  the  certificates  there  is  generally  a 
printed  form  of  sale  and  assignment,  with  an  irrevocable 
power  of  attorney  in  blank,  authorizing  the  unnamed  per- 
son to  do  all  things  requisite  to  perfect  the  transfer  on  the 
books  of  the  corporation.  When  such  formal  assignment, 
and  power  of  attorney  in  blank  is  signed  by  the  share- 
holder, and  the  certificate  is  delivered  therewith,  an  appar- 
ent ownership  in  the  shares  represented  is  created  in  the 
holder.  And  the  general  principle  sustained  by  the  great 
weight  of  authority,  as  well  as  of  reason,  is  that  when  the 
owner  of  a  certificate  of  stock  with  such  a  power  of  attorney 
in  blank  thereon  written,  or  thereunto  attached,  entrusts  it 
to  an  agent  with  power  to  deal  therewith,  a  bona  fide  pur- 
chaser for  value  without  notice  will  be  protected  in  his  ac- 
quisition of  the  certificate,  although  the  agent  to  whom  it 
has  been  entrusted  has  diverted  it  from  the  purposes  for 
which  it  was  put  in  his  charge,  or  has  been  guilty  of  a  fraud 
or  breach  of  trust  in  reference  thereto.^    This  doctrine  does 

'  Cushman  v.  Thayer  Man.  Co.,  76  N.  Y.,  267  ;  Smith  v.  American  Coal  Co., 
7  Lansing,  317. 

^  Johnston  v.  Laflin,  103  U.  S.  (13  Otto),  800;  Burton's  Appeal,  93  Penn.  St., 
214;  Wood's  Appeal,  92  Penn.  St.,  379  ;  Cushman  v.  Thayer  Man.  Co.,  76 
N.  Y.,  371  ;  Burrall  v.  Bushwick  Railroad  Co.,  75  N.  Y.,  220  (semble)  ; 
Moore  v.  INIetropolitan  N.  B.,  55  N.  Y.,  41  ;  McNeil  v.  Tenth  N.  B.,  46 
N.  Y.,  325;  New  York  &  N.  H.  R.R.  Co.  v.  Schuyler,  34  N.  Y.,  30; 
Commercial  Bank  v.  Kortright,  22  Wend.,  348  ;  Holbrook  v.  New  Jersey  Zinc 
Co.,  57  N.  Y.,  616  (semble)  ;  Leitch  v.  Wells,  48  N.  Y.,  585  ;  Prall  v.  Tilt,  28 
N.  J.  Eq.,  480  ;  Bridgeport  Bank  v.  New  York,  etc.,  R.R.,  30  Conn.,  275  ; 
Mount  Holly  Turnpike  Co.  v.  Ferree,  2  C.  E.  Green,  117;    Duke  v.  Cahawba 


§  1709.  CERTIFICATES  OF  STOCK.  723 

not  rest  upon  the  idea  that  the  certificate  of  stock  is  a  ne- 
gotiable instrument ;  but  upon  the  equitable  principle  that 
where  a  person  confers  upon  another  all  the  indicia  of 
ownership  of  property,  with  comprehensive  and  apparently 
unlimited  powers  in  reference  thereto,  he  is  estopped  to 
assert  title  as  against  a  third  person,  who,  acting  in  good 
faith,  acquires  it  for  value  from  the  apparent  owner. 

The  like  principles  would  apply  if  the  certificates  of  stock 
were  issued  in  favor  of  the  bearer,  and  were  entrusted  to 
an  aeent  who  transferred  them  in  breach  of  his  trust.^ 

But  if  the  certificate  of  stock  were  lost  or  stolen  with  a 
blank  assignment  and  power  of  attorney,  not  being  a  ne- 
gotiable instrument,  a  purchaser  could  not  acquire  title 
against  the  true  owner.*  The  doctrine  of  lis  pendens  has 
no  application  to  corporate  stock.^  We  have  not  consid- 
ered the  questions  which  arise  when  blank  powers  of  at- 
torney are  executed  under  seal.  They  are  elaborately  dis- 
cussed in  the  treatises  on  stocks.^ 

§  1 709.  The  corporation  should  require  the  surrender  of 


Co.,  10  Ala.,  82  ;  Thompson  v.  Toland,  48  Cal.,  99  ;  Fraser  v.  Charleston,  1 1  S. 
C.  N.  S.,  4S6  ;  Dos  Passos  on  Stockbrokers,  6oo  ct  seq.  ;  2  Ames  B.  &  N.,  784  ; 
Lewis  on  Stocks,  43  et  seq.  In  Taylor  v.  Great  Ind.  P.  R.R.  Co.,  5  Jur.  N.  S., 
1087,  the  blank  transfers  were  blank  as  to  the  value  and  number  of  the  shares, 
aAd  on  account,  as  it  would  seem,  of  their  defective  character,  the  doctrine  of 
the  text  was  not  applied.  In  Rumball  v.  Metropolitan  Bank,  2  Q.  B.,  194  ;  20 
Moak  E.  R.,  279,  a  similar  doctrine  was  applied  where  the  scrip  inured  to 
bearer. 

'  In  Rumball  v.  Metropolitan  Bank,  2  Q.  B.  Div.,  194,  and  20  Moak's  E.  R., 
279,  it  appeared  that  scrip  of  the  Anglo-Eg-yptian  Banking  Company  had  been 
issued,  certifying  that  after  payment  of  certain  instalments  per  share,  the  bearer 
would  be  entitled  to  be  registered  as  the  holder  of  ten  shares.  After  paying 
one  instalment  the  plaintiff  put  the  scrip  in  the  hands  of  a  stockbroker  for  cer- 
tain purposes ;  and  the  broker  fraudulently  diverted  them,  and  deposited  them 
with  the  defendant  as  security  for  a  loan.  "  It  was  held  that  plaintiff  could  not 
recover  his  scrip  in  an  action  against  the  lender  who  took  it  as  security,  on  the 
ground  as  stated  by  Miller,  J.,  that  "if  a  party  possessed  of  a  security  purport- 
ing on  the  face  of  it  to  be  transferable  by  delivery,  chooses  to  leave  such  security 
in  the  hands  of  a  third  party,  and  the  latter  makes  it  over  to  a  bona  fide  holder 
•'or  value,  the  true  owner  must  be  taken  to  have  brought  about  his  own  loss  and 
can  not  recover  it  back.'' 

"^  Bereich  v.  Marye,  9  Nev.,  312  ;  Burton's  Appeal,  93  Penn.  St.,  214  (semble)  . 
Dos  Passes  on  Stockbrokers,  601,  note  i. 

^Holbrook  v.  New  Jersey  Zinc  Co.,  57  N.  Y.,  627. 

*See  Lewis  on  Stocks,  46,  51. 


724  CERTIFICATES    OF    STOCK.  §   I7IO. 

the  certificate  issued  to  a  shareholder  before  entering  a 
transfer  of  the  shares  upon  its  books,  in  order  to  avoid 
Habihty  to  a  bo7ia  fide  transferee  of  such  certificate  without 
notice.^  The  United  States  Supreme  Court  has  held  that 
where  a  bank  whose  certificates  of  stock  declared  the  stock- 
holders entitled  to  so  many  shares  of  stock,  which  can  be 
transferred  on  the  books  of  the  corporation,  in  person  or 
by  attorney,  when  the  certificates  are  surrendered,  but  not 
otherwise,  and  which  suffers  a  stockholder  to  transfer  to 
anybody  on  the  books  of  the  bank  his  stock,  without  pro- 
ducing and  surrendering  the  certificates  thereof,  is  liable  to 
a  bona  fide  transferee  for  value  of  the  same  stock,  who 
produces  the  certificates  with  properly  executed  power  of 
attorney  to  transfer ;  and  this  is  so,  although  no  notice  has 
been  given  to  the  bank  of  the  transfer.  The  equities  in 
this  case  were  not  allowed  to  be  set  up  by  the  bank,  be- 
cause by  its  own  act  it  had  given  implied  assurance  that 
there  were  none.^ 


SECTION   II. 

OTHER   QUASI    NEGOTIABLE   INSTRUMENTS. 

§  1 710.  Bills  of  lading  constitute  the  most  important  of 
all  varieties  of  documents  of  title  w^hich  possess  a  quasi 
negotiable  quality,  and  a  special  chapter  is  devoted  to  their 
consideration.^  There  are  a  few  other  instruments  which, 
except  when  so  declared  by  statute,  are  not  negotiable  ; 
and  indeed  do  not  approximate  negotiability  to  the  same 
extent  as  -bills  of  lading  or  certificates  of  stock.  But  the 
tendency  of  modern   usage  is  to   increase  the  facility  for 

'  Cushman  v.  Thayer  Man.  Co.,  76  N.  Y.,  367  ;  Dos  Passes  on  Stockbrokers, 
618. 

^  Bank  v.  Lanier,  11  Wall.,  369,  See  Schouler  on  Personal  Property,  651,  632,. 
633.  634- 

^§  1727. 


),    1/12.  OTHER  QUASI  NEGOTIABLE  INSTRUMENTS.  725 

their  transfer,  and  a  few  words  as  to  their  general  nature 
may  not  be  out  of  place  in  this  work. 

§  1710^.  As  to  dividend  warrants. — In  England,  it  has 
been  held,  that  a  dividend  warrant  in  the  form  of  a  check 
drawn  by  the  Bank  of  England  upon  its  cashier,  payable 
to  the  plaintiff,  but  containing  no  words  of  negotiability, 
was  not  at  law  assignable  ;  and  that  whatever  might  be  the 
effect  of  an  immemorial  custom  in  a  particular  place,  that 
the  custom  and  usage  of  bankers  and  merchants,  approved 
for  sixty  years,  could  not  alter  the  law  by  which  such  an  in- 
strument conferred  no  right  of  action  on  an  assignee.^ 

§  I  71 1.  Checks  for  baggage  issued  by  common  carriers 
are  not  of  the  character  of  bills  of  lading  and  the  like 
quasi  negotiable  instruments  ;  and  the  persons  receiving 
them  are  not  presumed  to  know  that  they  contain  the 
terms  upon  which  the  property  is  carried.^ 

§  1 712.  Delivery  orders. — In  regard  to  delivery  orders, 
by  which  are  meant  orders  given  by  a  vendor  on  a  bailee, 
who  holds  possession  as  his  agent,  it  has  been  held  in  Eng- 
land, that  delivery  of  the  goods  is  not  complete  until  the 
bailee  has  attorned  to  the  buyer,  and  thus  become  his 
agent.'^  It  has  also  been  decided  that  such  an  order  differs 
in  effect  from  a  bill  of  lading  ;  that  the  indorsement  of  it 
by  a  vendee  to  a  sub-vendee  was  unavailing  to  oust  the 
possession  of  the  original  vendor,  and  that  his  lien  remained 
unaffected,  when  neither  the  first  buyer,  nor  the  sub- 
vendee  had  procured  the  acceptance  of  the  order,  nor 
taken  actual  possession  of  the  goods  before  the  order  was 
countermanded.*  Where  the  defendants  sold  to  B.  &  Co. 
100  tons  of  zinc,  and  gave  them  four  documents  to  the  fol- 


'  Partridge  v.  Bank  of  England,  9  Q.  B.,  396. 

'Blossom  V.  Dodd,  43  N.  Y.,  264;  see  Buller  v.  Heane,  2  Camp.,  415. 
"Benjamin  on  Sales,  613. 

*  McEwan  v.  Smith,  2  House  of  Lords'  Cases,  309 ;  Griffiths  v.  Perry,  1  E.  & 
E.,  680  ;  28  L.  J.  O.  B.,  208. 


726  CERTIFICATES    OF    STOCK.  §    ^7 '^3' 

lowing  effect :  "  We  hereby  undertake  to  deliver  to  your 
order  indorsed  hereon,  twenty-five  tons  merchantable  zinc 
off  your  contract  of  this  date  ";  and  upon  the  faith  of  these 
documents  the  plaintiffs  bought  of  B.  &  Ca,  and  paid  for 
fifty  tons  of  the  zinc,  and  B.  &  Co.  failed,  without  having 
paid  for  it  themselves,  whereupon  the  defendants  refused 
to  deliver  it  to  the  vendees — it  was  held  that  the  delivery 
orders  or  undertakings  did  not  estop  them  from  setting  up 
as  against  the  vendees  of  B.  &  Co.  their  right  as  unpaid 
vendors  to  withhold  delivery.^ 

§  I  7 1 3.  Dock  warra7tls  and  warehouse-keepers  receipts 
for  goods,  independent  of  statute  law,  are  of  modern  inven- 
tion, and  do  not  rest  like  bills  of  lading  upon  ancient  mer- 
cantile custom,  imparting  to  them  a  quasi  negotiability. 
"  These  documents,"  says  Blackburn,  J.,  "  are  generally 
written  contracts,  by  which  the  holder  of  the  indorsed 
document  is  rendered  the  person  to  whom  the  holder  of 
the  goods  is  to  deliver  them,  and  in  so  far  they  greatly  re- 
semble bills  of  lading  ;  but  they  differ  from  them  in  this 
respect,  that  when  goods  are  at  sea,  the  purchaser  who 
takes  the  bill  of  lading  has  done  all  that  is  possible  in  order 
to  take  possession  of  the  goods,  as  there  is  a  physical  ob- 
stacle to  his  seeking  out  the  master  of  the  ship,  and  requir- 
ing him  to  attorn  to  his  rights  ;  but  when  the  goods  are 
on  land,  there  is  no  reason  why  the  person  who  receives  a 
delivery  order,  or  dock  warrant,  should  not  at  once  lodge  it 
with  the  bailee,  and  so  take  actual  or  constructive  posses- 
sion of  the  goods.  There  is,  therefore,  a  very  sufficient 
reason  why  the  custom  of  merchants  should  make  the 
transfer  of  the  bill  of  lading  equivalent  to  an  actual  delivery 
of  possession,  and  yet  not  give  such  an  effect  to  the  trans- 
fer of  documents  of  title  to  goods  on  shore." ^ 

'  Farmeloe  v.  Bain,  i  Common  Pleas  Div.,  445  (1876). 

'Blackburn  on  Sales,  297  ;  Benjamin  on  Sales,  613  ;  Farina  v.  Home,  16  M, 
&  W.,  119.  Earlier  cases  took  a  different  view  ;  see  Lucas  v.  Dorrien,  7  Taunt., 
268  ;  Zwinger  v.  Samuda,  7  Taunt.,  265  ;  Keyser  v.  Suze,  Gow.,  58  ;  see  also 
Benjamin  on  Sales,  616. 


Ji    1 7 14.  OTHER  QUASI  NliGOTlABLE    INSTRUMENTS.  727 

§  1 714.  There  are  statutory  enactments  in  England 
which  greatly  enlarge  the  effects  of  such  instruments.^  In 
Virginia,  by  recent  act  of  Assembly,  warehouse  receipts 
(for  produce)  are  made  negotiable  under  certain  rules  and 
regulations,^  and  in  Minnesota  they  are  negotiable  by  in- 
dorsement and  delivery.^ 

'  See  Benjamin  on  Sales,  607,  and  the  factors'  acts  there  cited. 
'^  See  Acts  of  Assembly  of  1874,  p.  233, 
*  State  V.  Loomis,  27  Minn.,  521. 


I 


CHAPTER   LIII. 


BILLS    OF    CREDIT. 


§  1 71 5.    Constitutional  prohibition  tcpon  the  emission  of 
bills  of  C7^edit  by  the  States. — The  tenth  section  of  the  first 
article  of  the  Constitution  of  the  United   States  contains 
certain  prohibitions  and  restrictions  upon  the  power  of  the 
States  ;  and  the  first  clause  of  the  section  reads  as  follows  : 
"  No  State  shall  enter  into  any  treaty,  alliance,  or  confed- 
eration ;  grant  letters  of  marque  and  reprisal ;  coin  money, 
EMIT  BILLS  OF  CREDIT  ;  make  any  thing  but  gold  and  silver 
coin  a  tender  in  payment  of  debts  ;  pass  any  bill  of  at- 
tainder, ex  post  facto  law,  or  law  impairing  the  obligation 
of  contracts."     Herein,  we  are  only  concerned  in  the  pro- 
hibition against  the  emission  of  bills  of  credit ;  but  that 
prohibition  it  is  important  to  consider,  as  negotiable  instru- 
ments to  which  the  States  are  parties  are  frequently  im- 
pugned as  coming  within  its  pale  ;  and  sometimes  a  ques- 
tion of  nicety  is  involved,  in  determining  whether  they  do 
or  not.     Every  word  of  the  prohibition,  "  No  State  shall 
emit  bills  of  credit,"  is  pregnant  with  significance.     In  the 
first  place,  the  prohibition  is  upon  the  States  only  ;  and  cor- 
porations chartered  by  the   States  may  be  authorized  to 
issue  bills  which  the  State  itself  can  not  issue.^     In  the 
second  place,  the  word  emit  is  appropriately  selected,  be- 
cause it  is  never  employed  in  describing  those  contracts  by 
which  a  State  binds  itself  to  pay  money  at  a  future  day  for 
services  actually  received,  or  for  money  borrowed  for  pres- 
ent  use.^     And   in   the    third  place,  the   term  "bills   of 

'Brisco  V.  Bank  of  Kentucky,  11  Pet.,  433  (1837). 
»  Craig  V.  State  of  Missouri,  4  Pet.,  328  (1830). 
(728) 


^   I717.  WHAT    ARE    BILLS    OF    CREDIT.  729 

credit "  is  used  in  a  sense  well  understood  when  its  history- 
is  adverted  to.  We  propose  to  consider  (i)  What  are 
bills  of  credit,  and  (2)  What  are  not  bills  of  credit. 


SECTION  I. 

WHAT  ARE   BILLS   OF   CREDIT. 

§  1 716.  Defijiition. — A  bill  of  credit  is  a  negotiable 
paper  designed  to  pass  as  currency  and  circulate  as  money. 
Such  a  bill  of  credit  as  comes  within  the  constitutional 
prohibition  is  a  negotiable  paper  issued  by  the  sovereign 
power  of  one  of  the  United  States,  and  designed  to  pass 
as  currency  and  circulate  as  money. 

§  1 71 7.  The  nature  of  this  class  of  negotiable  instru- 
ments, and  the  object  and  spirit  of  the  constitutional 
restriction,  first  received  a  judicial  exposition  in  the  case  of 
Craig  V.  State  of  Missouri.^  In  that  case  it  appeared  that 
the  State  of  Missouri,  with  a  view  to  relieve  the  necessities 
of  the  times,  established  loan  offices  to  loan  certain  sums 
to  citizens,  taking  security  by  mortgage  redeemable  in 
instalments.  The  loan  was  in  certificates  in  the  following 
form  : 

"This  certificate  shall  be  receivable  at  the  Treasury,  or 
any  of  the  loan  offices  of  the  State  of  Missouri,  in  the 
discharge  of  taxes  or  debts  due  the  State  for  the  sum  of 

$ ,  with  interest  for  the  same  at  the  rate  of  two  per 

centum  per  annum  from  this  date,  the  day of , 

182-." 

They  were  signed  by  the  auditor  and  treasurer,  were  not 
to  exceed  in  amount  two  hundred  thousand  dollars,  and 
were  to  be  of  denominations  not  over  ten  dollars  nor  less 
than  fifty  cents. 

'4  Pet.,  411  (1830). 


730  BILLS    OF    CREDIT.  §   l7lS 

They  were  also  made  receivable  in  payment  of  salt  at  the 
salt  springs,  and  by  all  public  officers,  civil  and  military,  in 
discharge  of  their  salaries  and  fees  of  office.  The  proceeds 
of  the  salt  springs,  the  interest  accruing  to  the  State,  and  all 
estates  purchased,  and  all  debts  due  the  State,  were  consti- 
tuted a  fund  for  their  redemption.  Chief-Justice  Marshall, 
rendering  the  opinion  of  the  majority  of  the  court,  said  : 
"  In  its  enlarged,  and  perhaps  its  literal  sense,  the  term  '  bill 
of  credit '  may  comprehend  any  instrument  by  which  a  State 
engages  to  pay  money  at  a  future  day,  thus  including  a  cer- 
tificate given  for  money  borrowed.  But  the  language  of 
the  constitution  itself,  and  the  mischief  to  be  prevented, 
which  we  know  from  the  history  of  our  country,  equally 
limit  the  interpretation  of  the  terms.  The  word  'emit'  is 
never  employed  in  describing  those  contracts  by  which  a 
State  binds  itself  to  pay  money  at  a  future  day  for  services 
actually  received,  or  for  money  borrowed  for  present  use ; 
nor  are  instruments  executed  for  such  purposes  in  common 
lano-uacre  denominated  '  bills  of  credit.'  To  '  emit  bills  of 
credit'  conveys  to  the  mind  the  idea  of  issuing  paper 
intended  to  circulate  through  the  community  for  its  ordi- 
nary purposes  as  money,  which  paper  is  redeemable  at  a 
future  day.  This  is  the  sense  in  which  the  terms  have  been 
always  understood."  And  considering  that  the  instruments 
in  question,  though  calling  themselves  "  certificates,"  were 
of  the  character  above  indicated,  they  were  adjudged  bills 
of  credit  and  void. 

§  1 71 8.  That  instruments  bear  interest  does  not  render 
them  the  less  bills  of  credit. — In  the  same  case,*  Mr.  Justice 
Johnson  dissenting,  considered  that  a  sufficient  reason  why 
the  papers  should  not  be  regarded  as  bills  of  credit,  was 
found  in  the  fact  that  they  bore  interest,  and  consequently 
varied  in  value  every  moment  of  their  existence.     This,  he 


•  Craig  V.  State  of  Missouri,  4  Pet.,  438,  444,  Thompson  and  McLean,  JJ.j 
dissenting. 


^   1720.  WHAT    ARE    BILLS    OF    CREDIT.  73 1 

said,  "  disqualifies  them  for  the  uses  and  purposes  of  a  cir 
culating  medium,  which  the  universal  consent  of  mankind 
declares  should  be  of  a  uniform  and  unchanging  value, 
otherwise  it  must  be  the  subject  of  exchange,  and  not  the 
medium."  The  opinion  of  the  court  does  not  notice  this 
argument  ;  but  it  strikes  us  as  without  force — indeed  as  self- 
destructive.  The  very  object  of  the  constitutional  pro- 
vision was  to  inhibit  the  issue  of  a  paper  currency  which 
would  vary  in  value  every  moment  of  its  existence,  and 
was  not  of  a  uniform  and  unchanging  value.  Hence, 
these  very  qualities  made  them  all  the  more  bills  of  credit. 

§  1 7 1 9.  //  is  not  necessary  that  a  bill  of  credit  should  be  a 
legal  tender. — It  was  contended  further,  in  the  same  case, 
that  these  certificates,  although  deemed  bills  of  credit  in  the 
common  acceptation  of  the  term,  w^ere  not  so  in  the  sense 
of  the  constitution,  because  they  were  not  made  a  legal 
tender.  But  the  prohibition  is  general.  It  extends  to  all 
bills  of  credit,  not  to  bills  of  a  particular  description  ;  and 
there  is  no  just  foundation  for  this  distinction.^ 

§  1720.  It  has  been  urged,  upon  the  basis  of  more  recent 
historical  light  on  the  subject,  that  no  instrument  is  a  bill  of 
credit,  within  the  meaning  of  the  Federal  Constitution,  un- 
less it  be  made  a  legal  tender  in  payment  of  debts,  and  this 
was  the  opinion  of  as  great  a  statesman  as  James  Madison. 
It  does  not  seem  that  this  information  was  afforded  in  the 
cases  decided  by  the  Supreme  Court  of  the  United  States, 
which  take  an  adverse  view ;  and  it  has  been  thought  by 
that  able  publicist,  R.  M.  T.  Hunter,  of  Virginia,  that  had 
it  been  supplied  a  different  result  might  have  been  antici- 
pated. Militating  strongly  against  his  opinion  on  the  ques- 
tion is  the  fact  that  the  very  succeeding  phrase  of  the  con- 
stitution contains  an  express  prohibition  against  the  States 
making  anything  but  "gold  and  silver  coin  "  a  legal  tender. 


*  Craig  V,  State  of  Missouri,  4  Pet.,  434. 


732  BILLS    OF    CREDIT  §    I72I. 

which  would  alone  be  sufficient  to  interdict  bills  of  credit, 
if  Mr.  Madison's  and  Mr.  Hunter's  conceptions  are  correct. 
This  subject  is  of  such  extended  interest  that  we  append 
extracts  from  a  recent  report  of  Mr.  Hunter,  as  treasurer 
of  Virginia,  submitting  a  financial  scheme  with  arguments 
in  support  of  it.-^ 

§  1 72 1.    The  name  is  immaterial. — The  Chief-Justice,  in 
answer  to  the   argument  that  the  instrument  in  Craig  v. 

'  In  one  of  the  documents  accompanying-  the  annual  message  of  the  Governor 
of  Virginia,  made  December  2,  1874,  is  published  Mr.  Hunter's  "  Plan  of  a  Con- 
stitutional Currency,"  communicated  to  Governor  Jas.  L.  Kemper.     It  is  briefly 
this  :  "  Let  the  State  issue  $3,000,000  in  bills  of  the  denomination  of  $1,  $5,  $10, 
$20,  and  in  fractions  of  a  dollar,  with  a  provision  that  the  holder  may  at  pleasure 
convert  these  notes  into  bonds,  in  sums  of  $100,  or  multiples  of  $100,  to  draw  in- 
terest from  the  State  at  the  rate  of  four  per  cent,  per  annum,  in  specie.     In  addi- 
tion to  which  the  holder  of  this  bond  shall  be  allowed  to  reinvest  into  bills  of  the 
like  denomination  as  at  first  ;  which  bills  shall  bear  no  interest,  but  shall  be  con- 
vertible and  reconvertible  as  originally  provided.     The  interest  on  these  bonds 
shall  be  paid  semi-annually,  unless  the  holder  should  convert  them  into  currency, 
at  a  shorter  period,  when  interest  shall  be  paid  for  the  period  of  its  existence  as 
a  bond.     Until  the  sum  of  $3,000,000  has  been  issued,  any  holder  of  Virginia 
State  bonds  shall  be  allowed  to  exchange  them  for  these  bills  at  the  market  price 
in  Richmond  when  sold  for  legal  tenders.     And  when  once  issued  these  bills 
may  be  received  at  par  in  payment  for  half  the  taxes  of  any  person  or  corpora- 
tion who  may  owe  the  State  for  taxes."     In  the  course  of  his  argument  Mr. 
Hunter  says  :  "  The  privilege  of  paying  half  the  ta:-:es  in  these  bills  would  add 
greatly  to  their  credit,  and  consequently  afford  great  relief  to  our  people.     Nor 
would  the  State  run  any  risk  if  it  should  not  exceed  the  limit  of  $3,000,000 — for 
every  bill  thus  issued  a  corresponding  value,  and  possibly  a  much  larger  amount 
in  State  stock  would  be  secured.     In  following  the  provisions  of  the  law,  no 
bill  would  be  issued  except  in  exchange  for  State  stock  at  the  market  rate.     It 
may  be  supposed  that  such  an  issue  would  subject  the  State  to  the  tax  of  the 
United  Stales  upon  the  amount,  but  a  reference  to  the  law  will  show  that  the 
tax  is  imposed  only  upon  the  notes  of  any  person,  State  bank,  or  State  banking 
association,  used  for  circulation.     A  description  and  enumeration  of  issues  which 
does  not  include  such  an  emission  of  bills  by  the  State  as  is  herein  described. 
If  it  did,  the  United  States  would  doubtless  relieve  the  State  from  any  tax  upon 
such  an  issue  designed  to  build  up  a  sinking  fund  for  a  State  so  deeply  indebted 
as  Virginia,  and  one  in  which  such  an  issue  would  perform  so  useful  a  function 
for  currency  purposes  amongst  a  people  so   deeply  depressed  as  ours.     It  has 
been  objected  that  the  provision  herein  proposed  falls  within  the  constitutional 
prohibition  to  the  States  to  emit  bills  of  credit.     But  a  careful  examination  of  the 
question,  it  is  believed,  will  remove  this  objection.     It  has  been  a  matter  of  much 
difliculty  to  decide  what  is  a  '  bill  of  credit,'  within  the  meaning  of  the  consti- 
tution.    Judge  Marshall,  in  the  case  of  Craig  v.  The  State  of  Missouri,  4  Pet., 
431,  432,  which  was  decided  by  four  out  of  seven  judges,  said,  that  to  '  emit  bills 
ot  credit  conveys  to  the  mind  the  idea  of  issuing  paper  intended  to  circulate 
through  the  community  for  its  ordinary  purposes  as  money,  which  paper  is  re- 
deemable at  a  future  day.     This  is  the  sense  in  which   the  terms  have  always 
been  understood.'     Judge  McLean,  in  Briscoe  v.  Bank  of  Kentucky,  11  Pet.,  314, 
says  :  '  The  definition  which  does  include  all  classes  of  bills  of  credit  emitted  by 
the  colonies  or  States,  is  a  paper  issued  by  the  sovereign  power,  containing  a 


§   1723-  WHAT    ARE    BILLS    OF    CREDIT.  ^^3 

State  of  Missouri  were  certificates  of  debt,  not  bills,  con 
tinued  :  "  Had  they  been  termed  *  bills  of  credit '  instead  of 
'certificates,'  nothing  would  have  been  wanting  to  bring 
them  within  the  prohibitory  words  of  the  constitution. 
And  can  this  make  any  real  difference?  Is  the  proposition 
to  be  maintained,  that  the  constitution  meant  to  prohibit 
names  and  not  things  ?  That  a  very  important  act,  big  with 
great  and  ruinous  mischief,  which  is  expressly  forbidden  by 
words  most  appropriate  for  its  description,  may  be  performed 
by  the  substitution  of  a  name  ?  That  the  constitution,  in 
one  of  its  most  important  provisions,  may  be  openly  evaded 
by  giving  a  new  name  to  an  old  thing  ?  We  can  not  think 
so.  We  think  the  certificates  emitted  under  the  authority 
of  this  act  are  as  entirely  bills  of  credit  as  if  they  had  been 
so  denominated  in  the  act  itself." 

§  1722.  It  was  contended  also  that  these  instruments 
were  not  bills  of  credit,  because  they  were  not  promises  to 
pay,  but  promises  to  receive.  But  they  were  made  receiv- 
able for  official  salaries  and  fees,  and  were  designed  to  be 
used  as  currency,  and  thus  were  bills  of  credit. 

§  1723.  Being  bottomed  on  a  fiLiid  does  not  rendei'  the 
instrument  any  less  a  bill  of  credit. — In  the  same  case,  Mr. 

pledge  of  its  faith,  and  designed  to  circulate  as  money.'  Mr.  Madison,  in  a  let- 
ter hereafter  to  be  quoted,  says  the  constitution  meant  such  bills  as  were  issued 
with  a  provision  that  they  should  be  received  as  a  legal  tender.  In  the  opinion  of 
Marshall  and  McLean,  the  bills  were  not  only  to  circulate  as  money,  but  to  con- 
tain a  pledge  of  the  faith  of  the  State  to  redeem  them  at  some  future  time  with 
money.  Both  attributes  were  necessary  to  lead  to  the  mischiefs  enumerated  by 
Mr.  Madison  in  the  44th  number,  p.  207,  of  the  '  Federalist,'  and  both  must 
have  existed  to  render  the  bills  unconstitutional.  The  last  was  especially  neces- 
sar}-.  It  was  not  until  there  was  an  overissue  of  these  bills,  and  the  State  be- 
came unable  to  pay  them  in  money,  or  in  some  mode  satisfactor)-  to  the  holder, 
that  the  mischiefs  began.  Then,  indeed,  when  the  bills  became  irredeemable, 
they  became  worthless  as  a  medium  of  exchange  and  a  nuisance  to  society. 
Could  the  State  have  redeemed  them  in  some  satisfactory  mode,  no  harm  would 
have  ensued.  The  plan  here  proposed  is  liable  to  no  such  objection,  and  does 
not  come  within  the  mischief  sought  to  be  prevented.  There  is  no  promise  to 
pay  this  bill ;  the  holder  is  to  be  allowed  to  fund  it  in  a  convertible  bond  of  the 
State,  which  may  always  be  done."  Mr.  Hunter  appends  Mr.  Madison's  letter, 
dated  Montpelier,  Februarj"  2,  1831,  and  found  on  page  210  of"  Selections  from 
Private  Correspondence  of  James  Madison,  from  18 13  to  1836,"  published  by  J. 
C.  McGuire,  exclusively  for  private  circulation,  wherein  Mr.  ^ladison  says  : 
"The  evil  which  produced  the  prohibitory  clause  in  the  constitution  of  the 
United  States  was  the  practice  of  the  States  in  making  bills  of  credit,  and  in 
some  instances  appraised  property,  a  legal  tender." 


734  BILLS    OF    CREDIT.  §   '^7^Z' 

Justice  Thompson,  dissenting,  thought  that  the  natural  and 
literal  meaning  of  the  term  "  bills  of  credit "  imported  bills 
drawn  on  credit  merely,  and  not  bottomed  upon  any  real 
or  substantial  fund  for  their  redemption.  -  But  although 
secured  by  a  fund,  the  bill  is  nevertheless  issued  upon,  and 
received  upon,  the  credit  of  the  State — the  belief  and  faith 
that  the  State  will  pay  them.  Should  the  fund  fail  or  be 
diverted,  the  credit  of  the  State  would  still  be  pledged  to 
their  redemption  ;  and  even  if  the  fund  were  mainly  the 
source  of  the  creditor's  reliance,  he  would  still  look  to  the 
State,  and  credit  it,  to  make  faithful  appropriation.^  The 
circumstance,  however,  that  a  fund  was  appropriated  to 
their  redemption  has  been  adverted  to,  amongst  others,  in 
subsequent  cases,  as  decisive  of  the  question  that  such  bills 
were  not  bills  of  credit.^ 

In  Louisiana,  papers  of  the  character  indicated  in  the 
subjoined  opinion  of  the  court  were  adjudged  bills  of 
credit.^ 

'  Story  on  the  Constitution,  §  1368,  vol.  ii. 

^  Darrington  v.  Alabama,  13  How.,  16. 

'City  National  Bank  v.  Mahan,  21  La.  Ann.,  753  (1869),  Ludeling,  C.  J.  : 
''  Section  I  of  the  Act  of  1866  provides  '  that  it  shall  be  the  duty  of  the  governor, 
and  he  is  hereby  empowered  to  issue,  on  behalf  of  the  State,  from  time  to  time, 
for  the  purpose  of  paying  the  current  expenses  of  the  State,  in  accordance  with 
appropriations  therefor,  according  to  law,  a  sum  not  exceeding  two  millions  of 
dollars  in  certificates  of  indebtedness.'  "  "  That  they  were  issued  on  the  faith 
of  the  State  is  apparent  on  the  face  of  the  certificates  : 

"  '  New  Orleans,  Louisiana,  May  23,  1866. 

"  '  It  is  hereby  certified  that  five  dollars  is  due  by  the  State  of  Louisiana  to 
bearer,  and  the  State  Treasurer  is  hereby  directed  to  pay  the  same  twelve 
months  after  date. 

"  '  (Signed)  H.  Peralta,  Auditor. 

"  '  Approved  :  Adam  Giffen,  Treasurer.'  " 

"Indorsement. — '  This  certificate  is  receivable  in  payment  of  all  State  dues 
and  for  sale  of  public  lands,  and  is  fundable,  at  the  option  of  the  holder,  in  State 
bonds  bearing  six  per  cent,  interest  per  annum,  payable  semi-annually,  in  ac- 
cordance with  the  provisions  of  an  act  of  the  legislature  approved  ninth  Febru- 
ary, 1866.'  "  "  That  ihey  were  designed  to  circulate  as  money  is  manifested  by 
the  act  of  the  legislature  as  well  as  by  the  certificates  themselves.  The  act 
aforesaid  declares  the  certificates  are  to  be  issued  '  for  the  purpose  of  paying 
the  current  expenses  of  the  State.'  Section  two  declares  that  the  governor  shall 
determine  the  denomination  and  form  of  the  certificates  ;  that  they  shall  be 
printed  and  engraved  under  his  direction  and  control,  etc.,  and  that  they  shall 
be  receivable  for  all  State  taxes  or  other  public  dues,  as  well  as  for  the  sale  of 
public  lands.'     They  were  issued  in  sums  of  five,  ten,  and  twenty  dollars,  in  the 


§   1724-  WHAT    ARE    NOT    BILLS    OF    CREDIT.  735 

SECTION    11. 
WHAT  ARE   NOT   BILLS   OF   CREDIT. 

§  1724.  The  States  07ily  prohibited  from  emitting  them 
—  -corporations  and  private  parties  may  do  so. — We  have 
already  defined  bills  of  credit,  as  they  are  understood  within 
the  meaning  of  the  constitution.  The  inhibition  contained 
in  that  instrument  is  limited  to  the  States  ;  and  although 
the  bill  may  be  designed  to  circulate  as  currency,  if  it  be 
not  emitted  by  a  State,  it  is  as  free  from  impeachment,  as  in 
violation  of  the  constitution,  as  any  other  negotiable  paper. 
A  State  may  therefore  grant  acts  of  incorporation  author- 
izing banks  or  other  associations  to  issue  that  description 
of  paper  to  answer  the  purposes  of  money,  and  it  may  be 
issued  by  private  persons  and  partnerships.  This  was  de- 
termined by  the  United  States  Supreme  Court  in  a  case 
involving  an  act  of  the  legislature  of  Kentucky,  which  in- 
corporated the  "  Bank  of  the  Commonwealth  of  Kentucky," 
in  behalf  of  the  Commonwealth,  the  president  and  direct- 
ors of  which  were  chosen  by  the  legislature.^  The  bank 
was  authorized  to  issue  negotiable  notes  to  the  amount  of 
three  millions  of  dollars,  which  were  declared  to  be  receiv- 
able at  the  treasury  and  by  public  officers  in  payment  of  taxes, 
debts,  and  county  levies,  and  in  discharge  of  executions  of 
fie7'i facias.  They  were  in  denominations  of  from  one  to 
one  hundred  dollars.  It  was  contended  that  these  notes 
were  bills  of  credit  emitted  by  the  Commonwealth  of  Ken- 
tucky, and  that  the  paper  medium  of  the  country  was  in- 
tended to   be  embraced   in   the   constitutional    inhibition. 

similitude  of  ordinary  bank  bills,  and  they  were  actually  circulated  as  money. 
We  are  constrained,  therefore,  to  declare  that  said  certificates  were  bills  of 
credit,  and  that  the  act  number  five  of  the  General  Assembly  of  the  State  ot 
Louisiana,  entitled  'An  Act  to  authorize  the  issue  of  certificates  of  indebtedness 
and  of  bonds  for  the  funding-  of  the  same,'  is  null  and  void,  being-  a  contraven- 
tion of  section  ten  of  article  one  of  the  constitution  of  the  United  States." 
"  Briscoe  v.  Bank  of  Kentucky,  1 1  Pet.,  328,  Story,  J.,  dissenting. 


•^^S  BILLS    OF    CREDIT.  ^   1 725. 

But  the  court  held  otherwise,  McLean,  J.,  saying :  "  If 
this  argument  be  correct,  and  the  position  that  a  State  can 
not  do  indirectly  what  it  is  prohibited  from  doing  directly 
be  a  sound  one,  then  it  must  follow,  as  a  necessary  conse- 
quence, that  all  banks  incorporated  by  a  State  are  uncon- 
stitutional. This  doctrine  is  startling,  as  it  strikes  a  fatal 
blow  against  the  State  banks,  which  have  a  capital  of  nearly 
four  hundred  millions  of  dollars,  and  which  supply  almost 

the  entire  circulating  medium  of  the  country The 

Federal  government  is  one  of  delegated  powers.  All  pow- 
ers not  delegated  to  it,  or  inhibited  to  the  States,  are  re- 
served to  the .  States,  or  to  the  people.  A  State  can  not 
emit  bills  of  credit,  or,  in  other  words,  it  can  not  issue  that 
description  of  paper  to  answer  the  purposes  of  money 
which  was  denominated,  before  the  adoption  of  the  consti- 
tution, bills  of  credit.  But  a  State  may  grant  acts  of  in- 
corporation for  the  attainment  of  those  objects  which  are 
essential  to  the  interests  of  society.  This  power  is  incident 
to  sovereignty  ;  and  there  is  no  limitation  in  the  Federal 
Constitution  on  its  exercise  by  the  States  in  respect  to  the 
incorporation  of  banks." 

§  1 725.  In  subsequent  cases  this  view  has  been  reaffirmed ; 
and  it  is  decided  that,  although  a  State  may  supply  the 
whole  capital  of  the  bank,  may  be  its  only  stockholder,  select 
the  directory,  and  receive  the  profits,  if  any  be  realized,  and 
may  make  the  bills  receivable  for  debts  and  taxes,  the  bills 
of  the  bank  can  not  be  called  bills  of  credit  issued  by  the 
State,  not  being  made  payable  by  the  State,  but  by  the  bank 
only.^  And  the  doctrine  has  been  carried  to  the  extent  of 
holding  such  instruments  valid,  even  though  the  State  may 
pledge  its  faith  for  their  ultimate  redemption.  In  a  case  of 
this  kind  the  Supreme  Court  said :  "  It  is  impossible  to  say 
that  bills  of  this  kind  come  within  the  definition  of  bills  of 

'  Woodruff  V.  Trapnall,  10  How.,  203  (1850)  ;  see,  also,  Curran  v.  Arkansas, 
15  How.,  304  (1853). 


§    1726.  WHAT    ARE    NOT    BILLS    OF    CREDIT.  'Jl'J 

credit";  and  the  reasons  assigned  were,  that  upon  the  face 
of  the  bills  there  was  no  promise  to  pay  by  the  State,  but  an 
express  promise  by  the  bank  ;  that  the  bank  had  an  ample 
fund  for  their  redemption  ;  that  the  guaranty  of  eventual 
payment  of  the  notes  by  the  bank  was  remote  and  contin- 
gent, and  merely  formal,  if  the  bank  were  properly  con- 
ducted ;  and  that  because  the  State  received  the  profits,  it 
could  be  no  more  said  that  it  issued  the  notes  than  that  a 
private  stockholder  issued  the  notes  of  his  bank.^ 

§  1726.  Not  every  promissory  note,  however,  issued  by 
the  State  constitutes  a  bill  of  credit.  Bonds  of  the  States 
are  frequently  issued  with  coupons  attached  for  instalments 
of  interest.  They  are  not  bills  of  credit,  because  not  is- 
sued to  circulate  as  money,  but  to  pay  actual  indebtedness 
in  a  convenient  form.^  And  the  fact  that  they  are  made 
receivable  for  dues  to  the  State  does  not  make  them  bills 
of  credit.^ 

■  Uarrington  v.  Alabama,  13  How.,  15-17  (1851) ;  to  same  effect,  see  Owen  v. 
Branch  Bank,  3  Ala.,  258, 

*  McCoy  V.  Washington  Co.,  3  Wall.,  Jr.,  389.  See  next  note,  and  post, 
§  1491- 

'  Antoni  v.  Wright,  22  Grat.,  833  ;  Wise  v.  Rogers,  24  Grat.,  169  ;  Maury  v. 
Rogers,  Id. ;  see  chapter  XVI,  on  Governments  as  Parties  to  Negotiable  Instru- 
ments, §  449,  vol.  I. 

VUL.   II.— 47 


CHAPTER   LIV. 

BILLS    OF    LADING. 


SECTION    I. 
DEFINITION  AND   NATURE   OF   BILLS   OF  LADING. 

§  1727.  Bills  of  lading  are  generally  classed  among  ne- 
gotiable instruments,  and  are  frequently  spoken  of  as  ne- 
gotiable, like  bills  of  exchange,  by  text  writers  and  by 
jurists  of  high  reputation  and  authority.^  But  while  they 
are  assignable,  and  possess  certain  capacities  of  negotia- 
tion, which  assimilate  them  quite  closely  in  some  respects 
to  negotiable  instruments,  they  are  not  negotiable  in  the 
same  sense  as  bills  of  exchange  or  negotiable  promissory 
notes.^  And  it  is  more  correct  to  speak  of  them  as  quasi 
negotiable  instruments,  since  they  are  rather  like  than  of 
them.^  This  close  resemblance  to  instruments  strictly  ne- 
gotiable, and  the  frequent  use  made  of  them  in  commer- 
cial transactions,  in  connection  with  bills  of  exchange,  suf- 
ficiently identifies  them  with  the  subject  of  this  treatise  to 
render  a  consideration  of  their  leading  characteristics  de- 
sirable. 

§  1728.  As  to  their  definition  and  7iature. — A  bill  of 
lading  may  be  defined  to  be  a  written  acknowledgment  by 

•  Lickbarrow  v.  Mason,  2  T.  R.,  63  ;  Berkling  v.  Watling,  7  Ad.  &  E„  22  ; 
Bell  V.  Moss,  5  Whart.,  189. 

*  Gurney  v.  Behrend,  3  E.  &  B.,  622  ;  23  L.  J.  Q.  B.,  265  ;  Barnard  v.  Camp- 
bell, 55  N.  Y.,  462  ;  I  Smith's  Lead.  Cas.,  890. 

'  Schouler's  Personal  Property,  410,  605  ;  Davenport  Natl.  Bank  v.  Homeyer, 
45  Mo.,  145  ;  Blanchard  v.  Page,  8  Gray,  297  ;  National  Bank  v.  Merchants' 
Nat.  Bank,  i  Otto  (91  U.  S.),  98.  As  to  negotiability  by  statute,  see  §  1747a. 
There  is  quite  a  comprehensive  and  interesting  article  on  bills  of  lading  in  the 
Central  Law  Journal  tor  January  13th,  1882,  p.  24,  vol.  14,  No.  2. 

(738) 


§   1729-      DEFINITION  AND  NATURE  OF  BILLS  OF  LADING.       ^ 2>L, 

the  master  of  a  ship,  or  the  representative  of  any  common 
carrier,  that  he  has  received  the  goods  therein  described  for 
the  voyage  or  journey  stated,  to  be  carried  upon  the  terms 
and  delivered  to  the  persons  therein  specified.  •  It  is  at  once 
a  receipt  for  the  goods  which  renders  the  carrier  responsi- 
ble as  their  custodian,  and  an  express  written  contract  for 
their  transportation  and  delivery.^  And  to  facilitate  com- 
mercial transactions,  it  has  grown  to  be  regarded  as  the 
symbolical  representative  of  the  goods  which  it  describes ; 
and  its  transfer  carries  with  it  such  rights  as  the  party  in 
possession  of  the  goods  could  transmit  by  actual  corporeal 
transfer  of  the  goods  themselves. 

§  I  729.  Bill  of  lading  is  prima  facie  evidence  of  quan- 
tity and  quality  of  goods  received. — The  bill  of  lading  is 
clearly  a  receipt  for  the  goods,  accompanied  with  a  promise 
to  redeem  them  to  the  bailor,  or  according  to  his  order.^ 
And  while  the  master  of  the  ship,  or  the  agent  of  the  car- 
rier, has  no  authority  to  sign  bills  of  lading  for  a  greater 
quantity,  or  different  quality,  of  goods  than  is  actually 
received,  yet  the  bill  of  lading  is  sufficient  prima 
facie  evidence  of  the  truth  of  its  contents  as  against 
the  master  or  owner  of  the  ship,  or  other  carrier,  not  only 
as  to  the  reception  of  the  merchandise,  but  also  as  to  any 
material  fact  stated,  respecting  the  quantity,  or  quality,  or 
any  other  element  in  the  description  of  the  goods.^  And 
very  clear  proof  would  be  required  to  show  that  the  goods 
receipted  for  were  not  in  fact  received.*     The  law  applica- 

'  See  on  the  subject,  Schouler's  Personal  Property,  408 ;  Redfield  on  Carriers, 
§247  ;  I  Smith's  Lead.  Cas.,  879  et  scq.  ;  Benjamin  on  Sales,  656. 

'  Knox  V.  The  Nivclla,  Crabbe,  534. 

'  Leggett  on  Bills  of  Lading,  108  ;  Nelson  v.  Woodruff,  i  Black,  U.  S.  S.  C, 
156;  The  J.  W.  Brown,  i  Biss.,  76;  O'Brien  v.  Gilchrist,  34  Me.,  554;  May  v. 
Babcock,  4  Ohio  O.  S.,  346  (1829)  ;  Clark  v.  Barnwell,  12  How.,  272  ;  Rich  v. 
Lambert,  Id.,  347  ;  Great  Western  l^.R.  v.  McDonald,  18  111.,  172;  The  Lady 
Franklin,  8  Wall.,  325  ;  Redfield  on  Carriers,  §§247,  259;  Bates  v.  Todd,  i  M. 
&:  Rob.,  106;  Dickerson  v.  Seelye,  12  Barb.,  102;  Wayland  v.  Mosely,  5  Ala., 
430;  Woife  V.  Myers,  3  Sandf.,  7  ;  Greenleaf  on  Ev.,  §  305  ;  Abbe  v.  Eaton,  51 
N.  Y.,  410;  Meyer  v.  Peck,  28  N.  Y.,  590;  Berkley  v.  'Watling,  7  Ad.  &:  E.,  29 
Hubbersty  v.  Ward,  8  Exch.,  330;  Campion  v.  Colvin,  3  Bing.,  N.  C,  17. 

*  Little  Miami,  etc.,  R.R.  v.  Dodds,  i  Cin.  (Ohio),  47. 


740  BILLS    OF    L\DING,  §    1729^. 

ble  to  this  question,  in  so  far  as  it  relates  to  the  condition 
of  the  goods  received,  has  been  well  stated  in  Massachu- 
setts  by  Shaw,  C.  J.^ 

§  I  729^2.  Hoiv  fai^,  and  as  against  whoni',  a  bill  of  lad- 
ing is  conclusive  evidence  of  the  quantity  of  the  goods  re- 
ceived.— As  between  the  immediate  parties  to  the  bill  of 
lading,  and  in  so  far  as  it  is  a  receipt  for  the  goods  defining 
their  quantity,  quality,  etc.,  it  is  open  to  explanation  and 
contradiction  by  parol  evidence  or  otherwise  ;  ^  though  its 
contracting  terms  are  like  those  of  any  other  contract  sub- 
ject to  the  general  principle  that  a  written  contract  can  not 
be  varied  or  contradicted  by  parol  testimony.^ 

As  against  the  master  of  the  ship  the  bill  of  lading  is 
conclusive  evidence,  in  favor  of  a  consignee  who  has  ad- 
vanced money  upon  the  faith  of  its  statements  as  to  the 
quantity  and  condition  of  the  property  of  which  it  ac- 
knowledges the  receipt,  so  far  as  from  the  whole  instru- 
ment and  the  usage  of  trade  the  facts  may  be  regarded  as 
absolute  statements  from   the  master's  own  knowledge;^ 

'  Hastings  v.  Pepper,  1 1  Pick.,  43,  Shaw,  C.  J.,  saying :  "  It  may  be  taken  to 
be  perfectly  well  established  that  the  signing  of  a  bill  of  lading,  acknowledging 
to  have  received  the  goods  in  question  in  good  order,  is  prima  facie  evidence, 
that  as  to  all  circumstances  which  were  open  to  inspection  and  visible,  the  goods 
were  in  good  order ;  but  it  does  not  preclude  the  carrier  from  showing,  in  case 
of  loss  or  damage,  that  the  loss  proceeded  from  some  cause  which  existed,  but 
was  not  apparent,  when  he  received  the  goods,  and  which,  if  shown  satisfacto- 
rily, will  discharge  the  carrier  from  liability.  But  in  case  of  such  loss  or  damage 
the  presumption  of  law  is,  that  it  was  occasioned  by  default  of  the  carrier,  and 
of  course  the  burden  of  proof  is  upon  him  to  show  that  it  arose  from  a  cause 
existing  before  his  receipt  of  the  goods  for  carriage,  and  for  which  he  is  not  re- 
sponsible." See  Nelson  v.  Woodruff,  i  Black,  U.  S.  S.  C,  160 ;  Clark  v.  Barn- 
well, 12  Howard,  272;  Rich  v.  Lambert,  12  Howard,  347;  Farra  v.  Adams, 
Buller  N.  P.,  69;  post,  §  1742. 

*  The  Lady  Frankhn,  8  Wall,  325  ;  The  Delaware,  14  Wall.,  579  ;  Grace  v. 
Adams,  100  Mass.,  505;  Sears  v.  Wingate,  3  Allen,  103;  Abbe  v.  Eaton,  51 
N.  Y.,  410;  Meyer  v.  Peck,  28  N.  Y.,  590;  Bissel  v.  Campbell,  54  N.  Y.,  356  ; 
Dickerson  v.  Seelye,  12  Barb.,  102  ;  Cox  v.  Peterson,  30  Ala.,  608 ;  Bates  v.  Todd, 
I  Mood  &  R.,  106  ;  Wharton  on  Evidence,  §  1070. 

'York  Co.  V.  Central  R.R.,  3  Wall.,  107;  The  Lady  Franklin,  8  Wall.,  325; 
Cincinnati,  etc.,  R.R.  v.  Pontius,  19  Ohio  St.,  221  ;  Bank  of  Ky.  v.  Adams  Ex- 
press Co.,  93  U.  S.,  174;  Kirkland  v.  Dinsmore,  62  N.  Y.,  171  ;  Dorr  v.  New 
Jersey,  etc.,  Co.,  11  N.  Y.,  485  ;  Grace  v.  Adams,  100  Mass.,  505  ;  Wharton  on 
Evidence,  §  1070 ;  post,  §  1740. 

*  Sears  v.  Wingate,  3  Allen,  103.  St&  post,  §  1733  ;  see  also  Brown  v.  Powell 
Coal  Co.,  10  C.  P.  L.  R.,  562. 


§   I730-      DEFINITION  AND  NATURE  OF  BILLS  OF  LADING.       74I 

but  it  is  not  conclusive  against  the  owners  of  the  ship  as 
to  property  not  actually  received,  because  it  is  not  within 
the  scope  of  the  master's  authority  from  the  owners  to  sign 
bills  of  lading  for  any  property  but  such  as  is  put  on 
board.^  When  the  master  of  the  ship,  or  agent  of  the 
carrier,  issues  a  bill  of  lading  without  receiving  the  goods 
at  all,  the  same  principle  is  deemed  applicable,  as  is  here- 
after shown. ^ 

But  if  the  carrier  or  its  authorized  agent  issues  the  bill 
of  lading  containing  the  words  "quantity  guaranteed,"  the 
carrier  will  be  responsible  for  the  quantity  specified  to  the 
consignee,  the  terms  of  the  bill  being  conclusive.' 

§  1 730.  How  the  effect  of  a  bill  of  lading  is  a7ialog07is  to 
that  of  a  negotiable  instrument.  When  right  of  stoppage 
in  transitu  is  defeated. — The  idea  that  bills  of  lading  are 
negotiable  arose  from  the  use  to  which  they  were  ap- 
propriated, in  the  transfer  of  goods  purchased,  before 
they  were  delivered  to  the  purchaser,  or  before  they 
were  paid  for  ;  but  it  will  be  seen  that  their  peculiar 
properties  are  attributable  rather  to  a  liberal  application  of 
the  doctrine  of  equitable  estoppel  for  the  benefit  of  trade, 
than  to  any  custom  or  statute  which  placed  them  upon  the 
footing  of  negotiable  instruments,'*  for  both  of  these  sources 
of  negotiability  are  wanting.  The  consignor  of  goods 
shipped  takes  from  the  master  of  the  ship  a  bill  of  lading, 


'  Sears  v.  Wingate,  3  Allen,  103 ;  The  Loan,  7  Blatchford,  244.  In  Sears  v. 
Wingate,  3  Allen,  107,  Hoar,  J.,  said  :  "  We  think  that  the  rules  which  must 
govern  the  case  at  bar  are  these :  First.  The  receipt  in  the  bill  of  lading  is 
open  to  explanation  between  the  master  and  the  shipper  of  the  goods.  Second. 
The  master  is  estopped  as  against  a  consignee  who  is  not  a  party  to  the  con- 
tract, and  as  against  an  assignee  of  the  bill  of  lading,  when  either  has  taken  it 
for  a  valuable  consideration  upon  the  faith  of  the  acknowledgments  which  it 
contains,  to  deny  the  truth  of  the  statements  to  which  he  has  given  credit  by 
his  signature,  so  far  as  those  statements  relate  to  matters  which  are,  or  ought  to 
be,  within  his  knowledge.  Third.  When  the  master  is  acting  within  the  limits 
of  his  authority,  the  owners  are  estopped  in  like  manner  with  him  ;  but  it  is  not 
within  the  general  scope  of  the  master's  authority  to  sign  bills  of  lading  for  any 
goods  not  actually  received  on  board." 

'  See  post,  %  1733.  '  Bissel  v.  Campbell,  54  N.  Y.,  353. 

*  I  Smith's  Leading  Cases,  897. 


742 


BILLS    OF    LADING.  §   ^73^- 


and  sending  it  to  the  consignee  who  has  ordered  the  goods, 
draws  upon  him  by  bill  of  exchange  for  the  purchase  money. 
Before  the  goods  reach  their  destination  the  consignor,  who 
in  the  case  instanced  is  the  vendor  of  the  ^goods,  learns 
that  the  vendee  is  insolvent  ;  and  to  prevent  the  injustice 
which  would  be  done,  if,  in  consequence  of  the  vendee's  in- 
solvency, and  while  the  price  is  yet  unpaid,  they  were  to 
be  seized  upon  in  satisfaction  of  his  liabilities,  the  law  con- 
fers upon  the  vendor  the  right  to  stop  the  goods  in  tran- 
situ,  and  to  retain  them  until  the  whole  purchase  money  is 
paid.^ 

But  suppose  the  consignee  has  received  the  bill  of  lading 
of  the  goods,  deliverable  to  him  or  his  assigns,  or  indorsed 
to  him  or  his  assigns,  by  the  consignor,  and  has  assigned 
the  bill  by  indorsement  to  a  bojia  fide  third  party,  then  the 
vendor's  right  to  stop  the  goods  in  transitu  and  hold  them 
as  security  for  the  purchase  money  is  defeated,  and  the  as- 
signee of  the  bill  acquires  as  perfect  a  title  to  the  goods, 
although  they  have  not  reached  the  buyers  hands,  as  if 
they  had  actually  passed  through  his  hands  and  been  deliv- 
ered bodily  to  him.  This  was  decided  in  the  leading  case 
of  Lickbarrow  v.  Mason,^  and  may  now  be  regarded  as  the 

'  Gibson  v.  Carmthers,  8  M.  &  W.,  336  ;  Snee  v.  Prescott,  i  Atk.,  246 ; 
D'Aquila  v.  Lambert,  2  Eden,  95  ;  Amb.,  39. 

-  In  I  Smith's  Leading  Cases,  895,  896,  it  is  said  by  the  learned  American  an- 
notators  in  the  course  of  their  masterly  comments  on  Lickbarrow  v.  Mason  : 
"  It  would  seem  evident  from  what  has  been  said,  that  Lickbarrow  v.  Mason 
should  not  be  considered  as  going  beyond  the  only  point  which  it  actually  de- 
termines, that  the  right  of  a  vendor  to  stop  in  tra7isitti  may  be  defeated  by  a 
sale  made  by  the  vendee,  accompanied  by  a  transfer  of  the  bill  of  lading,  and 
not  treated  as  giving  bills  of  lading  the  character  of  negotiable  instruments, 
which  was  wholly  unnecessary  for  the  purposes  of  the  decision.  For,  as  the 
property  passes  under  such  circumstances  by  the  sale,  the  indorsement  of  the 
bill  has  no  other  effect  than  that  of  defeating  the  right  of  the  vendor  to  reclaim 
it,  by  operating  as  a  constructive  and  symbolic  delivery.  The  utmost,  therefore, 
that' this  decision  establishes,  is  an  exception  to  the  rule,  that  an  unpaid  vendor 
has  a  right  to  stop  in  transitu,  an  exception  and  a  rule  which  have  nothing  in 
common  with  the' negotiability,  either  of  the  bill  of  lading  or  of  the  property 
which  it  represents.  Nothing  can,  in  fact,  be  a  greater  departure  from  the  prin- 
ciples and  analogies  of  the  common  law,  than  to  treat  bills  of  lading  or  other 
documentary  evidences  of  title  to  chattels  personal  as  negotiable  instruments.  In- 
struments which  represent  choses  in  action  may  be  negotiable,  because  the  right 
can  not  be  separated  from  the  instrument,  and  has  no  distinct  or  actual  physical 


j  1730^-?.    DEFINITION  AND  NATURE  OF  BILLS  OF  LADING.       743 

settled  law  of  England  and  of  the  United  States.^  But 
this  capacity  of  the  bill  of  lading  for  transferring  the  right 
of  property,  under  these  circumstances,  does  not  imply  that 
it  is  a  negotiable  instrument  to  all  intents  and  purposes.' 
The  assignee  of  the  bill  of  lading  is  protected  because  the 
vendor  of  the  goods  has  placed  in  the  hands  of  his  assignor 
a  muniment  of  title,  clothing  him  with  apparent  ownership 
of  the  goods,  and  it  is  unequitable  that  a  secret  trust  should 
be  enforced  in  favor  of  the  vendor,  who  has  issued  such 
muniment  of  title  against  a  person  who  has  taken  an  as- 
signment of  it  for  valuable  consideration,  atid  without  no- 
tice of  such  circumstances  as  render  it  not  fairly  and 
honestly  assignable.^ 

§  1730^.  IV/ien  right  of  stoppage  in  trajtsitu  ceases. — If 
the  goods  had  actually  reached  the  consignee,  and  he  were 
to  sell  them  to  a  third  party,  although  they  might  be  un- 
paid for,  such  third  party  would  acquire  a  perfect  title 
against  the  world.^  But  a  sale  of  goods  not  yet  received 
by  the  vendee,  without  a  transfer  of  the  bill  of  lading,  would 
not  divest  the  right  of  stoppage  in  transitu?  And  after 
goods  have  reached  the  consignee,  the  right  of  stoppage  in 


existence.  And  even  there,  negotiability  only  exists  in  the  case  of  absolute 
promises  for  the  payment  of  money,  a  thing  negotiable  in  itself,  and  which  can 
not  be  reclaimed  by  the  true  owner  from  any  one  who  has  received  it  bona  fide 
and  in  exchange  for  a  valuable  consideration.  But  chattels  personal  are  wholly 
insusceptible  of  negotiation  in  themselves,  and  it  is  manifestly  inconsistent  to 
give  the  documents  which  represent  them  a  different  character The  re- 
sult of  the  cases,  therefore,  as  a  whole,  seems  to  be  that,  while,  on  the  one  hand, 
the  possession  of  bills  of  lading  or  other  documents  of  the  same  nature,  may  be 
evidence  of  title,  and  equivalent  for  some  purposes  to  actual  possession,  yet,  that 
on  the  other,  it  does  not  constitute  title,  nor  dispense  with  the  rule  nemo  plus 
juris  ad  all  urn  transferre  potest,  qiiatn  ipse  habet." 

'  Newhall  v.  Central  P.  R.R.  Co.,  51  Cal.,  345  ;  Emery  v.  Irving  N.  B.,  25 
Ohio  St.,  360;  Dows  V.  Greene,  24  N.  Y.,  641 ;  Gumey  v.  Behrend,  2  El.  &  B., 
622;  2  Redfield  on  Railroads,  160,  161 ;  Becker  v.  Hallgarten,  86  N.  Y.,  167. 

"^  See  Shaw  v.  Railroad  Co,,  loi  U.  S.  (11  Otto),  564,  s^wApost,  §  1750^. 

'Brewster  v.  Sime,  42  Cal.,  130;  Newhall  v.  Central  R  R.R.  Co.,  51  Cal.,  345, 

*  Ilsey  v.  Stubbs.  49  Mass.,  65  ;  Winslow  v.  Norton,  29  Me,,  419-  Nathan  v 
Giles,  5  Taunt.,  588  ;  Becker  v.  Hallgarten,  86  N.  Y.,  167. 

'  Craven  v.  Ryder,  6  Taunt.,  433  ;  Holmes  v.  Crane,  2  Pick.,  606, 


744  BILLS    OF    LADING.  §   1 73 1. 

transittt-,  as  its  very  terms  import,  is  at  an  end.^  To  stop 
them  while  in  transitu  is  an  equitable  remedy,  first  applied 
by  courts  of  equity  in  order  to  prevent  injustice  to  the  ven- 
dor ;  but,  on  the  other  hand,  it  is  considered  that  if  the 
vendor  has  chosen  to  transmit  to  his  vendee  the  document- 
ary evidence  of  title  to  the  goods,  accompanied  with  au- 
thority (which  a  bill  of  lading  imports)  to  vest  the  same  in 
his  assignee,  and  he  has  done  so  before  the  goods  have 
reached  their  destination,  then  the  equitable  right  to  stop 
them  must  yield  to  the  broader  and  more  commanding 
equity  of  the  '%ona  fide  purchaser  of  the  bill  of  lading  to 
hold  them  as  his  own.^ 

§  1 73 1.  Transfer  of  bill  of  lading  passes  title  to  prop- 
erty in  same  manner  as  a  delivery  of  the  goods. — Thus  the 
bill  of  lading  passes  the  property,  when  it  is  indorsed  and 
intended  so  to  operate,  in  the  same  manner  as  a  direct  de- 
livery of  the  goods  would  do  if  so  intended,  and  it  operates 
no  further.^  It  constitutes  a  symbolic  and  constructive 
delivery  of  the  goods,'*  being  the  proper  substitute  for  the 
actual  delivery  of  goods  at  the  time  at  sea  en  roiUe  to  the 
consignee,  and  the  arrival  and  delivery  of  which  the  con- 
signor has  placed  it  in  his  power  by  the  bill  of  lading  to 
anticipate.^ 

§  1731^.  When  bill  of  lading  becomes  functus  officio. — 
The  bill  of  lading  being  the  substitute  and  symbolic  repre- 
sentative of  the  goods,  not  physically  delivered  at  the  time 

*  Edwards  v.  Brewer,  2  M.  &  W.,  375  ;  Nicholls  v.  Lefevre,  2  Bing.  N.  C,  83  ; 
Turner  v.  Trustees,  6  Eng.  L.  &  Eq.,  515  ;  Sturtevant  v.  Orser,  24  N.  Y.,  539. 

"^  I  Smith's  Leading  Cases,  891. 

^  Newsom  v.  Thornton,  6  East.,  41  ;  Gardner  v.  Rowland,  2  Pick.,  599  ;  Mears 
V.  Waples,  3  Houst.  (Del),  582  ;  Empire  Trans.  Co.  v.  Steele,  70  Penn.  St.,  190 ; 
Mower  v.  Peabody,  3  Kern.,  121  ;  Indiana,  etc.,  Bank  v.  Colgate,  4  Daly,  41  ; 
Emery  V.  Irving  Nat.  Bank,  25  Ohio  St.,  360  ;  Newhall  v.  Central  P.  R.R.,  51 
Cal.,  345  ;  Dows  v.  Greene,  24  N.  Y.,  638. 

*  Mechanics',  etc..  Bank  v.  Farmers',  etc..  Bank,  60  N.  Y.,47,  Miller,  J. :  "The 
delivery  of  the  bill  of  lading  to  the  plaintiff  was  a  good  symbolical  deliver}' of 
the  grain,  and  the  plaintiff  thereby  acquired  a  lien  upon  it,  or  title  to  it,  and  was 
fully  authorized  to  hold  it  until  the  loan  was  paid." 

"  Pratt  v.  Parkman,  24  Pick.,  42. 


§   I732.      DEFINITION  AND  NATURE  OF  BILLS  OF  LADING.       745 

it  is  issued,  continues  to  represent  them  until  they  have 
reached  the  hands  of  the  party  entitled  to  their  possession. 
It  becomes /unc^us  officio  as  soon  as  the  goods  are  landed 
and  delivered  to  the  person  entitled  to  possession  ;  and  if 
they  are  landed  and  warehoused  in  the  name  of  the  holder 
it  seems  that  he  is  then  possessed  of  the  goods  in  the  eye 
of  the  law,  and  that  he  deriv^es  his  power  over  them  there- 
after, not  from  the  bill  of  lading,  but  from  such  possession.^ 
But  it  has  been  held  in  England  that  under  the  statute  of 
II  and  12  Victoria,  c.  1 8,  which  is  known  as  the  Sufferance 
Wharves  Act,  the  bill  of  lading  continues  to  represent  the 
goods  at  a  sufferance  wharf  until  replaced  by  the  wharfin- 
ger's warrant.^  In  brief,  the  bill  of  lading  is  exhausted,  and 
does  not  become  fundics  officio  until  there  is  a  delivery  of 
the  goods ;  and  there  can  be  no  complete  delivery  of  the 
goods  until  they  come  into  possession  of  some  person  who 
has  the  right  of  possession  under  it.^  The  indorsement  and 
delivery  of  a  bill  of  lading  while  current  to  a  bank  as  col- 
lateral security  for  paper  discounted  on  its  faith  and  credit 
operates  the  same  as  a  delivery  of  the  goods  ;  and  the  bank 
can  hold  them  so  far  as  necessary  to  pay  the  discounted 
paper  as  against  the  consignee  or  any  other  person.* 

§  1 732.  As  to  who  may  issue  a  bill  of  lading. — This  may 
be  done  by  any  common  carrier,  as  well  by  one  which  car- 
ries by  land  as  by  water,  though  the  term  "  bill  of  lading" 

'  Hatfield  v.  Phillips,  9  M.  &  W.,  467  ;  Mottram  v.  Heyer,  5  Denio,  632. 

^  Meyerstein  v.  Barber,  L.  R.,  2  C.  P.,  661  ;  36  L.  J.  C.  P.,'  361,  Martin,  B., 
saying :  "  For  many  years  past  there  have  been  two  symbols  of  property  of 
goods  imported  ;  the  one  the  bill  of  lading,  the  other  the  wharfinger's  certificate 
or  warrant.  Until  the  latter  is  issued  by  the  wharfinger  the  former  remains  the 
only  symbo'  of  property  in  the  goods."  In  New  York  the  factor's  act  of  1830 
protects  one  who  makes  advances  upon  the  faith  of  the  documentary  evidence  of 
title  furnished  by  a  warehouseman  keeper's  receipt  of  imported  goods  procured 
by  a  factor  by  his  being  intrusted  with  an  invoice  of  the  goods,  although  the 
invoice  shows  that  the  goods  belonged  to  the  shipper.  Cartwright  v.  Wilder- 
ming,  24  N.  Y.,  521. 

*  Heiskell  v.  Farmers',  etc.,  Bank,  89  Penn.  St.,  155  ;  IMeyerstein  v.  Barber, 
L.  R.,  2  C.  P.,  661  ;  36  L.  J.  C.  P.,  361  ;  Leggett  on  Bills  of  Lading ;  Benjamin 
on  Sales,  622. 

*  First  Nat.  Bank  v.  Kelly,  57  N.  Y.,  34.     St^post,  §  1734a. 


746  BILLS    OF    LADING.  §   1 733 

seems  to  have  had  its  origin  from  the  act  of  "  lading  "  ves- 
sels, which  in  the  early  days  of  commerce  were  the  most 
frequent  vehicles  of  trade.  Railroad  corporations,^  express 
companies,^  and  all  other  common  carriers  -may  issue  such 
a  bill. 

The  bill  of  lading  must  be  issued  by  the  carrier  or  its 
representative.  If  the  paper  be  signed  by  the  consignor 
only,  it  is  not  a  bill  of  lading.^ 

The  obligation  of  the  carrier  to  give  on  receiving  goods 
a  bill  of  lading,  extends  only  to  acknowledging  the  receipt 
of  the  goods,  and  expressing  the  promise  to  carry  and  de- 
liver them.      He  is  not  bound  to  specify  the  freight.* 

§  '^72)?)'  Whether  carrier  is  bound  by  bill  of  lading 
issned  by  master  of  ship,  or  other  agent,  when  the  goods  are 
not  in  fact  received. — Although  the  bill  of  lading  is  signed 
by  the  master  of  the  ship,  or  other  agent  of  the  carrier  who 
undertakes  the  transportation  of  the  goods,  the  subscription 
is  as  accent  for  the  carrier,  and  the  contract,  in  so  far  as  it  is 
within  the  scope  of  the  agency,  is  binding  upon  the  carrier 
But  according  to  the  English  authorities,  and  to  the  weight 
and  general  current  of  the  American  authorities  also,  the 
master  of  the  ship,  or  other  shipping  agent  of  the  carrier, 
has  no  implied  authority  to  grant  a  bill  of  lading  unless  the 
goods  are  actually  received  by  him  for  transportation.  He 
is  an  agent  with  limited  authority,  and  parties  dealing  with 
the  bill  of  ladino^  are  chargeable  with  notice  of  the  limita- 
tion.  And  if  the  master  of  the  ship  or  other  shipping 
agent,  transcend  his  authority  and  issue  a  bill  of  lading  for 
goods  which  are  not  actually  shipped,  the  ship-owners  or 
other  carriers,  represented  by  the  master  or  other  shipping 


'  Stevens  v.  Boston,  etc.,  R.R.  Co.,  8  Gray,  262 ;  Illinois  Central  Railroad  Co. 
V.  Owens,  53  111.,  391  ;  Lawrence  v.  N.  Y.,  etc.,  R.R.  Co.,  36  Conn.,  63  ;  Stein- 
weg  V.  Erie  R.R.  Co.,  43  N.  Y.,  123  ;  Worden  v.  Bemis,  32  Conn.,  268. 

'^  Grace  v.  Adams,  100  Mass.,  505.  '  Gage  v.  Jaqueth,  i  Lans.,  207, 

*  The  May  Flower,  3  Ware,  300. 

^  Ferguson  v.  Coppeau,  6  Har.  &  J.,  394. 


^  1733^.    DEFINITION  AND  NATURE  OF  BILLS  OF  LADING.       747 

agent,  will  not  be  bound  by  the  bill  of  lading,  although  it 
be  transferred  to  a  bona  fide  holder  for  value  without 
notice.^  The  United  States  Supreme  Court,  following  the 
English  cases,  has  adopted  these  views ;  and  in  a  recent  case 
reafiiirms  its  previously  expressed  conclusion  to  this  effect.^ 
If  the  goods  were  actually  received  alongside  the  ship  by 
the  servants  of  the  ship-owners,  and  the  master  thereupon 
signed  the  bills  of  lading,  this  would  suffice  to  bind  the 
ship-owners.' 

And  if  the  goods  were  not  so  received  as  to  bind  the 
carrier,  the  master  or  other  agent  issuing  the  bill  of  lading 
would  be  liable  for  the  consequences  of  his  misrepresen- 
tation to  a  person  advancing  money  upon  the  faith  of  his 
statements  therein.* 

§  1733^-  Confiicting  authorities.  Cases  maintaining 
that  bill  of  lading  is  conclusive  evidence  against  carrier  as 
to  receipt  of  goods. — The  decisions  which  exonerate  the 
carrier  from  liability  when  the  bill  of  lading  is  issued   by 

*  See  ante,  §  ij2gn.  Grant  v.  Norway,  20  L.  J.  C.  P.,  93  ;  2  Eng.  L.  &  Eq., 
337;  10  C.  B.,  665.  See  also  Hubbersty  v.  Ward,  18  Eng.  L.  &  Eq.,  551  ; 
Coleman  v.  Riches,  29  Eng.  L.  &  Eq.,  323 ;  McLean  v.  Fleming,  L.  R.,  2  S. 
Ap.,  128;  Union,  etc.,  R.R.  v.  Yeager,  34  Ind.,  i  ;  Hall  v.  ^Layo,  7  Alien,  456  ; 
Louisiana  Bank  v.  Laveille,  52  Mo.,  380;  Sears  v.  Wingate,  3  Allen,  103;  Hunt 
V.  Miss.  C.  R.R.,  29  La.  An.,  449  ;  Fellows  v.  Steamer  Powell,  16  La.  An.,  316 ; 
B.altimore  &  Ohio  R.R.  v.  Willcens,  44  Md.,  11  ;  Dean  v.  King,  22  Ohio  St., 
136;  Second  N.  B.  v.  Walbridge,  19  Ohio  St.,  419;  Robinson  v.  Memphis,  etc., 
R.R.,  9  Fed.  R.,  129 ;  Mackenzie  on  Bills  of  Lading,  9 ;  Leggett  on  Bills  of  Lad- 
ing, 27. 

'  The  Schooner  Freeman  v.  Buckingham,  18  Howard,  182  ;  Pollard  v.  Vinton, 
U.  S.  S.  C,  1882,  Miller,  J.,  saying:  "Before  the  power  to  make  and  deliver  a 
bill  of  lading  could  arise,  some  person  must  have  shipped  goods  on  the  vessel. 
Only  then  could  there  be  a  shipper,  and  only  then  could  there  be  goods  shipped. 
In  saying  this  we  do  not  mean  that  the  goods  must  have  been  actually  placed 
on  the  deck  of  the  vessel.  If  they  came  within  the  control  and  custody  of  the 
officers  of  the  boat  for  the  purpose  of  shipment,  the  contract  of  carriage  had 
commenced  and  the  evidence  of  it  in  the  form  of  a  bill  of  lading  would  be  bind- 
ing. But  without  such  a  delivery  there  was  no  contract  of  carrying,  and  the 
agents  of  defendant  had  no  authority  to  make  one."  See  also  The  Delaware, 
14  Wall,  602  ;  The  Joseph  Grant,  i  Biss.,  193;  The  Bark  Edwin,  i  Sprague, 
480. 

'  McLean  v.  Fleming,  Law  R.,  2  H.  L.,  128 ;  Bryans  v.  Nix,  4  M.  &  W„  775 ; 
8  L.  J.  Ex.,  137  ;  British  Columbia  Mill  Co.  v.  Nestleship,  Law  R.,  3  C.  P.,  499; 
Pollard  V,  Vinton,  U.  S.  S.  C,  1882 ;  Mackenzie  on  Bills  of  Lading,  9. 

*  Lickbarrow  v.  Mason,  2  T.  R.,  75 ;  Sears  v.  Wingate,  3  Allen,  103 ;  Mac- 
kenzie on  Bills  of  Lading,  9  ;  attie,  §  1729a. 


748  BILLS    OF    LADING.  §   1733^' 

his  shipping  agent  without  actual  receipt  of  the  goods,  have 
met  with  strong  opposition  in  some  cases  ;  and  the  carrier 
has  been  liable  on  the  ground  that  the  act  of  issuing  the 
bill  is  within  the  scope  of  general  authority -conferred  upon 
the  agent,  and  that  if  he  violates  instructions,  or  in  bad 
faith  issues  the  bill  when  not  in  actual  receipt  of  the  goods, 
the  principal  should  be  bound  to  those  who  act  on  the  faith 
of  the  representation  contained  in  k,  upon  the  principle 
that  where  one  of  two  innocent  parties  must  suffer,  he  who 
has  enabled  a  third  person  to  occasion  the  loss  must  sustain 
it.  The  master  of  a  ship  is  generally  separated  from  his 
principals,  and  beyond  their  supervision  and  control.  Roving 
the  seas  in  commercial  enterprises,  and  often  thousands  of 
miles  apart  from  those  who  trust. him,  the  policy  of  the  law 
might  well  shield  his  principals  from  responsibilities,  which, 
were  he  in  a  position  under  their  inspection,  and  subject  to 
their  superintendence,  it  might  withhold.  And  in  respect 
to  railroad  corporations,  express  companies,  and  other 
carriers  by  land,  whose  agents  are  within  view  of  superior 
officers,  and  subject  to  speedy  removal  for  delinquencies,  it 
might  be  well  contended  that  their  shipping  agents,  when 
acting  within  the  apparent  scope  of  authority,  would  bind 
their  principals,  although  in  the  particular  case  violating 
actual  authority,  and  committing  a  breach  of  trust.  These 
do  not  appear  to  be  the  grounds  of  dissent  from  the 
doctrines  heretofore  stated  in  the  text.  And  the  cases 
which  maintain  the  liability  of  the  carrier  when  the  bill  of 
lading  is  issued  by  the  shipping  agent  without  receipt  of 
the  goods,  rest  upon  the  broader  grounds  above  set  forth, 
and  upon  public  policy  in  reference  to  commercial  trans- 
actions of  this  kind.  In  New  York,  where  the  agent 
of  a  railroad  company  in  Chicago,  upon  delivery  to  him 
of  a  forged  warehouse  receipt,  issued  to  M.  two  bills  of 
lading,  each  stating  the  receipt  of  a  quantity  of  lard  con- 
signed to  plaintiffs  at  New  York,  to  be  transported  and 
delivered  to  them  there,  it  appeared  that  the  agent  was  in 


i 


5   1734-  BILLS    DRAWN    ON    SHIPMENTS.  749 

formed  that  M.  intended  to  use  the  bills  of  ladingr  at  bank. 
M.  drew  sight  drafts  on  the  plaintiffs  in  New  York,  attach- 
ing to  them  the  bills  of  lading  ;  and  delivered  the  drafts  to  a 
bank  in  Chicago,  which  forwarded  them  to  New  York  for 
collection,  and  there  the  plaintiffs  paid  them  on  presen- 
tation upon  the  faith  and  credit  of  the  bills  of  lading 
attached.  In  an  action  by  the  drawees  of  the  drafts  against 
the  railroad  company  upon  the  bills  of  lading,  it  was  held 
that  the  company  was  bound  by  the  act  of  its  agent,  the 
same  being  within  the  apparent  scope  of  his  authority,  that 
it  was  estopped  to  deny  the  actual  receipt  of  the  lard,  and 
that  the  plaintiffs  were  entitled  to  recover.* 


SECTION  II. 

BILLS   OF  LADING  ACCOMPANYING    BILLS   OF   EXCHANGE   DRAWN 

ON    SHIPMENTS. 

§  1 734.  Effect  of  bill  of  lading  sent  to  consignee  with  bill 
of  exchange  drawn  for  pttrchase  money  of  goods. — Some- 
times a  bill  of  lading  for  the  goods  shipped  in  pursuance  of 

>  Armour  v.  Michigan  Central  R.R.  Co.,  65  N.  Y.,  in  (1875),  overruling 
same  case  in  3  J.  &  S.,  563.  Gray,  Commissioner,  said :  "  The  well- 
recognized  principle  that  a  party  who  by  his  admissions  has  induced  a 
third  party  to  act  in  a  particular  manner,  is  not  permitted  to  deny  the  truth 
of  his  admission,  if  the  consequence  would  be  to  work  an  injury  to  such  third 
party,  applies  to  and  governs  this  case."  Dwight,  Commissioner,  said  :  "  Street 
(the  agent),  having  power  to  issue  bills  direct  to  consignees  for  goods  actually 
in  the  possession  of  the  defendant  (the  railroad  company),  and  the  present  bills 
being  in  no  ways  distinguishable  in  form  from  those  which  were  usually  em- 
ployed, he  must  be  considered  as  having  the  necessary  authority   as  to  the 

plaintiffs  acting  in  good  faith Grant  v.  Norway  has  been  subject  to  much 

and  severe  criticism,  as  being  adverse  to  the  general  view  prevailing  in  the 
courts  of  this  State,  where  confidence  has  been  reposed  in  an  agent,  and  ap- 
parent authority  conferred  upon  him,  that  the  principal  must  suffer  from  an 
actual  exercise  of  authority  not  exceeding  the  appearance  of  that  which  is  granted 
when  one  of  two  innocent  persons  must  suffer,  in  such  a  case  that  person  must 
bear  the  loss  who  reposed  the  confidence.  So  far  as  Grant  v.  Norway  stands  in 
the  way  of  this  doctrine,  it  must  be  deemed  to  be  overruled  (remarks  of  Davis, 
J.,  in  New  York,  etc.,  R.R.  v.  Schuyler,  34  N.  Y.,  T},)."  To  same  effect,  see 
Sioux  City  and  P.  R.R.  v.  First  N.  B.,  10  Nebraska,  556,  and  Savings  Bank  v. 
Atchison,  etc.,  R.R.  Co.,  20  Kansas,  519.  Compare  Relyea  v.  N.  H.  R.  M.  Co., 
42  Conn.,  579. 


750  BILLS    OF    LADING.  §   1734^* 

orders  of  the  consignee,  with  a  bill  of  exchange  drawn  by 
the  shipper  upon  the  consignee  for  the  purchase  money,  are 
sent  in  one  enclosure  to  the  consignee.  In  such  cases  the 
bill  of  exchange  must  be  honored  by  the  consignee,  other- 
wise the  bill  of  lading  can  not  be  retained  ;  and  if  it  is  re- 
tained the  consignee  has  no  right  to  the  goods.^ 

§  1734'^.  Effect  of  bill  of  lading  indorsed  to  payee  of  bill 
drawn  on  vendee  for  purchase  money. — Frequently  the  con- 
signor of  the  goods  takes  a  bill  of  lading  from  the  carrier, 
draws  a  bill  payable  on  demand  upon  the  vendee  for  the 
price,  and  delivers  the  bill  of  exchange  with  the  bill 
of  ladinof  attached  to  an  indorser  for  value  of  the  bill 
of  lading.  In  such  cases  the  consignee  upon  the  receipt 
of  the  goods,  takes  them  subject  to  the  right  of  the 
holder  of  the  bill  of  lading  to  demand  payment  of  the 
bill  of  exchange  ;^  and  the  consignee  can  not  retain  the 
price  of  the  goods  on  account  of  a  debt  due  to  him 
from  the  consignee.^  If  the  goods  be  deliverable  by  the 
terms  of  the  bill  of  lading  to  the  consignee,  or  his  order, 
the  person  to  whom  it  is  transferred  by  the  consignor 
w^ould  be  charged  with  notice  of  the  rights  of  the  con- 
signee ;  and  on  the  other  hand,  if  the  bill  of  lading  be  drawn 
to  the  use  of  the  consignor,  or  his  order,  the  consignee 
would  be  charged  with  notice  of  the  rights  of  those  to  wdiom 
the  bill  of  lading  may  have  been  transferred.  But  in  either 
case  the  question  is  open  to  inquiry  as  to  what  such  rights 
may  be,  and  can  be  determined  only  by  inquiry  into  the 
real  nature  and  character  of  the  transaction.* 


'  Shepherd  v.  Harrison,  L.  R.,  4  Q.  B.,  197  ;  5  H.  L.,  116;  Marine  Bank  v. 
Wright,  48  N.  Y.,  I  ;  Indiana,  etc.,  Bank  v.  Colgate,  4  Daly,  41  ;  Leggett  on 
Bills  of  Lading,  363. 

'  Emery  v.  Irving  Nat.  Bank,  25  Ohio  St.,  255;  Heiskell  v.  Farmers',  etc., 
Bank,  89  Penn.  St.,  155  ;  Dows  v.  Nat.  Exchange  Bank,  91  U.  S.  (i  Otto),  631  ; 
National  Bank  v.  Merchants'  Bank,  91  U.  S.  (i  Otto),  98. 

'  Emery  v.  Irving  Nat.  Bank,  25  Ohio  St.,  255. 

*■  Emery  v.  Irving  Nat.  Bank,  25  Ohio  St.,  255.  See  Dows  v.  National  Ex- 
change Bank,  91  U.  S.  (l  Otto),  631. 


(I 


§   I734'^-.  BILLS    DRAWN    ON    SHIPMENTS.  75 1 

In  a  case  before  the  U.  S.  Supreme  Court  it  appeared  that 
McLaren  &  Co.,  of  Milwaukee,  Wis.,  purchased  and  paid 
for  wheat  on  account  of  Smith  &  Co.,  of  Oswego,  N.  Y., 
and  took  bills  of  lading  describing  themselves  as  shippers,- 
deliverable  to  Fitch,  cashier  of  Merchants'  Bank,  Water- 
town,  N.  Y.  McLaren  &  Co.  presented  drafts  drawn  on 
Smith  «Sl  Co.,  with  the  bills  of  lading  attached  thereto,  to 
the  National  Exchange  Bank  of  Milwaukee,  which  dis- 
counted the  drafts,  and  by  indorsement  on  the  bills  of  lad- 
ing directed  the  wheat  to  be  delivered  to  Smith  &  Co.  upon 
payment  of  the  drafts,  and  they  sent  invoices  of  the  ship- 
ment to  Smith  &  Co.  It  was  held  that  McLaren  &  Co. 
remained  owners  of  the  wheat,  notwithstanding  their  trans- 
mission of  invoices  to  Smith  &  Co.  ;  that  as  owners  they 
had  a  right  to  transfer  it,  and  the  bills  of  lading  represent- 
ing it,  to  the  National  Exchange  Bank,  as  a  security  for  the 
acceptance  and  payment  of  the  drafts  drawn  for  the  price ; 
that  the  bills  of  lading  unexplained  were  almost  conclusive 
proof  of  an  intention  to  reserve  to  the  shipper  the  jus  dis- 
ponendi,  and  prevent  the  property  in  the  wheat  from  pass- 
ing to  the  drawees  of  the  drafts ;  and  that  the  bank  which 
discounted  the  drafts,  with  the  bills  of  lading  attached,  di- 
recting Fitch,  the  agent,  to  deliver  the  wheat  upon  their  pay- 
ment, acquired  a  special  property  in  the  goods,  and  a  com- 
plete right  to  hold  them  as  security  for  acceptance  and 
payment  of  the  drafts.^ 

In  a  New  York  case  it  appeared  that  V.,  at  Chicago, 
transferred  to  the  Marine  Bank  a  bill  of  lading  for  corn 
shipped  to  Wright  in  New  York,  the  bank  discounting  a 
draft  at  sight  drawn  on  the  faith  and  credit  of  the  bill  of 
lading.  Hunt,  commissioner,  giving  the  opinion  of  the 
court,  said  :  "  The  transfer  of  the  bill  of  lading  to  the  plain- 


'Dows  V.  National  Exchange  Bank,  91  U.  S.  (i  Otto),  618.  See. also  Jenkins 
V.  Brown,  14  Q.  B.,  496;  Turner  v.  Trustees  of  the  Liverpool  Docks,  6  Exch., 
543 ;  Schorman  v.  R.R.  Co.,  L.  R.,  2  Ch.  App.,  336  ;  EUerslaw  v.  Magniac,  6 
Exch.,  570. 


752  BILLS    OF    LADING.  §   1 734^. 

tiff  (the  bank)  under  the  circumstances  stated,  transferred 
also  the  title  to  the  corn  described  in  it.  The  transfer  was 
conditional  and  limited,  to  wit  :  to  provide  for  and  until 
the  acceptance  of  the  draft.  The  title  would  then  pass  to 
the  acceptor  as  their  security,  and  the  plaintiffs'  security 
would  be  transferred  to  the  personal  liabihty  of  the  defen- 
dants as  acceptors.  The  defendants  having  refused  to  ac- 
cept the  draft,  the  title  of  the  plaintiff  to  the  corn  remained 
unimpaired."^ 

§  I  734<^.  Effect  of  bill  of  lading  deliverable  to  order  at- 
tached to  draft  sent  to  agent  for  collection. — In  some  cases 
the  consignor  of  the  goods  sends  the  bill  of  lading  to  the 
consignee,  and  awaits  a  future  settlement  of  the  purchase 
money.  And  in  others  still  the  consignor  retains  the  bill 
of  lading  drawn  deliverable  to  his  own  order,  and  indorses 
it  to  an  agent,  accompanied  with  a  bill  of  exchange  drawn 
on  the  vendee  for  the  purchase  money  of  the  goods,  and 
with  instructions  to  the  agent  to  hold  the  bill  of  lading 
until  the  bill  of  exchange  is  paid.  An  acceptance  of  the 
bill  of  exchange,  in  such  cases,  will  not  entitle  the  vendee 
to  the  goods.  It  must  be  paid  before  title  to  the  goods 
vests  in  him  ;  and  if  the  carrier  deliver  the  goods  to  the 
consignee,  the  consignor,  or  the  party  duly  deriving  title  to 
the  bill  of  exchange  and  bill  of  lading  as  its  security,  may 
recover  them  from  him,  or  from  any  person  to  whom  he  has 
pledged  or  sold  them — such  delivery  being  unauthorized 

'  Marine  Bank  v.  Wright,  48  N.  Y.,  i.  In  Kelly  v.  Scripture,  16  N.  Y.  S.  C 
(9  Hun),  283,  it  appeared  that  K.  &  Co.  consigned  to  S.  certain  malt  for  sale  on 
their  account ;  and  after  they  were  in  possession  of  the  goods  drew  a  bill  of  ex- 
change lor  $1,000  in  favor  of  a  third  person,  as  an  advance  on  anticipated  realiza- 
tions from  the  sale.  S.  sold  the  malt  and  neglected  to  pay  the  drai't,  which  the 
drawers  were  compelled  to  take  up.  It  was  held  that  the  consignors  who  drew 
and  paid  the  draft  could  follow  the  proceeds  of  the  sale  of  the  malt  and  recover 
them  from  S.,  the  consignee,  and  that  S.  did  not  cease  to  be  a  factor  or  agent  ol 
the  consigniors  upon  acceptance  of  the  draft.  Brady,  J.,  who  delivered  the 
opmion  of  the  court,  distinguished  and  explained  the  cases  of  F.  &  N.  Nat. 
Bank  v.  Sprague,  52  N.  Y.,  605,  and  German  Bank  v.  Edwards,  53  N.  Y.,  541. 
As  to  the  New  York  Factors'  Act  (§  3,  chap.  179,  Laws  of  1830)  see  First  N. 
B.  V.  Shaw,  61  N.  Y.,  283  ;  M.  &  T.  Bank  v.  F.  &  M.  Bank,  60  N.  Y.,  41  ;  Cart- 
wright  V.  Wildemiing,  24  N.  Y.,  521. 


§   l']Z\b.  BILLS    DRAWN    ON    SHIPMENTS.  753 

by  the  terms  of  the  bill  of  ladinf^,  and  not  passing  property 
on  the  goods.^ 

But  if  there  be  an  agreement  between  the  consignor  of 
the  goods  and  the  drawees  of  the  bill  of  exchange,  drawn 
on  time  for  the  purchase  money,  that  the  bill  of  lading 
shall  be  surrendered  on  acceptance  of  the  bill  of  exchange, 
a  holder  of  the  bill  of  lading  who  has  become  such  by  in- 
dorsement of  the  bill  of  lading,  and  by  discounting  the 
draft  drawn  against  the  property  consigned,  can  acquire  no 
greater  rights  than  the  consignor.  He  has  the  same  rights 
that  the  consignor  has  to  demand  acceptance  of  the  accom- 
panying draft,  and  no  more  ;  and  if  the  consignor  can  not 
require  such  acceptance  without  surrendering  the  bill  of 
lading,  neither  can  the  holder  of  the  bill  of  exchange.^  And 
if  a  bill  of  exchange  drawn  on  time  be  sent  to  an  agent  for 
collection,  without  special  instructions,  and  with  a  bill  of 
lading  for  the  goods  sold  attached  thereto,  and  deliverable 
to  order,  there  is  no  implied  obligation  upon  the  agent  to 
do  more  than  to  require  acceptance  of  the  bill  of  exchange 
before  delivering  the  bill  of  lading.^ 

'  Heiskell  v.  Farmers',  etc.,  Bank,  89  Penn.  St.,  155.  See  also  Dows  v.  Nat. 
Exchange  Bank,  91  U.  S.  (i  Otto),  631  ;  Stollcnwerck  v.  Thacher,  115  Mass., 
224;  Aldermen  v.  Eastern  R.R.,  115  Mass.,  233  ;  Brandt  v.  Bowlby,  2  B.  &  Ad., 
932  ;  Seymour  v.  Norton,  105  Mass.,  272  ;  Leggett  on  Bills  of  Lading,  356. 

"^  National  Bank  v.  Merchants'  Bank,  91  U.  S.  (i  Otto),  93. 

*  National  Bank  v.  Merchants'  Bank,  91  U.  S.  (i  Otto),  94,  Strong,  J.,  saying: 
"  The  fundamental  question  in  this  case  is,  whether  a  bill  of  lading  of  merchan- 
dise deliverable  to  order,  when  attached  to  a  time  draft,  and  forwarded  with  the 
draft  to  an  agent  for  collection,  without  any  special  instructions,  may  be  sur- 
rendered to  the  drawee  on  his  acceptance  of  the  draft,  or  whether  the  agent's 

duty  is  to  hold  the  bill  of  lading  after  acceptance  for  the  payment It 

seems  to  be  a  natural  inference,  indeed  a  necessary  implication,  from  a  time 
draft  accompanied  by  a  bill  of  lading  indorsed  in  blank,  that  the  merchandise 
(which  in  this  case  was  cotton)  specified  in  the  bill  was  sold  on  credit,  to  be 
paid  for  by  the  accepted  draft,  or  that  the  draft  is  a  demand  for  an  advance  on 
the  shipment,  or  that  the  transaction  is  a  consignment  to  be  sold  by  the  drawee 
on  account  of  the  shipper.  It  is  difficult  to  conceive  of  any  other  meaning  the 
instrument  can  have.  If  so,  in  the  absence  of  any  express  a<^ree)Hent  to  the  con- 
trary, the  acceptor,  if  a  purchaser,  is  clearly  entitled  to  the  possession  of  the  goods 
on  his  accepting  the  bill,  and  thus  giving  the  vendor  a  completed  contract 
for  payment If  the  inference  to  be  drawn  from  a  time  draft  accom- 
panied by  a  bill  of  lading  is,  not  that  it  evidences  a  credit  sale,  but  a  request 
for  advances  on  the  credit  of  the  consignment,  the  consequence  is  the  same. 
Perhaps  it  is  even   more  apparent.     It  plainly  is,  that   the  acceptance  is  not 

Vol.  II.— 48 


754  BILLS    OF    LADING.  §   1734^. 

§  1734^.  It  follows  from  the  foregoing  statement  of 
principles  applicable  to  the  questions  under  consideration  : 
First :  That  the  indorsee  of  a  bill  of  lading  attached  to  a 
draft  which  he  acquires  upon  the  faith  and  credit  of  the 
bill  of  lading,  takes  it  subject  to  the  agreement  between 
the  consignor  and  consignee  of  the  goods  ;  and  that  if  the 
consignor  has  the  right  to  withhold  the  bill  of  lading  until 
the  draft  is  paid,  the  bona  fide  holder  of  the  draft 
has  the  same  right.-'  Second :  That  in  the  absence  of  a 
special  agreement,  a  time  draft  with  a  bill  of  lading  for  the 
goods,  for  or  on  account  of  which  it  is  drawn,  indicates 
that  the  bill  of  lading  is  to  be  surrendered  to  the  drawee  of 
the  draft  upon  its  acceptance  ;  and  that  the  holder  of  the 
draft  can  not  withhold  its  delivery  when  the  acceptance  is 
given,  unless  the  shipper  of  the  goods  had  a  right  to  do  so.^ 

asked    on   the   credit  of  the   drawer  of  the   draft,   but   on    the   faith    of    the 

consig-nment Nor    can   it    make   any   difference    that    the    draft    with 

the  bill  of  lading  has  been  sent  (as  in  this  case)  '  for  collection.'  That  in- 
struction means,  simply  to  rebut  the  inference  from  the  indorsement  that  the 
agent  is  the  owner  of  the  draft.  It  indicates  an  agency.  Sweeney  v.  Easter,  i 
Wall.,  166.  It  does  not  conflict  with  the  plain  inference  from  the  draft  and 
accompanying  bill  of  lading,  that  the  former  was  a  request  for  a  promise  to  pay 
at  a  future  time  for  goods  sold  on  credit,  or  a  request  to  make  advances  on  the 
faith  of  the  described  consignment,  or  a  request  to  sell  on  account  of  the  shipper. 
By  such  a  transmission  to  the  agent  he  is  instructed  to  collect  the  money  men  - 
tioned  in  the  draft,  not  to  collect  the  bill  of  lading  ;  and  the  first  step  in  the  col- 
lection is  procuring  acceptance  of  the  draft.  The  agent  is,  therefore,  authorized 
to  do  all  which  is  necessary  to  obtaining  such  acceptance.  If  the  drawee  is  not 
bound  to  accept  without  the  surrender  to  him  of  the  consigned  property,  or  of 
the  bill  of  lading,  it  is  the  duty  of  the  agent  to  make  that  surrender ;  and  if  he 
fails  to  perform  this  duty,  and  in  consequence  thereof  acceptance  be  refused,  the 
drawer  and  indorsers  of  the  draft  are  discharged."  In  his  learned  and  compre- 
hensive opinion,  Justice  Strong  cited,  in  support  of  his  views,  Lanfear  v.  Blos- 
som, I  La.  An.,  148,  and  Wisconsin  M.  &  F.  Fire  Ins.  Co.  v.  Bank  of  British  N. 
A.,  21  Upper  Canada  O.  B.,  284,  which  are  in  point ;  and  also  Shepherd  v. 
Harrison,  L.  R.,  4  O.  B.,'493 ;  5  H.  L.,  133 ;  Coventry  v.  Gladstone,  4  L.  R.  Eq., 
493;  Schuhardt  v.  llall,  39  Md.,  590;  Marine  Bank  v.  Wright,  48  N.  Y.,  i 
Cayuga  Bank  v.  Daniels,  47  N.  Y.,  631  ;  Gurney  v.  Behrend,  2  El.  &  B.,  622, 
and  other  cases.  And  he  distinguished  and  explained  Seymour  v.  Newton,  105 
Mass.,  272;  Gilbert  v.  Guignon,  L.  R.,  8  Ch.,  16;  Newcomb  v.  Boston,  etc., 
R.R.,  115  Mass.,  230;  Stollenwerck  v.  Thacher,  115  Mass.,  224,  and  Bank  v. 
Bayley,  115  Mass.,  228. 

1  Heiskell  v.  Farmers',  etc.,  Bank,  89  Penn.  St.,  225  ;  Dowsv.  Nat.  Exchange 
Bank,  91  U.  S.  (i  Otto),  618;  Emery  v.  Irving  N.  B.,  25  Ohio  St.,  255  ;  Marine 
Bank  v.  Wright,  48  N.  Y.,  i. 

""  National  Bank  v.  Merchants'  Bank,  91  U.  S.  (i  Otto),  93 ;  Marine  Bank  v 
Wright,  48  N.  Y.,  i. 


§   1734^-  BILLS    DRAWN    ON    SHIPMENTS.-  755 

Third :  That  where  a  bill  of  exchange  is  drawn  upon  a 
shipment,  on  time,  with  the  bill  of  lading  attached,  the 
holder  can  not  (at  least  in  the  absence  of  proof  of  a  local 
usage  to  the  contrary,  or  of  the  imminent  insolvency  of  the 
drawee)  require  the  drawee  to  accept  the  bill  of  exchange, 
except  on  the  delivery  of  the  bill  of  lading ;  and  when  in 
consequence  of  the  refusal  of  the  holder  to  deliver  the  bill 
of  lading,  acceptance  is  refused,  and  the  bill  of  exchange 
is  protested,  the  protest  will  be  without  cause,  and  the 
drawer  will  be  discharged.^  Fourth :  That  the  drawee  of 
the  bill  of  exchange  attached  to  the  bill  of  lading  is  not 
entitled  to  the  bill  of  lading  or  the  property  therein  de- 
scribed except  upon  acceptance,  or  payment  of  the  bill  of 
exchange  according  to  the  nature  of  the  case,  and  the 
agreement  with  the  shipper  of  the  goods  who  drew  the 
draft.^  Fifth  :  That  a  party  discounting  a  bill  of  exchange 
on  the  faith  of  the  indorsement  of  a  bill  of  ladins:  for  sroods 
deliverable  to  order  acquires  the  same  lien  on  the  goods  as 
security  for  the  draft  as  he  would  acquire  if  the  goods 
themselves  were  delivered  to  him  instead  of  the  bill  of 
lading.* 

§  1 734</.  It  is  not  the  duty  of  a  party  discounting  a  bill 
of  exchange  to  inquire  into  the  genuineness  of  a  bill  of 
lading  accompanying  it  in  order  to  hold  another  bound  by 
a  letter  of  credit  which  authorizes  the  bill  of  exchancfe  to 
be  drawn  upon  the  letter  writer  provided  it  be  accompanied 
by  the  bill  of  lading ;  and  if  the  letter  writer  pay  the  bill 
of  exchange,  and  afterward  discovers  that  the  bill  of  lading 
is  forged,  he  can  not  recover  back  the  money  on  the  ground 
of  mistake  of  fact* 

*  Lanfear  v.  Blossom,  i  La.  An.,  148 ;  National  Bank  v.  Merchants'  Bank,  91 
U.  S.  (I  Otto),  100. 

'^  Bank  V.  Bayley,  115  Mass.,  228;  National  Bank  v.  Merchants'  Bank,  icx) 
Mass.,  104 ;  Marine  Bank  v.  Wright,  48  N.  Y.,  i. 

*  First  Nat.  Bank  v.  Kelly,  57  N.  Y.,  34;  ante,  §  1731^ ;  Hathaway  v.  Haynes, 
124  Mass.,  311  ;  Heiskell  v.  Farmers'  Bank,  89  Penn.  St.,  155.  But  see  on  this 
subject  Mears  v.  Wapies,  4  Houston,  62. 

*  Ulster  Bank  v.  Synatt,  5  Irish  Eq.,  595  ;  Woods  v.  Thiedeman,  i  Hurl  & 
Colt,  478;  Lehman  v.  Young,  63  Ala.,  519. 


756  BILLS    OF    LADING.  §   1735- 

SECTION  III. 

THE    ELEMENTS   OF  A   BILL  OF   LADING. 

§  1735-  ^^  ^^  the  form  and  contents  of  bills  of  lading. — • 
Bills  of  lading  are  usually  signed  in  sets  of  three,  one  of 
which  is  retained  by  the  freighter  or  consignor,  one  sent  to 
the  consignee,  and  one  kept  by  the  master  for  his  own  use.^ 
But  sometimes  they  are  granted  in  sets  of  four,^  or  there 
may  be  only  a  single  bill.^  The  bill  retained  by  the  carrier 
("  the  ship's  bill,"  as  it  is  called  when  goods  are  shipped  on 
a  vessel),  is  designed  only  for  its  own  information  and  con- 
venience, not  for  evidence  as  between  the  parties  of  what 
their  agreement  was.  And  if  it  differs  from  the  others, 
they  must  be  considered  as  the  true  and  only  evidence  of 
the  contract.* 

§  1736.  In  whose  favor  drawn. — It  is  usual  for  the  name 
of  the  consignee  of  the  goods  to  whom,  or  to  his  assign, 
they  are  to  be  delivered,  to  be  mentioned.  But  the  bill  is 
sometimes  made  out  for  delivery  to  the  consignor  or  his 
assigns  ;  and  sometimes  "  to order,  or as- 
signs," which  form  imports  an  engagement  to  deliver  to 
the  person  whom  the  consignor  shall  nominate,  and  his 
assigns.^  Or  it  may  be  made  out  to  bearer. ^^  If  negoti- 
able words  be  contained  in  the  bill  of  lading,  they  only 
indicate  the  intention  of  the  shipper  as  to  the  person  for 
whose  use  the  consignment  is  made ;  and  the  bill  is  trans- 
ferred by  delivery  whether  negotiable  words  be  inserted  or 
not.''  The  consignee's  title  is  complete  if  the  bill  contain 
his  name,  and  is  sent  to  him  ;  and  the  goods  are  his,  sub- 
ject only  to  the  consignor's  right  to  stop  them  in  transitu 
for  breach  of  the  conditions  of  sale.     If  the  consignor  be 


■  Mackenzie  on  Bills  of  Lading,  3.  '  Lickbarrow  v.  Mason,  2  T.  R.,  63. 

*  Dows  V.  Perrin,  16  N.  Y.,  325.  'The  Thames,  14  Wall.,  98. 

*  Smith's  Mercantile  Law,  377-  °  Allen  v.  Williams,  12  Pick.,  297. 
^  Emery  v.  Irving  National  Bank,  25  Ohio  St.,  360. 


§   173^-  THE  ELEMENTS  OF  A  BILL  OF  LADING.   '  75^ 

himself  consignee  also,  and  sends  the  bill  of  lading  to  a 
third  party,  indorsed  to  him  in  full  or  in  blank,  the  effect 
is  the  same  as  if  such  party  were  named  in  the  bill  as  con- 
signee.^ If  the  consignee  advance  money  on  the  faith  of 
the  bill  of  lading  he  becomes  the  owner  of  the  bill  to  the 
extent  of  reimbursing  himself,  and  as  to  the  residue  in 
trust  for  the  former  owner.^ 

§  1737.  Several  bills  of  lading. — Where  there  are  sev- 
eral bills  of  lading,  each  is  a  contract  in  itself  as  to  the 
holder,  but  there  is  but  one  contract  as  to  the  masters  and 
owners.  Therefore  if  the  several  numbers  of  the  set  of 
bills  of  lading  be  indorsed  to  different  persons,  and  there 
be  competition  for  the  goods,  the  rule  is,  that  if  the  equi- 
ties be  equal,  the  property  passes  by  the  bill  first  indorsed.' 
For  the  principle  is  settled,  that  if  the  same  goods  are  sold 
to  two  different  persons  by  conveyances  equally  valid,  he 
who  first  lawfully  acquires  possession  has  priority.^  And 
if  a  party  makes  advances  on  faith  of  a  shipment,  one  who 
afterward  with  notice  of  the  fact,  though  before  the  first 
bill  of  lading  is  delivered,  receives  a  second  bill  of  lading 
for  the  goods,  is  not  entitled  to  its  benefit.^ 

§  1738.  Contents  of  bills  of  lading. — The  bill  of  lading 
should  contain  the  quantity  and  marks  of  the  merchandise ; 
the  names  of  the  shipper,  of  the  consignee,  and  of  the 
master  of  the  ship  ;  the  places  of  departure  and  discharge  ; 
and  the  price  of  the  freight.  Sometimes  it  states  also  the 
condition  of  the  goods.  And  from  early  times  it  has  been 
the  custom  to  express  as  a  limitation  of  the  contract  to 
carry  and  deliver  the  goods,  "  the  dangers  of  the  sea  ex- 


'  Walley  v.  Montgomery,  3  East.,  585. 

"  Haille  v.  Smith,  i  Bos.  &  Pul.,  563  ;  Armour  v.  Michigan  Central  R.R.,  6; 
N.  Y.,  120.  ^  ^ 

*  Caldwell  v.  Ball,  i  Term  R.,  205  ;  Meyerstein  v.  Barber,  L.  R.,  2  C.  P.,  661 
36  L.  J.  C.  P.,  361  ;  3  Kent  Com.,  284. 

*  Lanfair  v.  Sumner ;  Lamb  v.  Durant,  12  Mass.,  54;  i  Smith  Lead.  Cas.,  891 

*  Stevens  v.  Boston,  etc.,  R.R.  Co.,  8  Gray,  262. 


758  BILLS    OF    LADING.  §   1739- 

cepted."  In  later  times,  the  exception  has  been  usually 
extended  to  the  acts  of  God,  public  enemies,  fire,  and  all 
other  dangers  and  accidents  of  the  seas,  rivers,  and  naviga- 
tion.^ Other  clauses  are  sometimes  inserted  in  the  bill  of 
lading,  according  to  the  nature  of  the  contract  between 
the  parties  to  it,  to  provide,  for  instance,  for  the  payment 
of  demurrage  (by  which  is  meant  the  allowance  or  pay- 
ment for  detention  of  the  ship)  by  the  consignee,  the  effect 
of  which  is  to  bind  the  consignee  to  pay  it  if  he  receive 
the  goods — for  the  acceptance  of  goods  by  the  consignee, 
in  pursuance  of  a  bill  of  lading  whereby  the  shipper  makes 
payment  of  freight  or  demurrage  a  condition  precedent  to 
delivery,  is  evidence  of  an  undertaking  by  the  consignee 
to  pay  such  demand.^  Where  the  bill  contains  the  words, 
"  demurrage  $io  a  day  after  four  days,"  its  meaning  is,  that 
the  vessel  is  entitled  to  demurrage  after  four  days  from  her 
arrival  at  the  specified  place,  and  her  master  notifies  the 
consignee  of  arrival.  This  can  not  be  varied  by  proof  of 
usage  that  such  a  clause  means  four  days  after  the  vessel 
obtains  a  berth,  though  such  evidence  may  be  proper  where 
the  master  has  liberty  to  choose  a  landing  place.^  Where 
the  bill  contains  no  provision  for  the  payment  of  demur- 
rage, the  consignee,  or  his  assignee,  is  not  liable  therefor, 
even  if  he  receives  the  cargo,  much  less  where  he  assigns 
the  bill  before  delivery  of  the  cargo.^ 

§  I  739.  How  far  shipper  and  carrier  bound  by  ter?7is  of 
the  bill  of  lading. — A  clause  in  a  bill  of  lading  providing 
that  the  goods,  immediately  upon  delivery  by  the  carrier, 
shall  be  at  the  risk  of  the  shipper,  constitutes  a  valid 
special  contract.  But  it  must  be  reasonably  construed,  and 
no  obligation  otherwise  resting  on  the  carrier  is  thereby 
removed,  except  such  as  is  expressed  or  reasonably  implied. 


*  3  Kent  Com.,  282,  Lect.  XLVII.  ''  Scaife  v,  Tobin,  3  B.  &  Ad.,  523 

^Philadelphia,  etc.,  R.R.  Co.  v.  Northam,  2  Ben.,  i. 
"•Gage  V.  Morse,  12  Allen,  410. 


§  I740^-  THE  ELEMENTS  OF  A  BILL  OF  LADING.  759 

He  must  notify  the  consignee  of  the  arrival  of  the  goods, 
proffer  a  delivery  at  a  reasonable  and  proper  time,  and 
afford  the  consignee's  agents  an  opportunity  to  identify  and 
receive  them.  These  things  done,  his  liability  ceases,  un- 
less his  agents  negligently  deliver  them  to  an  improper  per- 
son.* And  even  where  loss  or  damage  from  neglect  of  an 
agent  is  excepted,  it  would  be  construed  as  contemplating 
only  the  hazards  of  transportation,  and  not  negligence  in 
delivering  the  goods  to  a  person  without  authority  to  re- 
ceive them.^ 

§  1740.  If  a  particular  vessel  be  named  in  the  bill  of 
lading  by  the  carrier,  it  must  be  assumed  that  the  owner  of 
the  goods  designated  her  as  the  proper  one  to  take  the 
goods,  having  regard  to  the  voyage  and  time  of  sailing, 
and  the  carrier  can  not  send  by  another  vessel  without  as- 
suming the  whole  risk  of  loss  or  damage  to  the  goods 
wiiile  on  such  vessel.^ 

Where  a  place  of  landing  the  goods  is  named  in  the  bill 
of  lading,  they  must  be  there  landed  if  it  can  be  done  with 
safety.^ 

§  1740^.  Carrier  can  not  exclude  liability  for  negligence. 
— The  carrier  is  bound  by  the  terms  of  the  bill  of  lading 
when  he  accepts  it  from  the  shipper,  although  he  may  be 
ignorant  of  its  contents;^  and  though  it  may  contain  an 
exemption  from  loss  by  fire,  the  exemption  will  not  ex- 
clude liability  for  loss  occasioned  by  the  carrier's  own  negli- 
gence ;^  as,  for  instance,  a  railroad  company  carrying  goods 
under  such  a  bill  of  lading  will  be  bound  for  loss  by  fire 


'  The  Santee,  7  Blatch.,  186.  '  Goddard  v.  Mallory,  52  Barb.,  87. 

"Guillaume  v.  Hamburgh,  etc.,  Packet  Co.,  42  N.  Y.,  212. 

*  Shaw  V.  Gardner,  12  Gray,  488. 

'^Germania  Fire  Ins.  Co.  v.  Memphis,  etc.,  R.R.,  72  N.  Y.,  90 ;  Belger  v. 
Dinsmore,  51  N.  Y.,  166. 

*  Germania  Fire  Ins.  Co.  v.  Memphis,  etc.,  R.R.,  72  N.  Y.,  90  ;  Lamb  v.  Cam- 
den, etc.,  Co.,  46  N.  Y.,  271  ;  Mvnard  v.  Syracuse,  etc.,  R.R.  Co.,  71  N.  Y.,  180; 
Wells  V.  Steam  Nav.  Co.,  8  N.  Y.,  375  ;  Lockwood  v.  R.R.  Co.,  17  Wall.,  357 
Hill  &  Man.  Co.  v.  Providence,  etc.,  Steamship  Co.,  113  Mass.,  495. 


760  BILLS    OF    LADING.  §   1 741. 

occasioned  by  sparks  from  the  locomotive,  the  goods  not 
being  protected  by  proper  apparatus ;  ^  the  terms  of  the 
contract  as  evidenced  by  the  bill  of  lading  can  not  be  varied 
by  parol  evidence.^ 

By  issuing  a  bill  of  lading  of  goods  as  deliverable  to 
order,  the  carrier  becomes  bound  not  to  deliver  them  with- 
out the  production  of  such  order ;  and  laches  of  the  holder 
in  not  presenting  the  order,  however  it  may  warrant  the 
carrier  in  divesting  itself  of  the  special  risks  assumed  as 
carrier,  forms  no  warrant  for  a  delivery  of  the  goods  to  a 
person  having  no  authority  to  receive  them.^ 

§  1 74 1.  When  losses  by  the  perils  of  the  sea  are  excepted 
in  the  bill  of  lading,  it  is  incumbent  on  the  carrier  to  show 
that  any  loss  which  has  occurred  was  occasioned  by  such 
peril ;  ^  but  when  the  peril  is  shown  to  have  existed,  the 
carrier  is /r^V/^^/^^z'^  relieved  from  liability,  and  its  negli- 
gence, if  averred,  must  be  proved.^  So  where  loss  from 
"  rust,  leakage,  or  shrinkage  "  is  excepted  in  the  bill,  the 
shipper  must  prove  negligence  in  order  to  charge  the  car- 
rier with  such  loss.^  And,  indeed,  wherever  negligence 
enters  into  the  cause  of  the  loss,  the  carrier  is  liable, 
although  it  proceeded  from  an  excepted  source.^  When 
the  bill  of  lading  contains  a  clause  exempting  the  carrier 
from  liability  for  loss  "  by  theft  on  land  or  afloat,"  it  is  not 
intended  to  apply  to  a  theft  by  the  purser  of  the  ship  put 
in  charge  of  the  articles.^ 


'  Steinweg  v.  Erie  R.R.  Co.,  43  N.  Y.,  123. 

"^  Ante,  §  1729;  Cincinnati,  etc.,  R.R.  v.  Pontius,  19  Ohio  St.,  221  ;  Germania 
Fire  Ins.  Co.  v.  Memphis,  etc.,  R.R.,  72  N.  Y.,  90  ;  Long  v.  N.  Y.  Central  R.R., 
50  N.  Y.,  "jd.     See  atite,  §  1729a. 

^  The  Thames,  7  Blatchf.,  226. 

*  Hooper  v.  Rathbone,  Taney,  519  ;  The  Juniata  Paton,  i  Biss.,  279. 

^  Transportation  Co.  v.  Downer,  11  Wall.,  129  ;  The  Juniata  Paton,  i  Biss.,  15. 

"  The  Invincible,  i  Low.,  225. 

'  Gill  V.  General  Iron  Screw  Collier  Co.,  L.  R.,  i  C.  P.,  600 ;  The  David  and 
Caroline,  5  Blatchf.,  266  ;  Merchants',  etc.,  Co.  v.  Cornforth,  3  Colorado,  280. 

"  Spinetti  v.  Atlas  Steamship  Co.,  21  N.  Y.  S.  C.  (14  Hun),  100  ;  s.  C,  80  N. 
Y.,  71. 


§   1743-  TRANSFER  OF  BILLS  OF  LADING.  76 1 

§  1 742.  As  to  the  condition  of  the  goods. — A  recital  in  a 
bill  of  lading,  that  a  cask  was  received  "  in  good  order  and 
well  conditioned,"  extends  only  to  the  apparent  external 
condition  of  the  cask,  excluding  any  implication  as  to  its 
intrinsic  soundness  and  sufficiency.^  And  the  recital  "  re- 
ceived in  good  order  and  condition  "  is  merely  presumptive 
evidence  that  the  goods  were  free  from  internal  injuries.^ 
The  words  "shipped  in  apparent  good  order"  do  not  change 
the  legal  effect  of  the  bill,  and  it  is  only  prima  facie  evi- 
dence that  they  were  in  good  order;  the  admission  being 
limited  to  the  apparent  condition,  a  latent  defect  may  be 
shown  by  the  carrier.^ 

Where  the  master  of  the  vessel  uses  all  proper  diligence, 
the  charterers  can  not  recover  damages  for  delay  caused  by 
forcible  detention  by  the  government.'* 


SECTION   IV. 

TRANSFER  OF   BILLS   OF   LADING. 

§  1743.  As  to  who  may  transfer  the  bill  of  lading. — 
Strictly  speaking,  no  person  but  the  consignee,  when  the 
bill  of  lading  is  made  out  in  his  name,  can  pass  legal  title  to 
the  goods,  by  indorsement  of  the  bill,  \X.'=^  prima  facie  effect 
being  to  vest  ownership  in  him.^  But  if  the  consignor  be 
the  owner,  and  the  shipment  be  on  his  own  account  and 
risk,  although  he  may  not  pass  the  title  by  virtue  of  a  mere 
indorsement  of  the  bill  of  lading,  unless  he  be  consignee 
also,  or  it  be  deliverable  to  his  order,  yet  by  any  assignment, 
either  on  the  bill  of  lading  or  by  a  separate  instrument,  he 


'  The  Olbers,  3  Ben.,  148. 

'  Richards  v.  Doe,  100  Mass.,  524.     See  also  Hastings  v.  Pepper,  il  Pick.,  43 
Nelson  v.  Woodruff,  i  Black,  U.  S.  S.  C,  160,  and  ante,  §  1729. 

'  The  Oriflamme,  i  Saw.,  176.  *  The  Onrust,  I  Ben.,  431. 

'  The  Sally  Magee,  3  Wall.,  457. 


762  BILLS    OF    LADING.  §   1 744. 

can  pass  the  legal  title  to  the  same  ;  and  it  will  be  good 
against  all  persons,  except  a  purchaser  for  a  valuable  con- 
sideration, by  an  indorsement  of  the  bill  of  lading  itself. 
Such  an  assignment  not  only  passes  the  legal  title  as  against 
his  agents  and  factors,  but  also  against  his  creditors,  in 
favor  of  the  assignee.^  It  is  necessary  that  the  bill  of  lading 
be  delivered,  in  order  to  pass  the  goods,  and  an  indorse- 
ment without  delivery  will  not  suffice.^  But  putting  it  in 
the  post-office,  addressed  to  the  indorsee  or  to  another  for 
him,  would  be  a  valid  delivery.^  When  the  indorsement  of 
a  bill  of  lading  is  proved,  it  will  be  presumed  to  have  been 
indorsed  for  value  until  the  contrary  is  shown.* 

§  1 744.  Indorsement  hi  blank. — A  bill  of  lading  indorsed 
in  blank  was  supposed  at  one  time  to  be  distinguishable 
from  one  indorsed  to  a  particular  person  ;^  but  it  has  long 
since  been  conceded  and  established  that  no  such  distinc- 
tion can  be  supported,  and  an  indorsement  in  blank  filled 
up  to  a  particular  person  is  as  effectual  as  if  originally  so 
written.^ 

§  1 745.  Conditional  and.  restrictive  indorsements. — A 
bill  of  lading  may  be  indorsed  with  conditions  or  restric- 
tions to  the  same  effect  as  the  like  indorsement  of  a  bill  of 
exchange  or  promissory  note.  Thus,  if  the  goods  are  to  be 
delivered,  provided  A.  B.  pay  a  certain  draft,  all  subsequent 
indorsees  take  subject  to  that  condition,  and  have  no  title 
until  it  is  complied  with.*^  And  the  indorsement  of  a  bill 
of  lading  "without  recourse"  was  recently  held  to  be  valid  ; 
and  the  ship-owners  having  delivered  the  goods  in  pursu 
ance  of  it,  were  not  permitted  to  sue  for  the  original  con- 
sideration.^ 

'  Conard  v.  Atlantic  Insurance  Co.,  i  Pet.,  445. 

"^  Allen  V.  Williams,  12  Pick.,  297,  '  Buffington  v.  Curtis,  15  Mass.,  528. 

*  Dracachi  v.  Anglo-Egyptian  Navigation  Co.,  L.  R.,  3  C.  P.,  190. 

"  Snee  v,  Prescott,  i  Atk.,  245.  °  Lickbarrow  v.  Mason,  2  T. 'R.,  63. 

^  Barrow  v.  Coles,  3  Camp.,  92  ;  Walley  v.  Montgomery,  3  East.,  585. 

*  Lewis  V.  M'Kee,  L.  R.,  2  Ex.,  37. 


§    I  746.  TRANSFER  OF  BILLS  OF  LADING.  763 

§  1745^.  Distinction  betivcen  transfer  of  property  sym- 
bolized by  bill  of  lading  and  transfer  of  carrier  s  contract 
— It  must  be  borne  in  mind  that  the  bill  of  lading  is  both 
the  symbol  of  the  property  which  is  delivered  to  the  carriei 
for  transportation,  and  evidence  of  the  carrier's  contract  to 
transport  and  deliver  that  property.  As  a  symbol  of  prop- 
erty it  may  be  transferred,  but  as  a  contract  with  the  carrier 
it  is  a  chose  in  action,  and  as  such  it  is  not  at  common  law 
assignable.  Upon  a  refusal  of  the  carrier  to  deliver  the 
goods,  the  transferee  of  the  bill  of  lading  might  sue  such 
carrier  for  the  wrongful  conversion  of  the  goods,  because 
the  property  in  them  passed  by  transfer  of  the  bill  of  lad- 
ing ;^  but  he  could  not  at  common  law  maintain  an  action 
for  a- breach  of  the  contract  contained  in  the  bill  of  lading, 
as,  for  instance,  for  not  delivering  them  according  to  the 
contract,  to  which  the  transferee  was  not  a  party,  for  the 
reason  that  such  contract  was  not  transferable.^  This  has 
been  changed  in  England  by  the  statute  of  i8  &  19  Victoria. 
In  some  of  the  States  of  the  United  States  the  transferee 
of  the  bill  of  lading  acquires  all  rights  of  his  transferrer  to 
the  benefit  of  the  contract ;  and  generally  the  assignee  of  a 
chose  in  action  may  sue  either  in  his  own  name  or  the  name 
of  his  assignor. 

§  1 746.  When  transfer  confers  greater  rights  than  trans- 
feree  possesses. — Between  the  original  vendor  and  vendee, 
the  transmission  or  indorsement  of  the  bill  of  lading  is  as 
ineffectual  for  all  purposes  as  for  the  absolute  transfer  of 
the  property,  and  only  serves  as  evidence  of  their  relations 
without  itself  affecting  them.  Its  receipt  by  the  consignee 
and  vendee  does  not  defeat  the  vendor's  right  of  stoppage 
in  transitu.  And  the  only  case  in  which  the  transfer  of 
the  bill  of  lading  confers  greater  rights  than  could  be  con- 


'  Haille  v.  Smith,  i  Bos.  &  Pul.,  564. 

'  Howard  v.  Shepherd,  19  L.  J.  C.  P.,  24S  ;  Thompson  v.  Downing,  14  L.  J 
Exch.,  320  ;  Sanders  v.  Vanzelier,  12  L.  J.  Exch.,  497  ;  Leggett  on  Bills  of  Lad 
ing,  341,  342  ;  Central  L.  J.,  January  13,  18S2,  vol.  xiv.  No.  2,  p.  24. 


764  BILLS    OF    LADING.  $   1747' 

ferred  without  such  transfer,  is  as  between  the  consignor 
and  consignee  on  the  one  hand,  and  a  transferee  of  the  bill, 
as  the  representative  of  the  goods,  to  a  bona  fide  purchaser 
on  the  other. ^ 

§  1 747.  Changes  of  common  law  by  statute. — ^The  com- 
mon law  respecting  bills  of  lading  has  been  very  much 
changed  by  statute  in  England  and  in  some  of  the  United 
States ;  and  other  documentary  evidences  of  title  are  placed 
in  some  cases  on  the  same  footing.  But  it  would  be  tres- 
passing too  much  upon  the  necessary  and  legitimate  topics 
of  this  volume  to  discuss  the  modifications  of  statute  law, 
and  the  nature  of  other  instruments  assimilated  in  a  greater 
or  less  degree  to  those  strictly  negotiable.^ 

§  1747^.  Effect  of  statute  snaking  bill  of  lading  negotiable. 
— In  the  United  States  Supreme  Court  it  was  recently  held 
that  although  a  statute  makes  bills  of  lading  negotiable  by 
indorsement  and  dehvery,  it  does  not  follow  that  all  the 
consequences  incident  to  the  indorsement  of  bills  and  notes 
ensue  or  are  intended  to  ensue  from  such  negotiation ;  and 
that  the  rule  that  a  bona  fide  purchaser  of  a  lost  or  stolen 
bill  or  note  is  not  bound  to  look  beyond  the  instrument 
has  no  appHcation  to  the  case  of  a  lost  or  stolen  bill  of 
lading.  And  that  the  purchaser  of  a  bill  of  lading,  who  has 
reason  to  believe  that  his  vendor  was  not  the  owner  thereof, 
or  that  it  was  held  to  secure  an  outstanding  draft,  is  not  a 
bona  fide  purchaser,  nor  entitled  to  hold  the  merchandise 
covered  by  the  bill  against  the  true  owner.^ 

§  1748.  Difference  between  consignee  and  vendee. — By 
the  common  law,  a  factor  or  consignee  stood  in  a  different 

•  Rowland  v.  Bigelow,  12  Pick.,  307  ;  Gumey  v,  Behrend,  3  El.  &  B.,  622. 
=  See  Cartwright  v.  Wilderrning,  24  N.  Y.,  521  ;  post,  §  i75o«- 
=  Shaw  V.  Railroad  Co.,  loi  U.S.  (11  Otto),  557.  In  Maryland,  bills  of  lading 
are  negotiable  by  statute  in  the  same  sense  as  bills  of  exchange,  Tiedeman  v. 
Knox,  53  Md.,  612.  See  the  following  cases,  which  relate  to  statutes  making 
bills  of  lading  negotiable :  Price  v.  Wisconsin  Co.,  43  Wise,  267  ;  Hale  v.  Mil- 
waukee Co.,  29  Wise,  482  ;  Greenbaum  v.  Megibben,  10  Bush  (Ky.),  419;  Erie 
Dispatch  Co.  v.  St.  Louis  Co.,  6  Mo.  Ap.,  172  ;  Merchants'  Bank  v.  Union  R.R. 
Co.,  69  N.  Y.,  373.    Post,  §  1750a. 


§   I  749.  TRANSFER  OF  BILLS  OF  LADING.  765 

situation  from  a  vendee  with  respect  to  his  power  to  pass 
the  property  therein  by  an  indorsement  of  the  bill  of  lading ; 
for  the  reason  that,  though  he  might  bind  his  principal  by 
a  sale  thereof,  he  could  not  do  so  by  a  pledge,  that  not  be- 
ing within  the  usual  scope  of  his  authority.^  And  even 
when  the  indorsement  was  by  the  vendor  himself,  the  trans- 
fer operated  only  as  a  conveyance  of  the  property  in  the 
goods,  but  not  as  an  assignment  of  the  contract,  so  that 
the  indorsee  could  not  sue  upon  the  bill  of  lading,^  except 
in  admiralty,  where  different  rules  obtained.^  But  now  the 
effect  of  the  factor's  act  in  England  is  to  give  validity  to 
pledges  by  agents,  as  well  as  to  sales  ;^  and  whether  the 
consignor  be  vendor,  or  merely  consigning  the  goods  for 
sale,  his  right  of  stoppage  will  be  defeated  by  the  assign- 
ment of  the  bill  of  lading,  even  to  a  person  not  a  vendee, 
but  from  whom  money  has  been  borrowed  on  the  faith  of 
it.  And  by  the  bills  of  lading  act,  all  rights  of  action  and 
liabilities  upon  the  bill  of  lading  are  to  vest  in  and  bind 
the  consignee  or  indorsee,  to  whom  the  property  in  the 
goods  shall  pass.^ 

§  1 749.  As  to  the  bona  fide  transferee. — The  transfer  of 
the  bill  of  lading,  in  order  to  affect  the  vendor's  right  of 
stoppage  in  transitu,  must  be,  both  by  the  common  law 
and  the  statute  law  of  England,  to  a  bona  fide  third  person. 
But  it  is  not  requisite  to  bona  fides  that  such  person  should 
be  without  notice  that  the  goods  have  not  been  paid  for, 
because  a  man  may  be  perfectly  honest  in  purchasing  goods 
which  he  knows  have  not  been  paid  for,  but  without  notice 
of  such  facts  as  render  the  bill  of  lading  not  fairly  and 
honestly  assignable.®     If,  however,  the  transferee  of  the  bill 

'  Newsom  v.  Thornton,  6  East.,  17  ;  Martin  v.  Coles,  i  M.  &  S.,  140 ;  Burton 
V.  Curyea,  40  111.,  320  ;  contra,  Marine  Bank  v.  Wright,  48  N.  Y.,  i. 

"  Thompson  v.  Downing,  14  AL  &  W.,  403;  Sanders  v.  Vanzeller,  4  Q.  B., 
297  ;  Smith's  Mer.  Law,  380. 

'  The  Rebecca,  5  Rob.  Adm.,  102  ;  i  Pars.  Shipping,  193. 

*  Benjamin  on  Sales,  607,  608,  657  ;  i  Smith's  Lead.  Cas.,  885. 

'  Benjamin  on  Sales,  658.  *  Cuming  v.  Brown,  9  East.,  506. 


766  BILLS    OF    LADING.  §   I75O. 

of  lading  knew  at  the  time  of  transfer  that  the  consignee 
of  the  goods  was  insolvent,  or  in  any  way  assisted  to  de- 
fraud the  consignor,  he  can  stand  in  no  better  situation 
than  the  consignee,  and  the  consignor  retains  the  right  of 
stoppage  in  tra7isitu  against  him.^ 

§  1 750.  Title  to  bill  of  lading  not  like  title  to  bill  of  ex- 
change.— The  bill  of  lading  not  being  negotiable,  the  mere 
honest  possession  of  such  an  instrument,  indorsed  in  blank, 
or  in  which  the  goods  are  made  deliverable  to  bearer,  al- 
though acquired  for  a  valuable  consideration,  is  not  such  a 
title  to  the  goods  as  the  like  possession  of  a  bill  of  ex- 
change or  negotiable  note  would  be  to  the  money  promised 
to  be  paid  by  the  acceptor  or  maker.  The  indorsement  of 
a  bill  of  lading  can,  therefore,  give  no  better  right  to  the 
goods  than  the  indorser  himself  had  (unless  by  statutory 
enactment),  for  the  bill  of  lading  is  unlike  commercial 
paper  in  this  :  that  the  assignee  can  not  acquire  a  better 
title  to  the  property  symbolically  delivered  than  his  assignor 
had  at  the  time  of  assignment.'^ 

§  1 750^.  Bill  of  lading  lost,  stolen,  or  fraudiclently  ob- 
tained.— It  follows  from  what  has  been  stated,  that  if  the 
owner  should  lose  or  have  stolen  from  him  a  bill  of  lading 
indorsed  in  blank,  the  finder,  or  the  thief  could  confer  no 
title  upon  an  innocent  third  person.^  But  the  title  of  bona 
fide  third  parties  will  prevail  against  the  vendor  who  has 
actually  transferred  the  bill  of  lading  to  the  vendee,  al- 
though he  may  have  been  induced  by  the  vendee's  fraud  to 
do  so,  because  a  transfer  obtained  by  fraud  is  not  void,  but 
voidable  only.*     If  the  goods  do  not  actually  belong  to  the 

*  Vertue  v.  Jewell,  2  T.  R.,  681. 

"^  Emer}'  v.  Irving  National  Bank,  25  Ohio  St.,  255.  See  Voss  v.  Robertson, 
46  Ala.,  483. 

^  Gurney  v.  Behrend,  2  El.  &  B.,  622 ;  23  L.  J.  Q.  B.,  265  ;  Brovver  v.  Pea- 
body,  3  Kern.,  126 ;  Dows  v.  Perrin,  16  N.  Y.,  333  ;  Dows  v.  Greene,  24  N.  Y., 
644;  Barnard  V.  Campbell,  55  N.  Y.,  462;  Benjamin  on  Sales,  658;  i  Smith's 
Lead.  Cas.,  900;  ante,  %  174.7a;  Shaw  v.  Railroad  Co.,  loi  U.  S.  (11  Otto),  557. 

*  Pease  v.  Gloahec,  L.  R.,  I  Privy  C.  App.,  219 ;  Benjamin  on  Sales,  658.  In 
Dows  V.  Greene,  24  N.  Y.,  644,  Smith,  J.,  said  :  "  A  contract  of  sale,  infected  by 


$>    1/51.  TRANSFER  OF  BILLS  OF  LADING.  "J^J 

shipper,  his  obtaining  and  transferring  a  bill  of  lading  for 
them  will  not  vest  title  in  the  transferee.^ 

§  1 75 1.  The  indorsee  of  a  bill  of  lading  may  libel  the 
vessel  in  which  the  goods  are  shipped,  for  failure  to  deHver 
them,  though  he  may  be  but  an  agent  or  trustee  for  an- 
other— as,  for  instance,  the  cashier  of  a  bank.^  And  the 
consignee  of  the  goods  to  whom  the  bill  has  been  indorsed, 
may  not  only  libel  the  carrier  vessel  for  its  default,  but  also 
a  vessel  by  whose  tortious  collision  with  the  carrier  vessel 
the  goods  have  been  lost.^ 

fraud,  is  valid  as  against  the  party  committing  the  fraud,  and  is  valid  to  pass 
and  to  protect  a  transfer  of  the  property  when  there  is  an  absolute  delivery 
as  against  the  vendor  till  it  is  rescinded.  As  against  him  and  in  his  favor  it  is 
a  voidable  contract,  voidable  at  his  election  ;  as  against  all  other  persons  it  is  a 
valid  contract  until  rescinded.  Now,  I  conceive  that  the  same  rule  applies  to 
this  bill  of  lading  as  would  apply  to  a  sale  and  delivery  of  personal  property." 
Compare  Dows  v.  Perrin,  i6  N.  Y.,  325,  and  Cartwright  v.  Wilderming,  24  N. 
v.,  521. 

'  IMoore  v.  Robinson,  62  Ala.,  537.  ^  The  Thames,  14  Wall.,  98, 

*  The  Vaughan,  14  Wall.,  258. 


CHAPTER   LV. 

GUARANTIES,   AND    THE    LAW    OF    GUARANTY    AS    APPLICABLE 
TO    NEGOTIABLE     INSTRUMENTS. 


SECTION   I. 

DEFINITION,   NATURE,   AND   CONSTRUCTION   OF   GUARANTIES. 

§  1752.  A  guaranty  is  defined  to  be  a  promise  to  answer 
for  the  payment  of  some  debt,  or  the  performance  of  some 
duty,  in  case  of  the  failure  of  another  person  who  is,  in 
the  first  instance,  liable  to  such  payment  or  performance.^ 
The  word  guaranty  signifies  the  same  as  warranty,  and  both 
words  are  derived  from  the  French  verb  garanth%  to  un- 
dertake, and  were  formerly  used  as  synonymous  terms.^ 

§  1 753.  Difference  between  guaranty  and  ordinary  sure- 
tyship.— Guaranty  is  a  peculiar  kind  of  suretyship,  as  is 
also  an  indorsement ;  but  guaranty  differs  from  indorse- 
ment, and  it  differs  also  from  the  ordinary  contract  of  a 
surety.  The  distinction  between  a  guarantor  and  an  ordi- 
nary surety  is  not  easily  defined,  and  the  terms  have  been 
frequently  used  as  convertible.  A  surety  is  generally  a  co- 
maker of  the  note,  while  the  guarantor  never  is  a  maker ; 
and  the  leading  difference  between  the  two  is,  that  the 
surety's  promise  is  to  meet  an  obligation  which  becomes 
his  own  immediately  on  the  principal's  failure  to  meet  it, 
while  the  guarantor's  promise  is  always  to  pay  the  debt  of 
another.^     A  surety  is  liable  as   much   as  his  principal   is 

^  Fell  on  Guaranty,  i  ;  Story  on  Notes,  §  457 ;  Smith's  Mercantile  Law,  chap, 
XI,  sec.  I. 

"^  Burrill's  Law  Dictionary.  *  2  Parsons  N.  &  B.,  Il8. 

(768) 


§   1754-       DEFINITION,   NATURE,  AND  CONSTRUCTION.  769 

liable,  and  absolutely  liable  as  soon  as  default  is  made,  with- 
out any  demand  upon  the  principal  whatever,  or  any  notice 
of  his  default.  He  may  be  damaged  by  reason  of  no  de- 
mand being  made  or  notice  given,  and  he  may  be  sued  as 
a  promisor.^ 

The  guarantor's  liability  is  less  stringent,  and  unless  de- 
mand is  made  within  a  reasonable  time,  and  notice  given 
in  case  of  default,  he  is  discharged  to  the  extent  that  he 
may  be  damaged  by  delay.  Thus,  if  the  debtor  has,  in  the 
meantime,  become  insolvent,  so  that  he  could  not  have  re- 
course upon  him,  he  could  not  be  held.^  Thus,  we  see  the 
surety's  liability  is  primary  and  direct,  like  that  of  the  prin- 
cipal. The  guarantor's  is  secondary  and  collateral.  And, 
in  general,  the  guarantor  contracts  to  pay,  if,  by  the  exer- 
cise of  due  diligence,  the  debt  can  not  be  made  out  of  the 
principal  debtor,  while  the  surety  undertakes  directly  for 
the  payment  at  once,  if  the  principal  debtor  makes  default. 
As  has  been  well  said,  the  surety  "  is  an  insurer  of  the  debt ; 
the  guarantor  is  the  insurer  of  the  solvency  of  the  debtor."'' 

§  I  754.  Diffei'ence  between  gtiaranty  and  indorse7nent. — 
The  liability  of  a  guarantor  also  differs  materially  from, 
and  is  more  onerous  than,  that  of  an  indorser.  The  in- 
dorser  contracts  to  be  liable  only  upon  condition  of  due 
presentment  of  the  bill  or  note  on  the  exact  day  of  maturi- 
ty, and  due  notice  to  him  of  its  dishonor.  And  he  is  ab- 
solutely discharged  by  failure  in  either  particular,  although 
he  may  suffer  no  actual  damage  whatever.  The  guarantor's 
contract  is  more  rigid,  and  he  is  bound  to  pay  the  amount 
upon  a  presentment  made,  and  notice  given  to  him  of  dis- 
honor, within  a  reasonable  time.  And  in  the  event  of  a 
failure  to  make  presentment  and  give  notice  within  such 
reasonable  time,  he  is  not  absolutely  discharged  from  all 


'  Perry  v.  Barret,  18  Mo.,   140.  -  Ibid. 

^  Krampt's  Ex'x  v.  Hatx's  Ex'rs,  52  Penn.  R.,  525  ;  Reigart  v.  White,  Ibid., 
438     Arentsv.  Commonwealth,  18  Grat.,  770. 

Vol.  II. — 49 


'J'JO  GUARANTIES.  §    1755. 

liability,  but  only  to  the  extent  that  he  may  have  sustained 
loss  or  injury  by  the  delay.^  The  same  person  may  be 
guarantor,  and  also  indorser  of  a  note  ;  and  in  such  case, 
while  failure  to  give  him  due  notice  of  demand  and  non- 
payment will  discharge  him  as  indorser,  he  will  still  be 
bound  as  guarantor.^ 

§  1 755.  As  to  construction  of  guaraiities. — For  the  inter- 
pretation of  guaranties,  the  cases  lay  down  very  opposite 
rules.  Some  of  them  incline  to  construe  the  guaranty  most 
strongly  against  the  guarantor,  on  the  ground  that  the 
words  of  an  instrument  are  to  be  taken  most  strongly 
against  the  party  using  them.^  Others  construe  it  strictly, 
because  it  is  (generally)  an  engagement  to  answer  for  the 
debt  of  another.*  Certainly,  where  there  are  ambiguous 
phrases  used,  they  are  to  be  taken  most  strongly  against 
the  guarantor,  upon  the  general  principle  which  throws  the 
burden  of  ambiguity  upon  the  party  creating  it.^  But  no 
special  rules,  different  from  those  which  apply  to  other  con- 
tracts, govern  it,  and  it  ought  to  receive  a  fair  and  liberal 
interpretation  according  to  the  true  import  of  its  terms. 
It  being  an  engagement  for  the  debt  of  another,  there  is 
certainly  no  reason  for  giving  it  an  expanded  signification 
or  liberal  construction  beyond  the  fair  import  of  its  terms. 
On  the  other  hand,  as  guaranties  are  contracts  of  extensive 
use  in  the  commercial  world,  upon  the  faith  of  which  large 
credits  and  advances  are  made,  care  should  be  taken  to  hold 
the  party  bound  to  the  full  extent  of  what  appears  to  be 
his  engagement.  Letters  of  guaranty  are  commercial  in- 
struments, generally  drawn  up  by  merchants,  sometimes 
inartificial   and    often    loose    in   their  structure  and  form. 

'  Arents  v.  Commonwealth,  18  Grat.,  770  ;  Storj'  on  Notes,  §  460. 

*  Deck  V.  Works,  57  N.  Y.  Pr.,  292. 

'  Mason  v.  Pritchard,  12  East.,  227  ;  Mayer  v.  Isaac,  6  M.  &  W.,  610;  Drum 
mond  V.  Prestman,  12  Wheat.,  518, 

*  Whitney  v.  Groot,  24  Wend.,  82  ;  Bigelow  v.  Benton,  14  Barb.,  128 ;  Evans 
V.  Whyle,  5  Bing.,  485 ;  15  E.  C.  L.  R.,  514 ;  Nicholson  v.  Paget,  i  C.&  M.,  48. 

*  Hargreave  v.  Smee,  6  Bing.,  244  ;  19  E.  C.  L.  R.,  69. 


^   1757.        DEFINITION,  NATURE,  AND  CONSTRUCTION.  77 1 

They  should  not,  therefore,  be  construed  with  nice  and 
technical  care  ;  but  according  to  the  facts  and  circum- 
stances accompanying  the  transaction,  holding  in  view  as 
the  main  object  to  ascertain  and  effectuate  the  intentions  of 
the  parties.* 

§  1756.  If  the  guaranty  propose  a  credit,  that  particular 
credit  must  be  granted,  or  the  guarantor  will  not  be  bound.^ 
An  authority  to  draw  bills  at  ninety  days  from  time  to 
time  means  at  ninety  days'  sight,  and  does  not  authorize  a 
drawing  at  ninety  days  from  date.'^  But  in  Massachusetts 
it  has  been  held  that  one  who  is  authorized  to  draw  drafts 
on  another  "  at  ten  or  twelve  days  "  with  nothing  to  indi- 
cate whether  ten  or  twelve  days  after  date  or  after  sight  is 
meant,  may  exercise  his  own  discretion,  and  consult  his 
own  convenience  in  that  particular.'*  Where,  by  letter  of 
credit  addressed  to  the  plaintiffs,  O.  opened  an  account 
with  them  in  favor  of  R.  &  Co.,  for  a  certain  amount  to 
be  used  by  sixty  days'  sight  drafts,  "  for  advances  to  be 
made  on  consignments  of  merchandise"  to  Q.'s  address, 
and  afterward  the  plaintiffs  by  letter  informed  R.  &  Co. 
that  Q.  had  opened  a  credit  with  the  plaintiffs  in  favor  of 
R.  &  Co.  for  that  amount  to  be  used  by  their  drafts  at 
sixty  days'  sight ;  and  the  letter  confirmed  the  credit,  and 
promised  that  R.  &  Co.'s  drafts  should  be  protested,  it  was 
held  that  only  sixty-day  drafts,  drawn  "  against  shipments 
of  consif^nments  to  the  address  of  O.,"  fell  within  the 
letter.^  , 

§  1757.  Liability  of  party  who  writes  his  name  on  back 
of  note  before  that  of  payee. — Great  diversity  of  opinion 


'  Douglas  V.  Reynolds,  7  Pet.,  122;  Lee  v.  Dock,  10  Id.,  493  ;  Lawrence  v. 
McCalmont,  2  How.,  449;  Bell  v.  Bruen,  i  How.,  187;  >Lauran  v.  BuUus,  16 
Pet.,  528  ;  Moore  v.  Holt,  10  Grat.,  294;  Smith  v.  Dann,  6  Hill,  543  ;  Mussey  v 
Rayner,  22  Pick.,  228. 

2  Walrath  v.  Thompson,  6  Hill,  540. 

^  Ulster  Co.  Bank  v.  McFarlan,  3  Den.,  553. 

*  Barney  v.  Newcomb,  9  Cush.,  47.  '  Gelpcke  v.  Quentrell,  66  Barb.,  617 


772  GUARANTIES.  §   1 757* 

has  arisen  as  to  the  Hability  of  one  who  writes  his  name  on 
the  back  of  a  note  which  is  payable  to  a  particular  payee 
before  such  payee's  name.  If  such  an  indorsement  be  made 
at  a  period  subsequent  to  the  original  transaction,  the  in- 
dorser  is  not  an  original  promisor,  but  a  guarantor.^  It  will 
be  presumed,  however,  that  such  indorsement  was  made  at 
the  time  the  note  was  executed;^  and  as  will  be  seen  in 
the  first  volume  of  this  work,  the  decisions  of  the  courts 
are  very  diverse  and  conflicting  as  to  the  liability  of  the 
party  making  it — some  regarding  him  as  a  comaker,  others 
as  a  surety,  others  as  an  indorser,  and  others  still  as  a 
guarantor.^ 

Our  view  is  this  :  When  the  note  is  not  negotiable,  such 
a  party  is  to  be  deemed  a  guarantor.  He  can  not  be  an 
indorser,  for  the  simple  reason  that  there  is  no  such  thing 
as  indorsement,  in  its  commercial  sense,  of  non-negotiable 
paper.  And  if  he  intended  to  be  a  surety,  it  is  reasonable 
to  presume  that  he  would  have  signed  conjointly  with  the 
maker,  or,  by  the  word  "  surety  "  attached  to  his  signature, 
indicated  an  intention  to  assume  that  character.  He  can, 
therefore,  only  be  a  guarantor.  ^ 

When  the  note  is  negotiable,  the  very  opposite  presump- 
tion arises.  It  is  intended  to  pass  current  from  hand  to 
hand,  and  it  is  but  natural  to  presume  that  one  who  assures 
a  negotiable  instrument  intends  to  assure  it  to  all  who  may 
become  its  holders,  unless  the  contrary  design  appears  ;  and 
that  assuming  the  responsibility,  he  is  also  entitled  to  the 
privileges  of  an  indorser.  It  is  true  that  there  is  no  trans- 
fer accompanying  such  indorsement,  either  in  point  of  fact 
or  colorably,  as  in  the  ordinary  case  of  an  accommodation 
indorsement,  and  in  the  title  as  against  the  maker,  such 

'  Benthall  v.  Judkins,  13  Mete,  265  ;  Union  Bank  v.  Willis,  8  Mete,  504 ;  Irish 
V.  Cutter,  31  Me.,  536. 

"  Benthall  v.  Judkins,  13  Mete,  265  ;  Lowell  v.  Gage,  38  Me.,  35  ;  Camden  v 
M'Koy,  3  Scam.,  437.  Evidence  is  admissible  to  show  when  the  signature  was 
made.     Draper  v.  Snow,  20  N.  Y.,  331.     See  vol.  i,  §  728. 

•  See  vol.  I,  §§  707  et  seg. 


§    1759*  "^^^  CONSIDERATION  01-   GUARANTIES.  'J']^ 

indorsement  forms  no  link.  But  the  indorser  in  suc.i  a 
case  seems  to  us  to  stand  in  the  position  of  a  drawer  whose 
bill  is  payable  to  the  order  of  the  payee,  and  which  has 
been  accepted  by  the  maker.  His  indorsing  in  that  pecul- 
iar style  would  indicate  that  it  was  done  for  accommoda- 
tion of  the  maker,  and  we  can  not  see  that  this  analogy 
between  his  position  and  that  of  an  accommodation  drawer 
fails  in  any  particular.^ 

§  1758.  Right  of  guara7itor  who  pays  note. — The  guar- 
antor of  a  note,  who  pays  it  upon  his  guaranty  of  payment 
by  the  payee,  who  is  also  indorser,  is  entitled  to  it  for  his 
own  use  when  he  pays  it  to  the  holder  ;  and  in  so  doing  he 
becomes  vested  with  the  same  rights  which  the  payee  had 
against  the  maker,  and  no  more.  If  the  consideration  as 
between  the  maker  and  payee  has  failed,  he  can  not  recover 
of  the  maker,  as  he  does  not  step  in  the  shoes  of  the  bona 
fide  holder,  to  whom  he  paid  it.^ 

A  guaranty  of  a  note  made  after  its  execution  upon  a 
new  and  sufficient  consideration  is  valid,  although  the  note 
is  payable  to  the  maker's  order  and  not  indorsed  by  him,  it 
having  been  in  that  condition  at  the  time  the  guaranty  was 
made.^ 


SECTION   II. 

THE   CONSIDERATION   OF   GUARANTIES   AND   THE   OPERATION   OF 
THE   STATUTE   OF   FRAUDS. 

§  1759.  (I)  As  to  the  consideration  of  guaranties. — It  is 
necessary  to  the  validity  of  a  guaranty  that  it  should  be 
upon  a  valuable  consideration.  There  are  three  classes  of 
cases  which  should  be  discriminated  :  (i)  When  the  guar- 
anty is  contemporaneous  with  the  principal  contract.      In 

'  See  vol.  I,  §§  707,  714.  "  Putnam  v.  Tash,  12  Gray,  121, 

'  Jones  V.  Thayer,  12  Gray,  443. 


774  GUARANTIES.  §    I760. 

such  a  case  it  is  not  necessary  that  it  should  be  a  separate 
and  distinct  consideration  from  that  upon  which  the  bill  or 
note  was  executed.  It  may  be  for  the  accommodation  of 
the  drawer,  maker,  or  other  party  to  add  strength  to  the 
paper  and  induce  the  guarantee  to  take  it,  and  then  the  value 
received  from  him  embraces  the  guarantor  as  well  as  the 
principal.  The  credit  is  not  given  solely  to  either,  but  to 
both  ;  and  when  the  guaranty  is  made  prior  to  delivery,  it 
will  be  presumed  to  be  upon  consideration  of  the  credit, 
and  will  be  valid.^ 

§  I  760.  (2)  Whe7i  the  guaranty  is  made  after  the  contract 
is  completed,  and  is  not  for  the  benefit  of  the  guarantor. — In 
such  case,  the  original  consideration  being  exhausted,  there 
must  be  some  new  and  sufficient  consideration  to  support  it, 
otherwise  it  will  be  void.^  And  when  it  is  shown  that  the 
guaranty  was  made  after  the  completion  of  the  note  or  other 
contract,  there  is  no  presumption  of  consideration,  but  the 
contrary  ;  and  the  plaintiff  must  prove  a  new  and  express 
consideration  in  order  to  enforce  it.^  There  may,  however, 
be  circumstances  which  show  that,  although  the  guaranty 
was  not  made  until  after  delivery  of  instrument,  it  was  de- 
signed and  understood  originally  that  it  should  be  made,  or 
have  the  effect  as  if  made  beforehand,  and  that  it  entered 
into  the  inducement  to  the  promisee  to  take  it ;  and  under 
such  circumstances  it  will  relate  back  to  the  time  when  it 
was  intended  to  operate,  and  be  valid  accordingly.'*  But 
unless  this  be  the  case,  the  consideration  must  appear,  where 


*  Parkhurst  v.  Vail,  73  111.,  323  ;  Draper  v.  Snow,  20  N.  Y.,  331  ;  Manrow  v. 
Durham,  3  Hill,  584  ;  Leggett  v.  Raymond,  6  Hill,  639  ;  Bickford  v.  Gibbs,  8 
Cush.,  184;  Hopkins  v.  Richardson,  9  Grat.,  494;  Snively  v.  Johnson,  i  W.  & 
S.,  309  ;  Colburn  v.  Averill,  30  Me.,  310  ;  Gillighan  v.  Boardman,  29  Me.,  79; 
Campbell  v.  Knapp,  15  Penn.  St.,  27. 

^  Howe  V.  Merrill,  5  Cush.,  80 ;  Tenney  v.  Prince,  4  Pick.,  385.  See  also  and 
compare  Williams  v.  Williams,  67  Mo.,  667  ;  Green  v.  Shepherd,  5  Allen,  570. 
But  as  to  innocent  holder,  see  Ewing  v.  Clarke,  8  Mo.  Ap.,  570. 

'  Tenney  v.  Prince,  4  Pick.,  385 ;  Klein  v.  Currier,  14  111.,  237  ;  Parkhurst  v. 
Vail,  73  111-.  323- 

*  Hawkes  v.  Phillips,  7  Gray,  284 ;  Moies  v.  Bird,  1 1  Mass.,  436. 


§    1763.  THE  CONSIDERATION   OF  GUARANTIES.  775 

it  is  necessary  that  it  be  set  fortli,  in  order  to  satisfy  the 
statute  of  frauds.^ 

§  1 76 1.  (3)  When  the  guaranty  is  made  after  tJie  con- 
tract is  conipleted,  and  is  for  the  benefit  of  the  guarantor. — 
Thus,  where  a  party  holds  a  bill  or  note,  and  upon  a  trans- 
fer in  some  transaction  of  his  own  guarantees  it  is  to  his 
transferee.  In  such  case,  the  consideration  moves  directly 
to  him  for  his  own  benefit ;  it  is  really  his  own  debt  that  he 
promises  to  pay  in  a  particular  way,  and  not  the  debt  of 
another.  And  the  clause  of  the  statute  respecting  a  promise 
or  engagement  to  pay  the  debt  of  another  has  no  applica- 
tion to  it.^ 

§  1762.  (II)  As  to  the  operation  of  the  statute  of  frauds. 
—In  the  29th  year  of  Charles  II.  (1667),  there  was  enacted 
"  The  Statute  of  Frauds,"  as  it  is  called,  a  provision  of 
which  was  that  "  noe  action  shall  be  brought  whereby  to 
charge  the  defendant  upon  any  speciall  promise  to  answere 
for  the  debt,  default,  or  miscarriages  of  another  person, 
unlesse  the  agreement  upon  which  such  action  shall  be 
brought,  or  some  memorandum  or  note  thereof,  shall  be  in 
writing,  and  signed  by  the  party  to  be  charged  therewith, 
or  some  other  person  thereunto  by  him  law^fully  author- 
ized." 

Many  questions  have  arisen  upon  the  construction  of 
this  statute  both  in  England  and  in  the  United  States,  in 
every  one  of  which  it  has  been  copied,  either  precisely  or 
in  a  somewhat  modified  form,  and  some  of  them  it  is  nec- 
essary to  consider  in  connection  with  guaranties,  (i) 
When  is  a  guaranty  such  a  promise  to  answer  for  the  debt 
of  another  as  to  come  within  the  meaning  of  the  statute  ? 
(2)  How  must  it  be  expressed,  when  it  comes  within  the 
statute,  in  order  to  conform  to  it  ? 

§  1 763.  Firstly  :  When  a  guaranty  is  a  promise  to  ajiswer 
for  the  debt  of  a^tother. — When  a  third  person  gets  credit, 

'  Edwards  on  Bills,  223.  "  Sttposi,  §  1763. 


77t>  GUARANTIES.  §   1^764. 

or  forbearance,  upon  the  guaranty  of  another,  even  when  it 
is  contemporaneous,  the  latter's  promise  is  clearly  "  a  prom- 
ise to  answer  for  "  his  debt,  and  it  must  comply  with  the 
statute  in  order  to  be  valid.  But  there  arejcases  in  which 
a  guaranty  is  really  to  answer  for  one's  own  debt,  though 
having  the  appearance  of  a  promise  to  answer  for  another's, 
and  in  such  cases  it  is  not  within  the  statute.^  Thus, 
where  the  defendant  transferred  the  note  of  a  third  person, 
payable  to  him  or  bearer,  to  the  plaintiff,  in  exchange  for 
his  own  note,  which  plaintiff  held,  and  at  the  same  time 
indorsed  a  guaranty  on  the  back  of  it,  without  expressing 
a  consideration,  it  was  held  that,  "  although  in  form  a 
promise  to  answer  for  the  debt  or  default  of  another,  in 
substance  it  was  an  engagement  to  pay  the  guarantor's 
own  debt  in  a  particular  way,"  and  that  "  it  would  be 
good  without  any  writing."^  So  where  a  third  person's 
note  was  transferred  with  mere  verbal  guaranty  that  it 
"  was  good  and  collectable,"  in  part  payment  of  a  horse,  it 
was  held  valid,  because  in  reality  a  promise  to  pay  the 
amount,  unless  the  third  person  paid  it  for  him.^  This  doc- 
trine is  uniformly  adopted  in  the  United  States,  where  the 
guaranty  is  upon  a  pre-existing  consideration,  as  well  as 
where  it  is  for  a  debt  contracted,  goods  sold,  or  obligations 
exchanged,  at  the  time  the  guaranty  is  made.*  Where  one 
who  sells  a  note  guarantees  its  payment,  the  guaranty  is  an 
original  undertaking,  and  need  not  be  written.^ 

§  1764.    Secondly  :  As  to  the  te}^ms  of  the  giiaj'anty. — It 

■  Throop  on  Verbal  Agreements,  640,  §  650. 

^  Brown  v.  Curtis,  2  N.  Y.  (2  Comst.),  225. 

'Cardell  v.  McNiel,  21  N.  Y..  336  (i860) ;  see  also  Fowler  v.  Clearwater,  35 
Barb.,  143  (1861)  ;  Dauber  v.  Blackney,  38  Barb.,  432  (1862)  ;  Milks  v.  Rich,  80 
N.  Y.,  269  (1880)  ;    see  ante,  §  739^. 

*  Beaty  v.  Grim,  18  Ind.,  131  (1862)  ;  Malone  v.  Keener,  44  Penn.  St.,  107 
(1862);  Dyer  v.  Gilson,  16  Wis.,  557  (1863);  Huntington  v.  Wellington,  12 
Mich.,  10  (1863)  ;  Thurston  v.  Island,  6  R.  I.,  103  (1859J  ;  Hopkins  v.  Richard- 
son, 9  Grat.,  485  (1852)  ;  Hall  v.  Rodgers,  7  Humph.,  536  (1874)  ;  Rowland  v. 
Rorke,  4  Jones  (N.  C),  337  (1857)  ;  Johnson  v.  Gilbert,  4  Hill,  178  ;  Meech  v. 
Smith,  7  Wend.,  315  ;  Sheldon  v.  Butler,  24  Minn.,  513. 

'  Meech  v.  Smith,  7  Wend.,  315  ;  Hunt  v.  Adams,  5  Mass.,  358. 


§   1  y6^.  THE  CONSIDERATION  OF  GUARANTIES.  yyy 

has  been  held  uniformly  in  England,  that  when  the  guar- 
anty is  to  answer  the  debt  of  another  the  consideration 
must  be  expressed,  as  well  as  the  promise,  to  satisfy  the 
word  "  agreement "  in  the  statute,  and  that  parol  evidence 
is  inadmissible  to  supply  it.^  This  view  rested  upon  the 
ground  that  the  word  agreement  was  used  in  the  sense  of  a 
mutual  contract,  and  that  it  was  necessary  for  the  consider 
ation,  without  which  there  is  no  contract,  to  appear  upon 
the  face  of  the  writing,  in  order  to  the  existence  of  a  writ- 
ten agreement.  In  the  United  States  a  number  of  cases 
have  adopted  this  reasoning;^  but  the  word  agreement  sig- 
nifies, in  its  ordinary  acceptation,  the  thing  agreed  upon, 
and  it  would  seem  that  if  the  thing  agreed  upon  was  in 
writing  the  statute  would  be  complied  with.  It  is  true 
that  the  formal  compact  is  technically  an  agreement ;  but 
the  word  would  seem  to  have  been  used  in  its  popular  and 
ordinary  sense,  rather  than  as  a  technicality,  being  intended 
to  apply  to  all  manner  of  contracts  among  the  people  ;  and 
the  opinion  predominates  in  this  country  that  if  the  prom- 
ise is  written  it  is  sufficient.^ 

§  I  765,  When  name  in  blank  is  sicfficient  writing  to  sat- 
isfy statute  of  frauds. — In  those  States  where  the  consid- 
eration is  not  required  to  be  expressed,  the  name  of  the 
party  in  blank  is  often  regarded  as  a  sufficient  writing  to 
satisfy  the  statute,  the  signature  applying  to  the  contract 
already  written,  or  to  the  words  above  the  signature,  which 
are  afterward  written  by  implied  authority,  as,  for  instance, 

'  Wain  V.  Walters,  5  East.,  10 ;  Saunders  v.  Wakefield,  4  Barn.  &  Aid.,  595 
Jenkins  v.  Reynolds,  3  Brod.  &  Bing,,  14;  Morley  v.  Boothby,  3  Bing.,  107; 
Newbury  v.  Armstrong,  6  Bing,,  201  ;  Alnutt  v.  Ashenden,  5  Man.  &  G.,  392. 

^  Henderson  v.  Johnson,  6  Ga.,  390  ;  Elliott  v.  Giese,  7  Harris  &  J.,  457  ; 
Righy  V.  Norwood,^  34  Ala.,  129;  Simons  v.  Steele,  36  N.  H.,  73;  Sears  v. 
Brink,  3  Johns,  210;  Leonard  v.  Vredenburgh,  8  Johns,  29;  Nichols  v.  Allen, 
23  Minn.,  543;  Ordeman  v.  Lawson,  49  Md.,  135;  Parry  v.  Spikes,  49  Wise, 
385- 

^  Packard  v.  Richardson,  17  Mass.,  122,  Parker,  C.  J.  ;  Smith  v.  Ide,  3  Vt., 
390;  Gillighan  v.  Boardman,  29  Me.,  79;  Sage  v.  Wilcox,  6  Conn.,  81  ;  Reed 
V.  Evans,  17  Ohio,  128  ;  Buckley  v.  Beardslee,  2  South,  570;  Ashford  v.  Robin 
son,  8  Ired.,  114  ;  Wren  v.  Pearce,  4  Sm.  &  M.,  91  ;  Little  v.  Nabb,  10  Mo.,  3. 


T^Z  GUARANTIES.  §   1 766. 

where  one  not  the  payee  of  a  note  indorses  it  when  it  is 
made.^  This  is,  we  think,  the  correct  view ;  but  there  is 
also  another  ground  on  which  such  party  may  be  held,  that 
is,  that  such  a  party  is  an  indorser,  and  that  the  statute  has 
no  application  to  those  cases  which  come  peculiarly  within 
the  rules  of  the  law  merchant.^ 

Where  the  statute  only  requires  the  "  promise  "  to  be  in 
writing,  it  is  not  necessary  for  the  consideration  to  appear.^ 

§  1 766.  When  consideration  77tust  appear  it  need  not  be 
set  out  at  length. — Where  it  is  held  that  the  consideration 
must  appear  in  the  guaranty  of  another's  debt,  it  is  never- 
theless not  necessary  that  it  be  set  out  at  length  ;  but  suffi- 
cient, if  it  appear  by  reasonable  intendment.  Thus,  "  I 
hereby  guarantee  the  present  account  of  Miss  H.  M.,  due 
to  B.  (Sl  Co.,  of  £^11  4  4,  and  what  she  may  contract 
from  this  date  to  30th  of  September  next,"  was  held  a  suf- 
ficient indication  of  the  consideration  ;  which  was  for  a 
future  as  well  as  past  credit,  and  it  was  not  necessary  that 
the  consideration  and  promise  should  be  co-extensive.*  So, 
"  in  consideration  of  your  being  in  advance  to  Messrs.  Lees 
and  Sons,  in  the  sum  of  ^10,000,  for  the  purchase  of  cot- 
ton, I  do  hereby  give  you  my  guaranty  for  that  amount  in 
their  behalf." °  So,  "You  will  please  be  so  good  as  to 
withdraw  the  promissory  note,  and  I  will  see  you  at  Christ- 
mas, when  you  shall  receive  from  me  the  amount  of  it, 
together  with  the  memorandum  of  my  son's,  making,  on 
the  whole,  ;^45."^  So  it  was  held,  that  the  consideration, 
which  was  a  forbearance  to  sue,  was  sufficiently  manifest 

'  Perkins  v.  Catlin,  ii  Conn.,  213  ;  Nelson  v.  Dubois,  13  Johns,  175  ;  Aloies 
V.  Bird,  II  Mass.,  436. 

'■^  See  chapter  xix,  §  567  and  notes,  vol.  i ;  Throop  on  Verbal  Agreements, 
^59'  §§  85,  86.     Text  approved  in  Taylor  v.  French,  2  Lea,  260. 

^  Colgin  V.  Henley,  6  Leigh,  85  ;  Taylor  v.  Ross,  3  Yerg.,  330 ;  Pearce  v 
Wren,  4  S.  &  AL,  91  ;  Violett  v.  Patten,  5  Cranch,  142  ;  Edwards  on  Bills,  240^ 
241. 

*  Russell  V.  Moseley,  3  B.  &  B.,  211. 

*  Haigh  V.  Brooks,  10  Ad.  &  El.,  309. 

*  Shortrede  v.  Cheek,  i  Ad.  &  El.,  57. 


§1767.  THE  CONSIDERATION  OF  GUARANTIES.  779 

where  the  plaintiff,  having  pressed  W.  for  payment  of  a 
debt,  the  defendant,  W.'s  attorney,  sent  to  plaintiff  a  bill 
accepted  by  W.  at  two  months,  inclosed  in  a  letter,  wherein 
defendant  said:  "W.  being  again  disappointed  in  receiving 
remittances,  and  you  expressed  yourself  inconvenienced  for 
money,  I  inclose  you  his  acceptance  at  two  months,"  and 
the  plaintiff  refusing  the  bill,  unless  defendant  put  his  name 
to  It,  the  latter  wrote  on  the  back  of  the  letter  •  "  I  will 
see  the  bill  paid  for  W.''^ 

§  1767.  New   York  decisions. ~\xi   New   York,   it   was 
formerly  held,  that  if  the  original  contract  and  the  guaran- 
tee were  contemporaneous,  and  the  guaranty,  therefore,  an 
essential  inducement  to  the  credit  given,  it  would  not  be 
necessary  to  show  any  other  consideration  than  that  mov- 
ing between  the  parties  to  the  original  contract ;  and  that 
whether  the  guaranty  were  on  the  same  or  a  separate  paper, 
It  need  not  disclose  a  distinct  consideration.^     Subsequent- 
ly the  statute  of  frauds  was  so  amended  in  that  State  as  to 
require  the  consideration   to   be  expressed  in  writing,  and 
since  then   a  stricter  interpretation  has   obtained.     Thus, 
where  a  party  wrote  under  a  promissory  note  simultaneous- 
ly with  Its  execution,  and  the  consideration  was  granted 
upon  the  credit  of  his  name,   "  I  hereby  guarantee  the  pay- 
ment of  the  above  note."  the  guaranty  was  held  void  be- 
cause no  consideration  was  expressed.^     But  where  the  con- 
sideration is  required  to  be  expressed,  it  need  not  be  de- 
fined ;    and,    therefore,    the   words    "value    received"   are 
deemed  a  sufficient  expression  of  it.''     If  a  guaranty  be  un- 
der seal,  the  consideration  is  conclusively  imported." 

'  Em  matt  v.  Kearns,  5  Bing.  N.  C,  559 

^^oTr^^dr^?^''^^^'  ^  J°^"^'  =9;  Barley  V.  Freeman.  11  Johns.  221; 
iNeison  V.  Dubois,  13  Johns,  175,  approved  in  D-\Volf  v.  Rabaud.  i  Pet.  lit 

^^_  Bank  of  Tennessee  v.  Barksdale,  5  Sneed,  jy.  Crocker  v.  Gilbert,  9  Cush.. 


78o  GUARANTIES.  §   1 768. 


SECTION   III. 

FORMS   AND  VARIETIES   OF  GUARANTIES. — ABSOLUTE   AND   CON- 
DITIONAL  GUARANTIES. 

§  1768.  Forms  of  g2iaranties. — The  guaranty  of  a  bill 
or  note  need  not  be  in  any  particular  form,  and  it  is  gov- 
erned usually  b}"  the  same  rules  which  apply  to  other  guar- 
anties. 

A  guaranty  is  generally,  and  when  it  is  to  answer  for  the 
debt  of  another,  it  must  be  written.  But  there  may  be 
valid  verbal  guaranties.  When  written,  it  may  be:  (i)  By 
a  separate  instrument ;  or  (2)  by  writing  on  the  instrument 
guaranteed ;  and  it  may  be  (3)  sealed  or  unsealed. 

When  it  is  written  on  the  instrument  guaranteed,  its 
very  presence  is  identification  of  the  contract  referred  to  ; 
but  when  on  a  separate  paper,  it  must  describe  with  suffi- 
cient accuracy  the  bill  or  note  or  other  contract  it  refers  to. 

§  I  768^.  As  to  the  varieties  of  guaranties. — A  guaranty 
may  be  (i)  general  or  special  ;  (2)  absolute  or  conditional ; 
(3)  limited  or  unlimited  ;  and  (4)  temporary  or  continuing. 
A  general  guaranty  is  a  guaranty  to  whomsoever  may  ac- 
cept the  proffer  made.  A  special  guaranty  is  a  guaranty 
to  a  particular  person. 

§  1769.  In  the  second  place,  as  to  absohUe  and  conditional 
guaranties. — If  A.  guarantees,  expressly  or  by  implication, 
to  pay  the  note  of  B.  to  C,  provided  B.  does  not  pay  it,  he  be- 
comes absolutely  liable  for  its  payment  immediately  upon 
B.'s  default,  and  is,  therefore,  deemed  an  absolute  guarantor 
of  the  due  payment  of  the  note  by  B.  to  C.^  But  if  A. 
guarantees  the  collectibility  or  goodness  of  B.'s  note  to  C, 
he  does  not  absolutely  guarantee  its  payment,  but  only  that 
he  will  pay  it  in  the  event  that  C.  shall  test  the  collectibility 

'  Dickerson  v.  Derrickson,  39  111.,  575;  Allen  v.  Rightmere,  20  Johns,  365; 
Arents  v.  Commonwealth,  18  Grat.,  770. 


§   1769'^.         FORMS  AND  VARIETIES  OF  GUARANTIES.  78 1 

or  goodness  of  the  note  by  regular  prosecution  of  suit  against 
B.,  and  shall  be  unable,  by  due  and  reasonable  diligence,  to 
enforce  its  payment.  And  accordingly  he  is  only  deemed 
a  conditional  guarantor  of  payment^ 

And  he  is  always  deemed  only  a  conditional  guarantor 
of  payment  when  there  is  some  extraneous  event,  beyond 
the  mere  default  of  the  principal,  upon  which  the  guaranty 
becomes  binding.^ 

The  words,  "  I  guarantee  the  collection  of  the  within 
note,"  ^  and  "  I  promise  that  this  note  is  good  and  collecti- 
ble after  due  course  of  law,"  *  and  "  I  warrant  this  note 
good,"  °  are  phrases  of  similar  import,  binding  the  guarantor 
only  upon  condition  that  the  guarantee  acts  with  due 
diligence  in  prosecuting  the  collection  of  the  note. 

§  I  y6ga.  What  is  due  diligence  in  such  cases,  depends 
largely  upon  the  statutes  of  the  States,  which  are  variant, 
and  upon  the  practice  which  has  grown  up  in  the  courts  ; 
and  is  rather  a  question  of  local  jurisprudence  than  one  of 
general  commercial  law.  We  do  not  deem  it,  therefore,  ap- 
propriate to  pursue  the  topic  through  its  multiform  ramifi- 
cations. It  may  be  generally  stated,  however,  that  "  dili- 
gent and  honest  prosecution  of  a  suit  against  the  principal 
to  judgment  with  a  return  of  nulla  bo7ta,  has  always  been 
regarded  as  one  of  the  extreme  tests  of  due  diligence."^ 

But  if  the  principal  were  insolvent,  suit  would  be  vain, 
and  need  not  be  brought.'''     And  so,  if  he  remove  from  the 

'  2  Am.  Leading  Cases,  129,  133. 

'^  Dickerson  v.  Derrickson,  39  111.,  575.  The  guaranty  was:  "I  do  hereby 
agree,  in  case  G.  K.  does  not  pay  R.  P.  D.  S325  in  three  months  from  date,  to 
gxiarantee  to  said  D.  the  payment  of  said  sum  of  money."  Walker,  C.  ].,  said  : 
'*  In  this  case  the  parties  have  only  clothed  in  language  what  the  law  implies  in 
all  mere  absolute  guaranties.  The  contract  of  an  absolute  guarantor  is,  that  if 
the  principal  fails  to  pay,  the  guarantor  will.  If  it  were  not  so,  it  would  not  be 
a  guaranty,  but  an  independent  undertaking." 

'  Loveland  v.  Shepherd,  2  Hill,  139.  *  Moakley  v.  Riggs,  19  Johns,  69. 

'  Curtis  V.  Smallman,  14  Wend.,  231 ;  Cumpston  v.  McNair,  i  Wend.,  457. 

*  Camden  v.  Doremus,  3  Howard,  515  ;  Jones  v.  Ashford,  79  N.  C,  176. 

■'  Camden  v.  Doremus,  3  How.,  515  ;  M'Doal  v.  Yeomans,  8  Watts,  361  ; 
Sanford  v.  Allen,  i  Cush.,  473. 


782  GUARANTIES.  §    ^JJO. 

State  where  the  contract  was  made.^  But  if  the  principal 
resided  in  a  foreign  State  when  the  contract  was  made,  the 
guarantee  would  then  be  required  to  proceed  against  him 
before  pursuing  the  guarantor.^ 


SECTION  IV. 

LIMITED   AND   UNLIMITED,   AND    TEMPORARY  AND   CONTINUING 

GUARANTIES. 

§  1770.  A  guaranty  may  be  limited  or  unlimited  in  re- 
spect to  the  amount  guaranteed.  It  may  be  limited  to  a 
single  transaction.  It  may  be  limited  within  a  certain  period 
of  time.  And  it  may  be  a  continuing  or  standing  guaranty, 
applying  to  successive  transactions,  without  limit  as  to  time. 
Where  A.  &  B.  addressed  a  letter  of  credit  to  C,  saying, 
"  If  D.  wishes  to  take  goods  of  you  on  credit,  we  are  will- 
ing to  lend  our  names  as  security  for  any  amount  he  may 
wish,"  it  was  held  unlimited  as  to  the  amount,  but  not  con- 
tinuing beyond  the  first  parcel  of  goods  delivered  to  D., 
there  beinof  no  words  to  show  that  successive  transactions 
were  contemplated.*  So,  where  the  agreement  was  to  be 
answerable  "  for  the  payment  of  £^0  for  T.  L.,  in  case  T. 
L.  does  not  pay  for  the  gin  he  received  from  you,"  it  was 
held  limited  to  the  single  purchase  of  ^50  worth  of  gin.^ 
So,  where  it  ran  :  "  I  hereby  guarantee  Mr.  J.  J.'s  account 
with  you  for  wine  and  spirits  to  the  amount  of  ;^20o";^ 
and  where  it  guaranteed  A.  "to  the  extent  of  sixty  pounds, 
at  quarterly  account,  bill  two  months,  for  goods  to  be 
purchased  for  him  of  B."  ^     Where  the  wife  of  C,  a  retail 

'  Cooke  V.  Nathan,  i6  Barb.,  342  ;   White  v.  Case,  13  Wend.,  543. 
""  Burt  V.  Horner,  5  Barb.,  501.  '  Rogers  v.  Warner,  8  Johns,  92. 

*  Nicholson  v.  Paget,  i  Cr.  &  M.,  48.     But  qticere,  Mayer  v,  Isaac,  6  M.  &  W, 
605. 

'  Alnutt  V.  Ashenden,  5  M.  &  Gr.,  392. 
"  Melville  v.  Hayden,  3  Barn.  &  Aid.,  593. 


§    I  77  I-  LIMITED  AND  UNLIMITED  GUARANTIES.  7S3 

trader,  owning  property  in  her  own  right,  gave  the  plaintiff, 
with  whom  C.  dealt,  the  following  guaranty  :  "In  con- 
sideration of  you  having,  at  my  request,  agreed  to  supply 
and  furnish  goods  to  C,  I  do  hereby  guarantee  to  you  the 
sum  of  ;/^500.  This  guaranty  to  continue  in  force  for  the 
period  of  six  years,  and  no  longer,"  it  was  held  that  the 
guaranty  did  not  cover  sums  due  for  goods  supplied  before 
its  date,  but  was  limited  to  goods  sold  after  its  date,  to  the 
value  of  ^500.^ 

§  1 771.  Where  the  letter  of  credit  ran,  "The  object  of 
the  present  letter  is  to  request  you,  if  convenient,  to  furnish 
them  (S.  &  H.  H.)  with  any  sum  they  may  want,  as  far  as 
fifty  thousand  dollars,  say  fifty  thousand  dollars,"  it  was 
held  to  be  limited  to  a  single  advance  of  $50,000,  and  that 
when  the  sum  was  once  advanced,  the  guaranty  was  ex- 
hausted. 

"The  language  of  a  letter,"  said  Story,  J.,  "should  be 
very  strong  that  would  justify  the  court  in  holding  the 
guaranty  to  be  a  continuing  guaranty,  which  is  to  cover  ad- 
vances from  time  to  time  to  the  stipulated  amount,  toties 
quoties,  until  the  guarantor  shall  give  notice  to  the  contrary. 
I  see  nothing  in  this  letter  to  justify  such  a  conclusion  ;  and 
in  every  doubtful  case,  I  think  that  the  presumption  ought 
to  be  against  it."*^ 

Where  the  guaranty  was  as  security  Vto  the  amount  of 
;^ 1 0,000  on  certain  acceptances,  or  any  other  account 
thereafter  to  subsist  between  A.  &  B.,"  it  was  held  to  cover 
all  transactions  up  to  the  amount  of  ^10,000,  but  none  be- 
yond.'* 


'  Morrell  v.  Cowan,  7  Ch.  Div.,  151, 

■^  Cremer  v.  Higginson,  i  Mason,  323. 

'  Sansome  v.  Bell,  2  Camp.,  39.  In  Ranger  v.  Sargent,  36  Tex.,  26,  it  ap- 
peared that  R.  &  Co.  were  sued  on  a  draft  drawn  September  3,  1S66,  on  the 
faith  of  a  letter  of  credit  as  follows :  "  The  bearer,  W.  H.  R.,  is  authorized  to 
draw  on  us  for  six  hundred  dollars  specie.  Houston,  August  31,  1866.  R.  & 
Co."  They  pleaded  that,  since  the  giving  of  the  letter  of  credit,  they  had  paid 
to  W.  H.  R.,  and  to  his  order,  more  than  the  sum  specified  in  the  letter  01 
credit,  whereby  the  authority  conferred  by  said  letter  had  been  exhausted  ;  and 


784  GUARANTIES.  §    1772. 

§  1772.  Expressions  of  contimting  credit.  English  de- 
cisions.— In  the  foregoing  cases,  it  will  be  observed  that 
there  were  no  such  expressions  of  continuing  credit,  as 
'*  from  time  to  time,"  or  "  at  any  time,"  or  for  "  any  debt," 
etc., — and  where  such  expressions  are  used,  they  are  re- 
garded as  extending  the  guaranty  to  several  and  successive 
transactions.  Thus  a  guaranty  of  "  any  debt  A.  B.  may 
contract  in  his  business  as  jeweler,  not  exceeding  one  hun- 
dred pounds,  after  this  date,"  ^  or  to  A.  "for  any  goods  he 
hath,  or  may  supply  my  brother  W.  P.  with  to  the  amount 
^100,"^  has  been  held  to  be  limited  only  in  respect  to  the 
amount  guaranteed  at  any  one  time,  and  to  apply  to  any 
sum  or  goods  not  over  ^loo,  which  might  be  advanced 
from  time  to  time.  Lord  EUenborough  said,  in  the  first 
of  the  cases  just  cited  :  "  The  guaranty  is  not  confined  to 
one  instance,  but  applies  to  debts  successively  renewed.  If 
a  party  means  to  be  surety  only  for  a  single  dealing,  he 
should  take  care  to  say  so.  By  such  an  instrument  as 
this,  a  continuing  suretyship  is  created  to  the  special 
amount."^  The  like  decision  was  rendered  upon  a  guaranty 
of  "  any  bills  you  may  draw  on  him  on  account,  etc.,  to  the 
amount  of  ^200."*  So  where  it  was,  "to  the  extent  of 
^300,  for  any  tallow  or  soap  supplied  by  B.  to  F."^ 

§  1773.  Decisions  in  the  United  States. — In  the  United 
States  the  like  course  of  adjudication  has  been  followed. 
Where  the  guaranty  ran,  "  I  will  be  responsible  for  what 
stock  McK.  has  had,  or  may  want  hereafter,  to  the  amount 


that  the  plaintiff,  by  the  exercise  of  ordinary  diligence,  could  have  ascertained 
these  facts.  Held  to  be  a  good  defence.  That  though  the  instrument  sued  on 
was  a  general  letter  of  credit,  in  that  it  was  directed  to  no  particular  person, 
and  limited  to  no  time  or  place,  yet  it  was  special  in  that  it  was  limited  in 
amount,  and  a  party  making  advances  on  it  was  bound  to  make  inquiry  whether 
it  had  been  paid,  or  the  authority  to  draw  exhausted  ;  and  held  further,  \\\2X 
when  the  defendants  delivered  the  letter  of  credit,  it  became  the  absolute  prop- 
erty of  the  holder,  and  they  lost  all  control  over  it. 

1  Merle  v.  Wells,  2  Camp.,  413.  °  Mason  v.  Pritchard,  2  Camp.,  436. 

*  Merle  v.  Wells,  2  Camp.,  413.  "  Mayer  v.  Isaac,  6  M.  &  W.,  605. 

'  Barton  v.  Bennett,  3  Camp.,  220. 


§   1774^-  THE  NEGOTIABILITY  OF  GUARANTIES.  785 

of  five  hundred  dollars,"  it  was  held  to  embrace  successive 
advances  of  five  hundred  dollars  each.^  And  in  a  leadinor 
case  before  the  United  States  Supreme  Court,  where  the 
letter  of  credit  recited  that  the  bearer  "  might  require  your 
aid  from  time  to  time "  and  promised  "  to  be  responsi- 
ble at  any  time  for  a  sum  not  exceeding  eight  thousand 
dollars,"  the  expressions,  "  from  time  to  time,"  and  "  at  any 
time,"  were  thought  decisive  of  its  being  a  continuing  guar- 
anty of  several  and  successive  advances  oi  eight  thousand 
dollars.^ 


SECTION  V. 

THE   NEGOTIABILITY   OF   GUARANTIES. 

§  1774.  In  the  first  place :  As  to  the  negotiability  of 
guaranties  not  zvritten  tipon  negotiable  instruments. — It 
seems  to  be  settled,  by  weight  of  authority,  that  when  the 
guaranty  is  written  upon  a  separate  paper,  unless  it  were 
addressed  in  such  a  manner  as  to  denote  that  it  was  intended 
to  guarantee  the  bill  or  note  to  every  holder,  it  would  not  be 
negotiable ;  and  that  if  addressed  to  a  particular  person 
only,  it  would  be  a  mere  personal  contract  limited  to  that 
person.^  And  when  no  person's  name  is  mentioned  in  such 
a  guaranty,  it  will  be  regarded  as  limited  to  the  first  person 
who  takes  the  note,  and  relies  on  the  guaranty.* 

§  1774^.   Equitable  iizterest  in  guara?ity  is  assignable.— 
But  in  either  case — and  in  any  case  of  the  guaranty  of  a 
bill  or  note — the  party  to  whom  the  guaranty  is  originally 
made,  may,  in  equity,  assign  his  right  to  the  holder  at  the 


'  Gates  V.  McKee,  3  Kern.,  237. 

"  Douglass  V.  Reynolds,  7  Pet.,  113.     See  2  Am.  Lead.  Cas.,  38  et  seq. 
'  McLaren  v.  Watson's  Ex'rs,  19  Wend.,  559;  S.  C.,  26  Wend.,  425  ;  Story  on 
Notes,  §  484;  2  Am.  Lead  Gas.,  314  ;  2  Rob.  Prac.  (n.  ed.),  298,  299. 
*  Story  on  Notes,  §  484. 

Vol.  II.— 50 


786  GUARANTIES.  §   1775* 

same  time  that  he  transfers  the  bill  or  note,  and  thereby 
invest  him  with  the  equitable,  although  not  the  legal,  title 
thereto.^ 

§  1775.  In  New  York  the  doctrine  was  urged  by  Senator 
Verplanck,  in  a  dissenting  opinion  of  great  learning  and 
ability,  that  although  the  guaranty  of  a  negotiable  instru- 
ment be  upon  a  separate  paper,  and  be  not  expressed  in  ne- 
gotiable words,  it  ought  to  be  held  negotiable  in  the  same 
manner  and  to  the  same  extent  in  favor  of  each  successive 
holder.^  And  while  the  weight  of  authority  is  to  the  con- 
trary it  is  difficult,  and  in  our  judgment  impossible,  to  an- 
swer satisfactorily  the  cogent  reasoning  upon  which  this 
view  is  based. 

§  1 776.  In  the  second  place  :  As  to  guaranties  written 
upon  the  paper  contemporaneously  with  its  execution.  Not 
ge7terally  deemed  negotiable. — When  the  guaranty  is  made 
at  the  time  the  paper  is  executed  and  delivered,  there  are 
numerous  authorities  which  hold  that  where  it  is  not  ex- 
pressed in  negotiable  w^ords,  the  mere  fact  that  it  is  written 
upon  a  negotiable  instrument  does  not  impart  to  it  any  nego- 
tiability, and  no  action  can  be  maintained  upon  it  by  any 
subsequent  holder  thereof.  It  was  so  held  in  Massachu- 
setts where,  underneath  the  signature  of  the  payee  of  a 
note  indorsed  by  him,  the  defendant  wrote  :  "  I  guarantee 
the  payment  of  semi-annual  interest  on  this  note  as  well 
as  the  principal."^  So  in  Michigan  where  the  defendant 
McCauley,  contemporaneously  with  the  execution  of  the 
note,  made  by  Sayer  payable  to  Soule,  wrote  on  the  back : 
"  For  value  received,  I  hereby  guarantee  the  payment  of 
the  within  note,"  and  Soule,  the  payee,  indorsed  it  to  the 
plaintiff,  it  was  held  he  could  not  recover,  the  guaranty  not 
being  negotiable.^     But  in  such  cases  it  will  be  presumed, 

»  Arents  v.  Commonwealth,  18  Grat.,  770;  Story  on  Bills,  §  457. 

*  McLaren  v.  Watson's  Ex'rs,  26  Wend.,  431  et  seg. 
'  True  V.  Fuller,  21  Pick.,  140  (1838). 

*  Tinker  V.  McCauley,  3  Mich.,  188  (1854),  overruling  Higgins  v.  Watson,  I 
Mich.,  420;  see  also  Small  v.  Sloan,  i  Bosw.,  353  (1857). 


§1777-  THE  NEGOTIABILITY  OF  GUARANTIES.  787 

unless  the  contrary  appears,  that  the  guarantor  of  a  note 
for  accommodation  contracted  with  the  party  who  sues 
upon  it,  and  it  will  not  be  necessary  for  him  to  prove 
affirmatively  that  he  was  the  first  holder  for  value.^ 

§  1777.  Cases  maintai7iing  the  iiegoHability  of  the 
guaranty  of  a  negotiable  iristrtcment  made  at  its  incep- 
tio7i. — But,  on  the  other  hand,  there  are  cases  which  main- 
tain that,  although  the  guaranty  on  the  paper,  written  at  the 
time  of  delivery,  specifies  no  person  to  w^hom  the  guarantor 
undertakes  to  be  liable,  and  has  no  negotiable  words,  it 
runs  with  the  instrument  to  which  it  refers,  partakes  of  its 
quality  of  negotiability,  and  any  person  having  the  legal 
interest  in  the  instrument  takes  in  like  manner  the  guaranty 
as  an  incident,  and  may  sue  thereon.^  And  it  has  been 
said,  in  such  a  case,  "  this  view  is  consistent  with  the  nature 
of  the  transaction,  the  evident  intention  of  the  parties,  and 
the  objects  and  uses  of  commercial  paper."  ^  This  seems 
to  us  the  better  doctrine.  By  writing  the  guaranty  on  the 
paper,  the  guarantor  evidences  his  intention  to  guarantee 
the  contract  of  the  maker.  That  contract  being  nego- 
tiable, is  made  with  any  and  every  person  who  may  be  the 
holder,  and  the  guarantor  is  thus  brought  in  privity  with 
any  and  every  person  who  becomes  the  holder.*  The  fore- 
going views  of  the  text  were  recently  approved  in  Indiana, 
in  the  case  of  a  note  where  above  the  name  of  the  payee 
and  indorser  there  were  written  the  words,  "  We  jointly  or 


*  Northumberland  County  Bank  v.  Eger,  58  Penn.  St.,  97. 

'  See  Cooper  v.  Dedrick,  22  Barb.,  516,  for  law  of  New  York. 
'  Webster  v.  Cobb,  17  111.,  466  (1856),  Skinner,  J.  ;  see  Arents  v.    Common- 
wealth, 18  Grat.,  770. 

*  McLaren  v.  Watson's  Ex'rs,  26  Wend.,  430  (1841),  Walworth,  Chancellor, 
saying  :  "  A  guaranty  indorsed  upon  a  negotiable  note,  whereby  the  guarantor 
agrees  with  the  holder  of  the  note  that  he  will  be  answerable  that  the  note  shall 
be  paid  to  him  or  to  his  order,  or  the  bearer  thereof,  when  it  becomes  due,  is 
probably  negotiable  by  the  transfer  of  the  note  upon  which  it  is  written  ;  for  it 
is  in  fcict  a  special  indorsement  of  the  note,  or  more  properly  a  negotiable  note 
in  itself.  But  to  make  a  guaranty  negotiable  as  a  part  of  the  note  to  which  it 
relates,  it  must  be  on  the  note  itself,  or  at  least  it  must  be  annexed  to  it,  in  the 
nature  of  iin  allonge,  or  eking  out  of  the  paper  upon  which  the  note  is  written.'' 


ySS  GUARANTIES  §   ^77^' 

severally,  for  value  received,  hereby  guarantee  the  prompt 
payment  of  the  within  note,"  signed  by  two  persons,  and 
suit  was  brought  by  the  indorsee  of  the  payee  against  the 
guarantors.^ 

§  1778.  Views  of  Story  and  Parsons  considered. — Judge 
Story  says  that  "  with  a  view  to  the  convenience  and  se- 
curity of  merchants,  as  well  as  the  free  circulation  and 
credit  of  negotiable  paper,  it  would  seem  that  such  a  guar- 
anty upon  the  face  of  a  bill  of  exchange,  not  limited  to  any 
particular  person,  but  purporting  to  be  general,  without 
naming  any  person  whatsoever,  or  purporting  to  be  a  guar- 
anty to  the  payee  or  his  order,  or  to  the  bearer,  ought  to 
be  held,  upon  the  very  intention  of  the  parties,  to  be  a  com- 
plete guaranty  to  every  successive  person  who  shall  become 
the  holder  of  the  bill."^ 

On  the  contrary,  Prof.  Parsons  says  :  "  Our  view  of  this 
question  is  this  :  The  negotiability  of  paper  payable  to  or- 
der is  established  by  a  very  peculiar  exception  to  the  general 
law  of  contracts ;  and  this  exception  rests  upon  a  usage  so 
ancient  and  universal  as  to  show  a  distinct  and  urgent  need 
of  it.  But  the  negotiability  of  a  guaranty  has  no  such 
usage  in  its  favor,  and  is  not,  therefore,  within  the  excep- 
tion. Moreover,  we  do  not  think  it  likely  to  be  brought 
within  this  usage,  or  on  other  grounds  established  by  ad- 
judication, because  all  exceptions  are  to  be  limited  by  the 
necessity  for  them  ;  and  we  see  no  necessity  for  any  such 
rule,  inasmuch  as  all  the  good  which  could  be  gained  from 
making  guaranties  negotiable  may  be  derived,  and  is  now 
in  part  derived,  from  the  practice  and  the  law  of  indorse 
ment."^  But  we  can  not  concur  with  this  eminent  jurist  as 
to  the  inutility  of  a  negotiable  guaranty.  There  is  no  form 
of  indorsement  by  which  the  liability  of  a  guarantor  can 
be  engrafted  upon,  and  made  negotiable  with,  a  negotiable 

'  Cole  V.  Merchants'  Bank,  S,  C.  of  Indiana,  American  Law  Register,  Nov., 
1878,  p.  703. 
2  Story  on  Bills,  §  458.  '  2  Parsons  N.  &  B.,  133,  134. 


§    1780.  THE  NEGOTIABILITY  OF  GUARANTIES.  789 

instrument.  An  indorser  in  the  ordinary  form  is  absolutely 
discharged  by  want  of  exact  demand  and  notice.  A  guar- 
antor is  only  entitled  to  reasonable  notice,  and  is  only  dis- 
charged to  the  extent  that  he  would  otherwise  be  injured. 
If  the  indorser  waives  demand  and  notice,  he  is  entitled  to 
no  demand  or  notice  whatever,  and  thus  he  makes  the  in- 
dorsement more  onerous  than  that  of  guaranty.  A  nego- 
tiable guaranty  is  an  engagement  intermediate  between 
that  of  an  indorsement  in  the  ordinary  form,  and  one  waiv- 
ing demand  and  notice  ;  and  when  a  party  intends  to  enter 
into  such  an  engagement,  there  is  certainly  nothing  in  the 
policy  of  the  modern  law  which  should  prevent  it. 

§  1779.  I^^  some  cases  it  has  been  held  that  a  guaranty 
of  payment,  indorsed  on  the  back  of  a  negotiable  note  at 
the  time  it  was  made,  rendered  the  guarantor  liable  to  the 
payee,  and  to  every  subsequent  bona  fide  holder,  as  a  joint 
and  several  maker  of  the  note.^  But  this  doctrine,  as  has 
been  said,  "  originated  in,  and  has  always  been  confined  to. 
New  York."^     And  there  it  no  longer  obtains.^ 

§  1780.  Absolute  negotiable  promise  07i  the  back  of  a 
note. — In  the  foregoing  cases,  the  words  only  imported  a 
secondary  obligation  ;  and  when  they  are  absolute  in  their 
terms,  an  absolute  effect  will  be  given  them.  For  a  party 
signing  on  the  back  of  a  note  may  make  an  absolute  ne- 
gotiable promise  to  pay  it,  as  well  as  on  its  face.  Where 
C.  and  D.  indorsed  on  the  back  of  a  note  from  A.  to  B.  at 
the  time  it  was  made  :  "  For  value  received,  we  jointly  and 
severally  undertake  to  pay  the  money  within  mentioned,  to 
the  said  B."  (the  payee),  they  were  held  as  original  promis- 
ors.^    So  an  indorsement,  with  the  words  "holders  on  the 

'  Hough  V.  Gray,  19  Wend.,  202  ;  Ketchum  v.  Gray,  24  Wend.,  456  ;  Luqueer 
V.  Prosser,  i  Hill,  256  ;  4  Hill,  420. 

"^  Tucker  v.  McCauley,  3  Mich.,  194,  Douglass,  J. 

^  Brown  v.  Curtis,  2  Corns.,  225  ;  Durham  v.  Manrow,  Id.,  533  ;  Brewster  v, 
Silence,  14  Barb.,  S.  C,  144 ;  Draper  v.  Snow,  20  N.  Y.,  331  ;  Glen  Cove  Mut 
Ins.  Co.  V.  Harrold,  20  Barb.,  298. 

*  White  V.  Howiand,  9  Mass.,  314, 


790  GUARANTIES.  §   1 78 1. 

within,"  makes  the  indorser  an  original  promisor.^  So  do 
the  words  indorsed:  "I  will  see  the  within  paid,"^  And 
where  the  note  was  written  :  "  We,  A.  as  principal,  and 
B.  as  surety,  promise,  etc.,"  and  was  signed  by  A.  and  in- 
dorsed by  B.,  the  latter  was  held  as  joint  maker. '^ 

§  I  781.  In  the  third  place  :  As  to  guaranty  written  on 
the  paper  by  the  transferrer  at  the  time  of  the  transfer. 
View  that  it  is  negotiable. — In  such  cases  the  better  opin- 
ion, as  it  seems  to  us,  is  that  the  transferrer  combines  the 
liability  of  indorser  and  guarantor.  He  transfers  the  in- 
strument, and  indorses  it,  by  which  he  becomes  liable  as 
indorser  by  due  demand  and  notice,  and  he  superadds  a 
guaranty  which  renders  him  liable  without  demand  or 
notice  upon  default  of  the  principal.  In  Vermont,  it.  ap- 
peared that  the  payee  of  a  negotiable  note  transferred  it 
for  value,  and  wrote  on  the  back,  over  his  signature,  "  I 
guarantee  the  payment  of  the  within  note."  The  plaintiff, 
a  remote  transferee,  sued  ;  and  it  was  held  that  he  could 
recover,  on  the  ground  that  the  indorsement  of  the  payee 
transferred  the  legal  title  in  the  note  to  every  subsequent 
holder,  notwithstanding  the  person  to  whom  the  note  was 
first  transferred  was  not  named  in  the  indorsement,  and  it 
was  not  made  in  terms  payable  to  order  or  bearer.  Fur- 
ther, that  such  indorsement  rendered  the  payee  liable  as  an 
indorser  to  any  holder ;  also  as  a  guarantor  without  proof 
of  demand  and  notice,  and  that  the  guaranty  passed  to 
every  holder.* 

'Brett  V.  Marston,  45  Me.,  401. 

^  Amsbaugh  v.  Gearhart,  11  Penn.  St.,  482. 

'  Palmer  v.  Grant,  4  Conn.,  389. 

^Partridg-e  v.  Davis,  20  Vt..  500  (1848)  ;  see  also  Heaton  v.  Hulbert,  3  Scam., 
489.  Robinson  v.  Lain,  31  Iowa,  9,  Day,  C.  J. :  "We  confess  ourselves  un- 
able to  give  effect  to  the  contract  of  guaranty  of  payment  and  waiver  of  demand 
and  notice  if  the  payees  intend  to  return  the  title.  The  writing  simply  consti- 
tutes an  indorsement  with  an  enlarged  liability."  In  Heard  v.  Dubuque  County 
Bank,  8  Neb.,  16,  the  payee  wrote  on  the  back,  "  For  value  received,  I  hereby 
g;uarantee  payment  of  the  within  note,  and  waive  presentation,  protest,  and 
notice."  Held  to  be  an  indorsement  with  the  enlarged  liability  of  guaranty. 
See  Deck  v.  Works,  57  N.  Y.  Pr.,  292. 


§   1782.  THE  NEGOTIABILITY  OF  GUARANTIES.  79 1 

§  1782.  Contrary  vieiv  that  a  guaranty  upon  the 
transfer  of  negotiable  paper  is  not  a  negotiation  ivithin 
the  laiu  merchant. — But  other  authorities  hold  that  a  guar- 
anty written  on  a  note  by  the  transferrer,  naming  no  one 
as  promisee,  could  only  be  operative  in  favor  of  the  party 
who  first  took  the  instrument  on  the  faith  of  it.^  In  the 
United  States  Supreme  Court  it  has  been  held  that  a  guar- 
anty is  not  a  negotiation  of  the  bill  or  note  as  understood 
by  the  law  merchant.^  In  Massachusetts,^  the  payee  of  a 
note  wrote  on  the  back,  over  his  signature,  "  I  hereby  guar- 
antee the  within  note."  Suit  was  brought  by  a  subsequent 
holder.  The  court  held  that  this  was  not  such  an  indorse- 
ment as  authorizes  such  holder  to  sue,  and  referring  to  a 
previous  case,^  said  :  "  It  is  true  there  was  the  further  ob- 
jection in  that  case,  that  the  guaranty  w^as  signed  not  only 
by  the   payee  of    the  note,   but  also  by  another  person. 


•   1  Nevins  v.  Bank  of  Lansingburgh,  10  Mich.,  547  ;  Omaha  N.  B.  v.  Walker, 

5  Fed.  R.,  399. 

■'Trust  Co.  V.  National  Bank,  loi  U.  S.  (11  Otto),  70.  In  this  case  the  note 
was  payable  to  the  Cook  County  National  Bank,  and  over  the  signature  of  the 
president  of  the  bank,  there  was  written  on  the  back  the  following  :  "  For 
value  received,  we  hereby  guarantee  the  payment  of  the  within  note  at  maturity, 
or  at  any  time  thereafter,  with  interest  at  ten  per  cent,  per  annum  until  paid,  and 
agree  to  pay  all  costs  or  expenses  paid  or  incurred  in  collecting  the  same." 
Strong,  J.,  said  :  "  In  no  commercial  sense  is  this  an  indorsement,  and  probably 

it  was  not  intended  as  such That  a  guaranty  is  not  a  negotiation  of  the 

bill  or  note  as  understood  by  the  law  merchant  is  certain.  Snevily  v.  Ekel,  i 
Watts  &  S.,  203  ;  Lamourieux  v.   Hewitt,  5  Wend.,  307  ;  Miller  v.  Gaston,  2 

Hill,  188 The  contract  can  not  be  converted  into   an  indorsement  or 

assignment.  And  if  it  could  be  treated  as  an  assignment  of  the  note,  it  would 
not  cut  off  the  defences  of  the  maker." 

'Belcher  V.Smith,  7  Gush.,  482  (1851);  Taylor  v.  Binney,  7  Mass.,  481  (181 1), 
is  to  same  effect.  But  Upham  v.  Prince,  12  Mass.,  14,  seems  to  uphold  the  doc- 
trine of  the  text. 

'Tuttle  V.  Bartholomew,  12  Mete,  454  (1847),  Dewey,  J.:  "A  different 
view  of  this  question  seems  to  have  been  taken  in  the  case  of  Blakely  v.  Grant, 

6  Mass.,  386,  which  was  an  action  upon  a  bill  of  exchange.  This  case  was  de- 
cided a  year  previous  to  that  of  Tyler  v.  Binney,  but  does  not  appear  to  have 
been  referred  to  in  the  argument  or  decision  of  the  latter  case.  In  the  case  of 
Blakely  v.  Grant,  it  was  held  that  a  signature  of  ihe  payee  to  the  following 
words,  '  should  the  within  exchange  not  be  accepted  and  paid  agreeably  to  its 
contents,  I  hereby  engage  to  pay  the  holder,  in  addition  to  the  principal,  twenty 
per  cent,  damages,'  might  operate  as  a  transfer  of  the  bill  of  exchange,  and  that 
the  indorsement  was  good,  though  no  person  was  named  as  indorsee  ;  and  that 
a  bona  fide  holder  might  insert  above  such  stipulation  a  direction  to  pay  the 
contents  to  his  order." 


792  GUARANTIES.  §   "^7^3^ 

But  irrespective  of  that,  the  court  were  of  opinion  that 
the  plaintiff  could  not  enforce  the  payment  of  the  note  by 
a  suit  in  his  own  name  as  indorsee." 

The  view  has  been  taken  in  some  cases  that  a  guaranty 
by  the  transferee  operates  as  a  strict  guaranty  as  between 
transferrer  and  transferee,  and  does  not  pass  to  subsequent 
holders ;  but  that  as  to  them  it  operates  as  an  assignment 
of  the  note,  so  far  as  to  enable  them  to  sue  other  parties 
than  the  guarantor.-^ 

§  1783.  In  Massachusetts,  where  the  payee  of  a  note 
transferred  it  with  the  words,  "  I  guarantee  the  payment  of 
this  note  within  six  months,"  the  court  said  :  "  The  defend- 
ant's engagement  amounts  to  a  promise  that  the  note 
should  at  all  events  be  paid  within  six  months.  Now, 
this  promise  may  not  be  assignable  in  law ;  and  yet  the 
note  itself  may  be -assignable  by  the  party  to  whom  it  was 
so  transferred,  so  that,  upon  non-payment  of  it  by  the 
promisor,  the  holder  would  have  a  right  of  action  against 
Prince  as  indorser."  ^ 

§  1 784.  Where  the  holder  transfers  the  note  and  guar- 
antees the  collection,  the  doctrine  has  been  held  that  the 
intention  is  manifested  to  make  simply  a  special  contract, 
and  not  to  become  liable  as  an  indorser.  Thus,  where  a 
note  payable  to  S.  B.  or  bearer  was  transferred  by  L.  with 
the  words,  "  I  warrant  the  collection  of  the  within  note,  for 
value  received,"  over  his  signature,  and  it  passed  into  the 
hands  of  a  subsequent  holder  from  the  transferee,  it  was 
held  that  he  could  not  maintain  suit  against  the  transferrer 
as  an  indorser.^     But  it  is  at  least  clear  that  the  transferrer  of 

'  Myrick  v.  Hasey,  27  Me.,  12  ;  see  Upham  v.  Prince,  12  Mass.,  14. 

''Upham  V.  Prince,  12  Mass.,  15  (1815). 

'  Lamourieux  v.  Hewitt,  5  Wend.,  308,  Savage,  C.  J. :  "  I  am  of  opinion  that 
an  action  can  not  be  maintained  on  the  guaranty  in  the  name  of  the  present 
plaintiff.  The  defendant  was  hable  upon  his  guaranty,  not  as  an  indorser  of 
negotiable  paper,  but  as  the  party  to  a  special  contract,  which  might  have  been 
written  on  a  separate  piece  of  paper  as  well  as  on  the  back  of  the  note.  The 
contract  was  made  with  Tuttle,  and  any  action  upon  it  must  be  in  the  name  ol 


^    I7^^5-        PRESERVATION  OF  guarantor's  LIABILITY.  793 

a  note  payable  to  bearer,  who  acquires  it  under  a  guaranty 
from  the  holder,  would  get  title  as  against  the  maker,  and 
could  maintain  action  against  him.^  Where  the  payees  of  a 
note  wrote  on  the  back  of  it,  "  We  guarantee  the  payment 
of  the  within  note  at  maturity,"  it  was  held  that  they  be- 
came jointly  and  severally  liable  without  demand  or  notice, 
and  that  it  was  their  duty  to  seek  the  holder  and  pay 
him.' 


SECTION  VI. 

REQUISITES    TO    THE    ESTABLISHMENT    AND    PRESERVATION   OF 
guarantor's   LIABILITY. 

§  1785.  As  to  notice  of  acceptance  of  guaranty. — When 
the  guaranty  is  made  through  personal  treaty  between  the 
guarantor  and  guarantee,  and  whenever  the  fact  that  the 
guarantee  has  accepted  the  proffer  of  the  guarantor  is 
equally  in  the  knowledge  of  both  parties,  no  notice  that  he 
accepts  the  guaranty  need  be  given  by  the  guarantee,  for 
the  simple  reason  that  it  is  already  known  to  the  guarantor.* 
This  rule  applies  where  there  is  a  guaranty  of  a  specific  ex- 
isting demand,  such  as  a  bill  or  note  ;  ■*  but  when  a  propo- 
sition for  a  guaranty  is  made,  it  must,  like  any  other  propo- 
sition for  a  contract,  be  accepted  before  it  is  binding  ;  and 
the  guarantee  must  notify  his  assent  in  some  form,  for  both 
minds  must  concur  in  order  to  constitute  a  contract.^   And 


Tuttle.  Promissory  notes  are  negotiable  only  by  virtue  of  the  statute,  but  this 
negotiable  quality  is  not  extended  to  any  other  instrument  relating  to  the  note." 
Vanderveer  v.  Wright,  6  Barb.,  547. 

'Johnson  v.  Mitchell,  50  Texas,  212;  see  ante,  §§  663,  696. 

"  Gage  V.  Mechanics'  Nat.  Bank,  79  111.,  62. 

'Lent  V.  Padelford,  10  Mass.,  230  ;  Wildes  v.  Savage,  i  Story,  22  ;  Walker  v. 
Forbes,  25  Ala.,  139. 

*  Montgomery  v.  Kellogg,  43  Miss.,  486  ;  Thrasher  v.  Ely,  2  Smedes  &  M., 
147. 

*  Jackson  v.  Yendes,  7  Blackf.,  526;  Sheurll  v.  Knox,  i  Dev.,  404  ;  2  Am 
Lead.  Cas.,  104 ;  2  Rob.  Prac.  (n.  ed.),  292. 


794  GUARANTIES.  §    1785^. 

when  the  guaranty  is  of  a  general  character,  addressed  at 
large  to  any  person,  without  limit  as  to  amount  or  time,  it 
is  regarded  rather  as  a  proposition  than  as  a  contract,  and 
notice  of  its  acceptance  should  be  given  ^by  the  party 
acting  upon  it.^ 

§  1 785(3;.  Views  of  United  States  Stcp7^eme  Co2crt. — A 
series  of  decisions  by  the  United  States  Supreme  Court 
has  established  the  further  doctrine  that  when  a  letter  of 
credit  is  addressed  to  a  particular  person,  or  is  placed  in 
the  hands  of  the  debtor,  expressly  or  impliedly  addressed 
to  all  the  world,  and  such  letter  contemplates  future  and 
prospective  guaranties,  notice  of  its  acceptance  is  necessary, 
because  without  it  he  could  neither  know  to  whom  he  was 
liable  nor  to  what  amount.  And  it  is  necessary  in  order 
that  he  may  be  put  on  his  guard  against  losses,  and  avail 
himself  of  the  appropriate  means  of  protection.^  In  a  re- 
cent case  before  that  court  the  question  was  elaborately 
considered,  and  it  was  held  that  the  rule  requiring  notice 
of  the  acceptance  of  a  guaranty,  and  of  an  intention  to  act 
under  it  in  those  cases  where  in  legal  effect  the  instrument 
is  only  an  offer  or  proposal,  acceptance  of  which  by  the 
guarantee  is  necessary  to  that  mutual  assent  without 
which  there  can  be  no  contract ;  and  that  no  such  notice 
is  necessary  where  the  guarantors  contract  unconditionally 
to  guarantee  overdrafts  to  a  certain  extent.^ 

§  I  j2>^b.  Decisions  of  State  courts. — The  State  tribunals 
have  generally  adopted  the  same  doctrine,^  and  it  may  be 


*  Mussey  v.  Rayner,  22  Pick.,  229  ;  Montgomery  v.  Kellogg,  43  Miss.,  486. 

''Adams  v.  Jones,  12  Pet.,  207;  Douglass  v.  Reynolds,  7  Pet.,  113  ;  Edmund- 
son  V.  Drake,  5  Pet.,  624  ;  Lee  v.  Dick,  10  Pet.,  482  ;  Russell  v.  Clarke,  7 
Crancb,  69 ;  Wildes  v.  Savage,  i  Story  C.  C.  R.,  22  ;  Louisville  Man.  Co.  v. 
Welch,  10  How.,  461. 

^  Davis  V.  Wells,  Fargo  &  Co.,  Morrison's  Transcript,  vol.  3,  No.  i,  p.  130, 
affirming  S.  C,  2  Utah,  411. 

*  Bradley  v.  Carey,  8  Me.,  234  ;  Tuckerman  v.  French,  7  Me.,  115  ;  Norton  v. 
Eastman,  4  Me.,  521;  Craft  v,  Isham,  13  Conn.,  28;  Rapelye  v.  Bailey,  3 
Conn.,  438;  Babcock  v.  Bryant,  12  Pick.,  133;  Mussey  v.  Rayner,  12  Pick., 
223;    Kay  v.  Allen,  9  Barr,  320;  Lawson  v.  Townes,  2  Ala.,  373  ;  Walker  v. 


§   1786.       PRESERVATION  OF  GUARANTOR'S  LIABILITY.  795 

regarded  as  the  prevailing  view  of  the  law,  although  it  has 
been  sharply  criticised,^  and  it  has  been  declared  that  it  has 
no  foundation  in  English  jurisprudence.*^  Knowledge 
derived  from  circumstances  will  be  equivalent  to  notice, 
unless  injury  has  been  caused  by  want  of  earlier  informa- 
tion,^ and  notice  may  be  inferred  from  circumstances ;  * 
and  when  the  guaranty  has  been  accepted,  it  is  not  neces- 
sary to  give  notice  of  each  particular  advance  made  in  ac- 
cordance with  it.^ 

§  I  786.  Demand  upon  pi^incipal  and  notice  of  default  to 
guarantor. — When  the  guaranty  depends  upon  the  hap- 
pening of  a  contingent  event,  it  is  necessary  when  the 
event  has  occurred  that  notice  should  be  given  to  the  guar- 
antor within  a  reasonable  time  in  order  to  enable  him  to 
secure  himself  against  loss.^  But  when  the  guaranty  is  an 
absolute  engagement  to  pay  in  the  event  that  the  principal 
does  not  pay,  the  authorities  differ  as  to  the  necessity  of 
demand  or  notice  at  any  time  in  order  to  preserve  the  lia- 
bility of  the  guarantor.  By  one  class  of  authorities  it  is 
contended  that  where  one  transfers  a  promissory  note  and 
guarantees  its  payment,  proof  of  demand  and  notice  of 
non-payment  is  unnecessary ;  that  the  guarantor  is  the 
debtor  of  the  holder,  and  it  is  his  duty  to  seek  the  creditor 


Forbes,  25  Ala.,  139  ;  Taylor  v.  Wetmore,  10  Ohio,  490  (overruled  by  Powers  v. 
Bumcranz,  12  Ohio  St.,  284).  See  Wells  v.  Davis,  2  Utah,  44,  and  ante, 
§  i/Ssrr;  Montgomery  v.  Kellogg,  43  iNIiss.,  486;  Oaks  v.  Miller,  13  Vt..  106; 
Lowry  v.  Adams,  22  Vt.,  166  (overruling  Train  v.  Jones,  11  Vt.,  44) ;  Kincheioe 
V.  Holmes,  7  B.  Mon.,  5  ;  Lowe  v,  Beckwith,  14  B.  Mon.,  184 ;  Rankin  v.  Chikis, 
9  Mo.,  674  ;  Hill  V.  Calvin,  4  How.  (Miss.),  231  ;  Central  Savings  Bank  v.  Shine, 
48  Mo.,  461. 

'  2  Am.  Lead.  Cas.,  "]"],  99. 

""  Douglas  v.  Howland,  24  Wend.,  50 ;  see  also  Smith  v.  Dann,  6  Hill,  543 , 
Caton  v.  Shaw,  2  H.  &  Gill.,  13:  Powers  v.  Bumcranz,  12  Ohio  St.,  284  (over- 
ruling Taylor  v.  Wetmore,  10  Ohio,  490)  ;  Wilcox  v.  Draper,  Nebraska  S.  C, 
Nov.,  1 88 1,  Albany  L.  J.,  March  18,  1882,  p.  209. 

*  Norton  v.  Eastman,  4  Me,,  521. 

*Oaks  v.  Weller,  13  Vt.,  106  ;  Lowry  v.  Adams,  22  Id.,  160. 

*  Douglass  v.  Reynolds,  7  Pet.,  126;  Lowe  v.  Beckwith,  14  B.  Mon.,  184. 

'  Dickerson  v.  Derrickson,  39  111.,  577  ;  Clay  v.  Edgerton,  19  Ohio  St.,  553 
Montgomery  v.  Kellogg,  43  Miss.,  486. 


796  GUARANTIES.  §   1 787 

and  pay  the  debt  the  very  day  it  is  due ;  and  that  his  un- 
dertaking is  absolute  to  pay  the  note  when  due  if  the  maker 
does  not  then  pay  it.  And  that  proceedings  against  the 
maker  and  notice  to  the  guarantor  are  only  necessary  when 
there  is  a  guaranty  of  collection  which  is  a  conditional 
agreement  to  pay  if  the  money  can  not  be  collected  from 
the  maker.^ 

§  1787.  Cases  maintaining  necessity  of  demand,  and  no- 
tice of  default  in  reasonable  time  to  bind  guarantor. — By 
another  class  of  cases  it  is  maintained  that  as  the  non-pay- 
ment of  the  debt  must  come  peculiarly  within  the  knowl- 
edge of  the  guarantee,  the  guarantor  is  entitled  to  require 
demand  upon  the  maker  within  a  reasonable  time,  and  no- 


1  Allen  V.  Rightmere,  20  Johns,  366 ;  Brown  v.  Curtis,  2  Corns.,  228 ;  Heaton 
V.  Hulbert,  3  Scam.,  490  ;  Wright  v.  Dyer,  48  Mo.,  526  ;  Voltz  v.  Harris,  40  111., 
159.  In  Clay  v.  Edgerton,  19  Ohio  St.,  553,  the  holder  transferred  the 
paper,  indorsing  thereon  the  words,  "  I  guarantee  the  payment  of  the  within 
note  to  C.  Edgerton  or  order."  Brinckerhoff,  C.  J.,  said  :  "  In  the  second  place, 
it  is  argued  by  counsel  for  plaintiffs  in  error  that  the  petition  is  insufficient,  be- 
cause it  contains  no  allegations  of  demand  by  Edgerton  upon  Hoot,  the  maker 
of  the  note,  for  payment  thereof,  and  notice  to  Clay  of  non-payment.  On  this 
point  much  confusion  has  doubtless  arisen  from  a  failure  to  discriminate  be- 
tween a  guaranty  which  depends  on  some  contingency  or  condition,  and  one 
which  is  in  its  terms  absolute  and  unconditional.  Where  a  guaranty  is  depend- 
ent on  some  condition  or  contingency  expressed  in,  or  fairly  implied  from,  the 
terms  of  the  contract  of  guaranty,  a  compliance  with  those  terms  on  the  part  of 
the  guarantee  is  necessary,  and  must  be  alleged  and  proved  in  order  to  a  recov- 
ery upon  it.  But  where  the  guarantee  of  payment  is  absolute  and  uncondition- 
al, we  are  of  opinion  that  it  is  not  necessary,  in  order  to  make  owX.  2.  prima  facte 
case  for  recovery,  to  aver  or  prove  either  demand  or  notice.  This,  we  think,  is 
fairly  inferable  from  what  is  said  by  this  court  in  Bash  ford  v.  Shaw,  4  Ohio  St., 
266.  And  this  view  of  the  question  is  directly  ruled  in  Allen  v.  Rightmere,  20 
Johns,  365  ;  Brown  v.  Curtiss,  2  Coms.,  225  ;  Breed  v.  Hillhouse,  7  Conn.,  523 ; 
Read  v.  Cutts,  7  Greenl.,  186  ;  and  Heaton  v.  Hulbert,  3  Scam.  (111.),  489.  We 
are  aware  that  cases  may  be  found  in  which  the  point  has  been  ruled  otherwise ; 
but  it  seems  to  us  that  the  reasoning  of  Bronson,  J.,  in  Brown  v.  Curtiss,  supra, 
is  unanswerable  and  irresistible.  And  there  is  nothing  either  in  Bashford  v. 
Shaw,  supra,  or  in  Forest  v.  Stewart,  14  Ohio  St.,  246,  adverse  to  this  conclu- 
sion ;  and  what  is  said  by  the  court  in  Greene  v.  Dodge  &  Cogswell,  2  Ohio, 
431,  related  to  a  case  in  which  the  court  construed  the  contract  of  guaranty  sued 
on  to  be  a  conditional  one.  Now,  the  contract  of  guaranty  in  the  case  before^ 
us  is  absolute  and  unconditional.  Its  language  is  :  'I  guarantee  the  payment  of 
the  within  note  to  C.  Edgerton  or  order,'  and  we  are  of  opinion  that  no  aver- 
ment of  demand  or  notice  in  the  petition  was  necessary  ;  and  if  any  loss  had  re- 
sulted to  the  guarantor  by  reason  of  any  laches  on  the  part  of  the  guarantee, 
such  laches,  it  it  could  be  made  available  at  all,  would  be  matter  of  defence  to 
be  set  up  by  the  guarantor.'' 


§1788.       PRESERVATION  OF  guarantor's  LIABILITY.  79/ 

tice  of  non-payment  within  a  reasonable  time  after  default.^ 
This  seems  to  us  the  correct  doctrine  ;  and  the  great  body 
of  the  cases  which  maintain  the  contrary  view  seem  to 
have  grown  out  of  the  idea  which  has  obtained  in  New 
York,  that  the  guaranty  of  a  note  is  an  absolute,  and  not  a 
collateral  and  conditional  engagement.  In  an  Iowa  case, 
where  the  defendant  was  sued  as  guarantor  of  a  note  upon 
which  was  written,  "  For  value  received,  I  hereby  guaran- 
tee the  payment  of  the  within,"  it  was  said  by  Day,  J.  : 
"  If  the  principal  fails  to  pay  when  he  should,  the  guaran- 
tor must  be  informed  in  a  reasonable  time,  soon  enough  to 
give  him  such  opportunities  as  he  ought  to  have  to  save 
him  from  loss.  If  the  notice  be  delayed  a  very  short  time, 
but  by  reason  of  the  delay  the  guarantor  loses  the  oppor- 
tunity of  obtaining  indemnity,  and  is  irreparably  damaged, 
he  would  be  discharged  from  his  obligation.  But,  if  the 
delay  were  for  a  long  period,  and  it  was,  nevertheless,  clear 
that  the  guarantor  would  have  derived  no  benefit  from  an 
earlier  notice,  the  delay  would  not  impair  his  obligation."  ** 
§  1 788.  Nature  of  the  demand  and  notice  of  default  nec- 
essary to  hold  guarantor  liable. — But  the  authorities  which 

'  Douglas  V.  Reynolds,  7  Pet.,  126;  12  Id.,  523.  Story,  J.:  "The  fourth  in- 
struction insists  that  a  demand  of  payment  should  have  been  made  of  Haring, 
and  in  case  of  non-payment  by  him,  that  notice  of  such  demand  and  non-pay- 
ment should  have  been  given  in  a  reasonable  time  to  the  defendant,  otherwise 
the  defendants  would  be  discharged  from  their  guaranty.  We  are  of  opinion 
that  this  instruction  ought  to  have  been  given.  By  the  very  terms  of  this  guar- 
anty, as  well  as  by  the  general  principles  of  law,  the  guarantors  are  only  collat- 
erally liable  upon  the  failure  of  the  principal  debtor  to  pay  the  debt.  A  demand 
upon  him,  and  a  failure  on  his  part  to  perform  his  engagements,  are  indispensa- 
ble to  constitute  a  casus  faderis.  The  creditors  are  not,  indeed,  bound  to  in- 
stitute any  legal  proceedings  against  the  debtor,  but  they  are  required  to  use 
reasonable  diligence  to  make  demand,  and  to  give  notice  of  the  non-payment. 
The  guarantors  are  not  to  be  held  to  any  length  of  indulgence  of  credit  which 
the  creditors  may  choose;  but  have  a  right  to  insist  that  the  risk  of  their  re- 
sponsibility shall  be  fixed  and  terminated  within  a  reasonable  time  after  the  debt 
has  become  due.  The  case  of  Allen  v.  Rightmere  (20  Johns,  265)  is  distin- 
guishable. There  the  note  was  payable  to  the  defendant  himself,  or  order,  at  a 
future  day,  and  he  indorsed  it  with  a  special  guaranty  of  its  due  payment ;  and 
the  court  held  this  engagement  absolute,  and  not  conditional."  O.xford  Bank  v. 
Haynes,  8  Pick.,  423  ;  Talbot  v.  Gay,  18  Pick.,  535  ;  Cannon  v.  Gibbs,  9  Sergt. 
&  R.,  202 ;  Newton  Wagon  Co.  v.  Diers,  10  Neb.,  285. 

"  Second  National  Bank  v.  Gaylord,  34  Iowa,  248  ;  Rodabaugh  v.  Pitkin,  46 
Iowa,  545. 


798  GUARANTIES.  §   1 788. 

regard  demand  upon  the  principal,  and  notice  of  default, 
as  necessary  to  render  the  guarantor's  liability  absolute,  do 
not  contemplate  that  punctual  demand  and  immediate  no- 
tice which  are  necessary  to  charge  an  indorSer.  Nor  do 
they  consider  that  either  the  demand  or  notice  at  any  time 
are  absolute  conditions  precedent.  The  guarantor  is  only 
entitled  in  any  event  to  exact  demand  and  notice  of  default 
within  a  reasonable  time — such  time  depending  upon  all 
the  circumstances  of  the  case  ;  and  although  they  be  neg- 
lected altogether,  the  guarantor  will  only  be  discharged 
provided  he  has  suffered  loss,  and  then  only  to  the  extent 
of  such  loss.  For  if  he  could  not  have  profited  by  demand, 
or  by  notice  of  default,  and  has  lost  nothing  for  want  of 
them,  there  is  no  reason  why  he  should  complain.-^ 

When  the  principal  is  insolvent  at  maturity  of  the  debt, 
and  so  continues,  there  is  a  presumption  that  the  guarantor 
has  sustained  no  injury  by  delay  as  to  demand  and  notice  ;^ 
and,  on  the  other  hand,  injury  will  be  sufficiently  proved 
when  it  appears  that  the  guarantor  was  solvent  at  maturity, 
and  became  insolvent  before  demand  was  made  or  notice 
given. ^ 

The  guarantor  may  expressly  waive  notice  of  acceptance 
of  the  guaranty,  and  also  demand  and  notice  of  default, 
in  writing,  on  the  face  of  the  guaranty  ;*  or  he  may  waive 
it  by  a  promise  to  pay  after  maturity,  in  like  manner  as  an 
indorser.^ 


^  Dickerson  v.  Derrickson,  39  111.,  577  ;  Voltz  v,  Harris,  40  111.,  155  ;  Farmers', 
etc.,  Bank  v.  Kercheval,  2  Mich.,  504  ;  Rhett  v.  Poe,  2  How.  (S.  C),  457  ;  Fuller 
V.  Scott,  8  Kan.,  33. 

"^  Reynolds  v.  Douglas,  12  Pet.,  523  ;  Wildes  v.  Savage,  i  Story,  22  ;  Rhett  v. 
Poe,  2  How.,  457  ;  Bashford  v.  Shaw,  4  Ohio  St.,  263 ;  Hance  v.  Miller,  21  111., 
636 ;  Van  Wart  v.  Woolley,  3  B.  &  C,  439- 

«  Oxford  Bank  v.  Haynes,  8  Pick.,  423 ;  Talbot  v.  Gay,  18  Pick.,  534 ;  Wood- 
son V.  Moody,  4  Humph.,  303  ;  Beeker  v.  Saunders,  6  Ired.,  380  ;  Mayberry  v. 
Boynton,  2  Harr.,  24. 

*  Bickford  v.  Gibbs,  8  Cush.,  154;  Worcester  Co.  Inst.,  etc.,  v.  Davis,  13  Gray. 
531  ;  Wadsworth  v.  Allen,  8  Grat.,  174. 

^  Reynolds  v.  Douglas,  12  Pet.,  523;  Louisville  Man.  Co.  v.  Welsh,  10  How., 
476  ;  Sigourney  v.  Wetherell,  6  Mete,  563  ;  see  anU,  §§  1059  to  1168. 


§   1789-*    PRESERVATION  OF  GUARANTOR'S  LIABILITY.  799 

§  1 789.  As  to  what  zvill  discharge  giiarantor. — The 
guarantor  is  discharged  by  a  release  of  his  principal  as  ef- 
fectually as  he  would  be  by  payment*  He  is  also  discharged 
by  any  extension  of  time  allowed  the  principal  by  the  guar- 
antee upon  a  consideration  ;  by  any  renewal  which  suspends 
the  original  debt  ;  and  by  a  surrender  of  any  security  held 
by  the  creditor.^  Otherwise  the  guarantor  might  be  seriously 
damaged  by  the  act  of  the  guarantee.  But  taking  security 
from  the  principal  would  not  discharge  him,  unless  there 
were  some  agreement  to  give  him  time,  because  that  would 
strengthen,  rather  than  weaken,  his  debt.^  In  short,  a 
guarantor  is  a  species  of  surety,  and  will  be  discharged  by 
any  act  of  the  creditor  that  would  discharge  a  surety.*  A 
guarantee  of  the  payment  by  another  of  goods  to  be  sold 
not  founded  on  any  present  consideration  to  the  guarantor, 
and  providing  that  it  shall  continue  until  written  notice 
shall  be  given  of  its  termination,  is  revoked  by  the  death  of 
the  guarantor.^ 

'  Cowper  V.  Smith,  4  M.  &  W.,  519. 

"^  Sigourney  v.  Wetherell,  6  Mete,  553;  Shook  v.  Shute,  9  Port.  (Ala.),  113  ; 
Crosby  v.  Wyatt,  10  N.  H.,  318;  Mayhew  v.  Crickett,  2  Swanst.,  185  ;  Hart  v. 
Hudson,  6  Duer,  294  ;  Howell  v.  Jones,  I  C.  M.  &  R.,  97. 

'  Sigourney  v.  Wetherell,  6  Mete,  553  ;  Norton  v.  Eastman,  4  Greenl.,  521. 

*  See  a7ite,  §§  1 308  et  seq.,  1 326  et  seq. 

'Jordan  v.  Dobbins,  122  Mass.,  168. 


CHAPTER  LVL 

LETTERS    OF    CREDIT    AND    CIRCULAR    NOTES. 


SECTION    I. 
DEFINITION   AND   NATURE   OF   LETTERS   OF   CREDIT. 

§  1790.  Letters  of  credit  are  instruments  of  frequent 
use  in  commerce,  and  while  not  possessing  all  the  charac- 
teristics of  negotiability  which  pertain  to  bills  and  notes, 
partake  of  them  to  such  an  extent  as  to  be  necessarily 
classed  as  negotiable  instruments.  A  letter  of  credit  may 
be  defined  to  be  a  letter  of  request,  whereby  one  person 
requests  some  other  person  to  advance  money  or  give  credit 
to  a  third  person,  and  promises  that  he  will  repay  or  guar- 
antee the  same  to  the  person  making  the  advancement,  or 
accept  bills  drawn  upon  himself,  for  the  like  amount.  It 
is  called  a  general  letter  of  credit  when  it  is  addressed  to 
all  persons  in  general  requesting  such  advance  to  a  third, 
and  a  special  letter  of  credit  when  addressed  to  a  particular 
person  by  name.^ 

Sometimes  the  letter  of  credit  is  in  the  form  of  an  au- 
thority to  the  correspondent  to  draw  bills  on  the  letter- 
writer  ;  and  there  are  cases,  as  we  shall  see,  in  which  it 
amounts  to  an  actual  acceptance  by  the  letter  writer  of  the 
bills  when  drawn. 

In  the  chapter  on  Guaranties,**  letters  of  credit  have  been 
incidentally  treated  where  they  partook  of  the  nature  of 
guaranties.  But  they  are  frequently  direct  and  indepen- 
dent promises,  and  deserve  more  particular  notice. 

»  See  Union  Bank  v.  Coster,  3  N.  Y.,  214.  '  See  ante,  chapter  LV. 

(800) 


§  1792.  DEFINITION    AND    NATURE.  80I 

§  1 791.  Mr.  Bell,  the  learned  commentator  on  the  Laws 
of  Scotland,  whose  language  has  been  approvingly  quoted 
by  Judge  Story  in  his  treatise  on  Bills/  says  :  "  Letters  of 
credit,  strictly  speaking,  are  mandates,  giving  authority  to 
the  person  addressed  to  pay  money,  or  furnish  goods,  on 
the  credit  of  the  writer.  They  are  generally  made  use  of 
for  facilitating  the  supply  of  money  or  goods  required  by 
one  going  to  a  distance  or  abroad,  and  avoiding  the  risk 
and  trouble  of  carrying  specie,  or  buying  bills  to  a  greater 
amount  than  may  be  required.  The  debt,  which  arises  on 
such  a  letter  in  its  simplest  form,  when  complied  with,  is 
between  the  mandatory  and  mandant ;  though  it  may  be  so 
conceived  as  to  raise  a  debt  also  against  the  person  who  is 
supplied  by  the  mandatory  :  i.  Where  the  letter  is  pur- 
chased with  money  by  the  person  v/ishing  for  the  foreign 
credit  ;  or,  is  granted  in  consequence  of  a  check  on  his  cash 
account  ;  or,  procured  on  the  credit  of  securities  lodged 
with  the  person  who  grants  it ;  or,  in  payment  of  money 
due  by  him  to  the  payee,  the  letter  is,  in  its  effects,  similar 
to  a  bill  of  exchange  drawn  on  the  foreign  merchant.  The 
payment  of  the  money  by  the  person  on  whom  the  letter  is 
granted  raises  a  debt  or  goes  into  account  between  him  and 
the  writer  of  the  letter,  but  raises  no  debt  to  the  person 
who  pays  on  the  letter  against  him  to  whom  the  money  is 
paid.  2.  Where  not  so  purchased,  but  truly  an  accommo- 
dation, and  meant  to  raise  a  debt  against  the  person  accom- 
modated, the  engagement  generally  is  to  see  paid  any  ad- 
vances made  to  him,  or  to  guarantee  any  draft  accepted,  or 
bill  discounted  ;  and  the  compliance  with  the  mandate  in 
such  case  raises  a  debt  both  against  the  wTitcr  of  the  letter 
and  against  the  person  accredited." 

§  1792.  Letters  of  credit  have  long  been  in  use  amongst 
merchants.  Hallam,  in  his  w^ork  on  the  Middle  Ages,  has 
observed  that  :  "  There  were  three  species  of  paper  credit 

'  Stoiy  on  Bills,  §  463. 

Vol.  II.— 51 


802  LETTERS  OF  CREDIT  AND  CIRCULAR  NOTES.       §    1793- 

in  the  dealings  of  merchants  :  i.  General  letters  of  credit, 
not  directed  to  any  one,  which  are  not  uncommon  in  the 
Levant.  2.  Orders  to  pay  money  to  a  particular  person. 
3.  Bills  of  exchange  regularly  negotiable.  Instances  of  the 
first  are  mentioned  by  Macpherson  about  1200.  The  sec- 
ond species  was  introduced  by  the  Jews  about  1 183." 

§  1 793.  Marius  ^  gives  a  very  full  description  of  letters 
of  credit.  "  Now,"  he  says,  "  letters  of  credit,  for  the  fur- 
nishing of  moneys  by  exchange,  are  of  two  sorts,  the  one 
general,  the  other  special.  The  general  letter  of  credit  is, 
when  I  write  my  open  letter,  directed  to  all  merchants,  and 
others,  that  shall  furnish  moneys  unto  such  and  such  persons, 
upon  this  my  letter  of  credit,  wherein  and  whereby  I  do  bind 
myself,  that  what  moneys  shall  be  by  them  delivered  unto 
the  party  or  parties  therein  mentioned,  within  such  a  time, 
at  such  and  such  rates  (or,  in  general  terms,  at  the  price 
current),  I  do  thereby  bind  myself  for  to  be  accountable 
and  answerable  for  the  same  to  be  repaid  according  to  the 
bill  or  bills  of  exchange,  which,  upon  receipt  of  the  money 
so  furnished,  shall  be  given  or  delivered  for  the  same.  And 
if  any  money  be  furnished  upon  such  my  general  letter  of 
credit,  and  bills  of  exchange  therefor  given,  and  charged, 
drawn,  or  directed  to  me,  although,  when  the  bills  come  to 
hand,  and  are  presented  to  me,  I  should  refuse  to  accept 
thereof,  yet  (according  to  the  custom  of  merchants)  I  am 
bound  and  liable  to  the  payment  of  those  bills  of  exchange, 
by  virtue  and  force  of  such  my  general  letter  of  credit,  be- 
cause he  or  they  which  do  furnish  the  money  have  not  so 
much  (if  any)  respect  unto  the  sufficiency  or  ability  of  the 
party  which  doth  take  up  the  money  as  unto  me,  who  have 
given  my  letter  of  credit  for  the  same,  and  upon  whose 
credit,  merely,  those  moneys  may  be  properly  said  to  have 
been  delivered.  The  special  letter  of  credit  is,  when  a 
merchant,  at  the  request  of  any  other  man,  doth  write  his 

'  Marius  on  Bills,  36,  37  ;  Story  on  Bills,  §  460. 


^   1794.  DEFINITION    AND    NATURE.  803 

open  letter  of  credit,  directed  to  his  factor,  agent,  or  corre- 
spondent, giving  liim  order  to  furnish  such  or  such  a  man, 
by  name,  with  such  or  such  a  sum  of  money,  at  one  or 
more  times,  and  charge  it  to  the  account  of  the  merchant 
that  gives  the  letter  of  credit,  and  takes  bills  of  exchange, 
or  receipts  for  the  same."  And  again  :  "  Now,  in  the  gen- 
eral letter  of  credit,  he  that  writes  it  doth  make  use  of  his 
credit  for  his  own  account  and  concernments  in  his  way  of 
trade  ;  and  therefore  there  need  no  more  than  his  letter  of 
credit  to  make  him  liable  to  repay  what  shall  be  so  fur- 
nished. But  in  the  particular  letter  of  credit,  he  that  writes 
the  letter  doth  it  not  to  make  use  of  the  moneys  himself, 
or  to  be  employed  for  his  own  use,  but  for  the  use  and 
accommodation  of  some  other  man,  at  whose  request  he  is 
willinor  and  doth  write  his  letter  of  credit ;  and  therefore  it 
is  very  expedient  and  ordinary  for  him  at  whose  entreaty 
the  letter  is  written  at  the  writing  and  upon  receipt  thereof, 
to  give  security  by  bond,  or  otherwise,  unto  the  merchant 
that  gives  the  letter  of  credit,  for  repayment  unto  him,  his 
executors,  or  assigns,  of  all  such  moneys  as  shall  be  received 
by  virtue  of  the  said  letters  of  credit ;  for  the  merchant,  by 
his  letter,  stands  sufficiently  bound  to  his  correspondent ; 
and  therefore  it  is  no  more  but  reason  that  he  for  whom 
the  letter  is  granted  should  give  (as  it  were)  his  counter- 
bond  for  repayment.  The  bills  of  exchange,  which  are  to 
be  made  for  moneys  taken  up  by  letters  of  credit,  do  run 
in  the  ordinary  form  of  bills  of  exchange." 

§  1 794,  Rcseinblance  of  letters  of  credit  to  bills  of  ex- 
change.— Letters  of  credit  very  much  resemble  bills  of 
exchange  in  some  particulars,  but  they  are  not  bills  ;  on  the 
contrary,  they  possess  striking  differences,  although  used 
frequently  to  avail  the  same  general  purposes.  A  person  in 
New  York  having  need  of  a  certain  amount  in  London, 
may  purchase  a  bill  on  a  London  banker  for  that  amount  ; 
and  thus  readily  transfer  his  funds  from  the  one  place  to 


804  LETTERS  OF  CREDIT  AND  CIRCULAR  NOTES.       §   '^795' 

the  other.  But  he  may  not  know  to  what  extent  he  will 
need  funds  in  London,  and  not  desire  to  make  an  absolute 
transfer  of  all  that  he  may  possibly  need  to  that  point,  nor 
to  reduce  what  securities  he  may  hold,  into  money.  And 
then  his  convenience  may  be  better  suited  by  taking  with 
him,  or  sending  to  London,  a  letter  of  credit  to  a  house 
there,  in  which  the  letter  drawer,  who  is  duly  authorized  to 
do  so,  requests  it  to  furnish  the  letter  holder,  or  order,  or 
bearer,  whatever  of  money,  or  other  thing,  he  may  need  to 
a  certain  amount.  The  letter  drawer  may  be  only  the 
agent  of  the  letter  drawee  ;  or  he  may  be  a  correspondent, 
or  other  person  well  known  to  it.  He  receives  the  consid- 
eration either  in  a  deposit  of  funds,  or  securities  from  the 
letter  bearer  ;  and  becomes  the  debtor  of  the  letter  drawee, 
who  makes  advancements  upon  faith  of  the  letter,  to  their 
full  extent. 

Thus  it  becomes  a  constructive  transfer  of  funds,  without 
any  actual  transfer,  like  a  bill  of  exchange.  But  it  differs 
from  a  bill  in  several  particulars:  (i)  It  is  not  payable 
absolutely,  but  only  in  the  event  that  the  letter  bearer  may 
use  it ;  which  is  optional  with  him.  (2)  It  is  not  neces- 
sarily for  a  certain  amount.  (3)  It  is  not  necessary  that  it 
be  addressed  to  a  particular  person.  (4)  The  letter  writer 
in  many  cases  becomes  the  principal  and  only  debtor  for 
the  advances,  and  is  not  in  such  cases  at  all  like  the  drawer 
of  a  bill.  And  (5)  he  is  never,  like  the  drawer  of  a  bill, 
entitled  to  immediate  notice,  if  the  letter  is  not  complied 
with. 

§  1 795.  The  liability  of  the  letter  drawer  is  not  definite 
like  that  of  the  drawer  of  a  bill  ;  but  each  particular  letter 
of  credit  is  to  be  construed  according  to  the  particular  lan- 
guage of  the  mandate,  (i)  Sometimes  it  is  a  ditect  order 
to  advance  money  to  a  certain  amount  to  the  letter  bearer, 
and  an  absolute  undertaking  to  repay  it.  (2)  Sometimes  it 
promises  to  honor  bills,  drawn  for  any  amount  which  may 


§   1797-         ^^  WHOM  LETTER  OF  CREDIT  AVAILABLE.  805 

be  advanced  to  the  letter  bearer.  (3)  And  sometimes  it 
undertakes  that  the  letter  drawer  will  become  surety  of  the 
letter  bearer  to  the  extent  of  the  amount  advanced,  or 
credit  given  him. 

§  1 796.  Circular  notes. — There  is  a  peculiar  kind  of  letter 
of  credit,  called  a  circular  note,  which  has  recently  come  in 
vogue,  and  is  thus  described  :  "  Circular  notes,  as  they  are 
called,  are  a  still  more  recent  invention,  and  are  now  used  ex- 
tensively both  in  this  country  and  in  Europe,  but  by  travellers 
almost  exclusively.  They  are  generally,  but  not  always,  for 
specific  sums,  and  are  in  fact  letters  of  credit,  which  a  banking 
house  gives  to  a  traveller,  and  which  are  made  available,  on 
presentation  to  any  of  the  agents  or  correspondents  of  the 
house,  in  a  long  list  of  places,  the  names,  both  of  the  places 
and  of  the  agents  in  them,  being  usually  stated  in  the  in- 
strument itself.  A  principal  object  of  this  is  to  enable  a 
traveller  to  supply  himself  with  funds  frequently  and  at 
various  points,  and  thus  to  prevent  the  necessity  of  carrying 
with  him  large  sums  of  money,  or  depositing  them  at  the 
principal  centres  of  business  along  his  route.  They  are 
usually  transferable  by  indorsement,  and  are  perhaps  more 
like  bills  of  exchange  than  ordinary  letters  of  credit,  but 
are  not  the  same,  nor  would  they  be  in  all  respects  governed 
by  the  law  of  negotiable  paper."  ^ 


'  SECTION  II. 

TO   WHOM   A   LETTER   OF  CREDIT   IS   AVAILABLE,  AND   HOW   FAR 
IT  IS   NEGOTIABLE. 

§  1797.  There  is  no  doubt  that  a  special  letter  of  credit 
is  an  available  promise  in  favor  of  the  person  to  whom  it  is 
specially  addressed,  whenever  he  makes  the  advance,  or 

'  2  Parsons  N.  &  B.,  109. 


So6  LETTERS  OF  CREDIT  AND  CIRCULAR  NOTES.        §   1 79?. 

grants  the  credit  which  it  requests.^  Nor  is  there  any  doubt 
that  if  any  one  else  attempts  to  accept  and  act  upon  the 
proposition  contained  in  the  letter,  he  comes,  in  as  a  mere 
volunteer ;  and  he  can  not,  by  thus  thrusting  himself  for- 
ward, create  any  legal  obligation  on  the  part  of  the  writer.' 
And,  as  we  have  already  seen,  it  is  equally  well  settled  that 
if  it  contains  a  promise  to  honor  bills,  it  is  enforceable  in 
the  hands  of  any  person  taking  them  upon  the  faith  of  it, 
either  as  an  actual  acceptance,  or  as  a  promise  to  accept,  as 
the  case  may  be.^  It  was  at  one  time  questioned  whether 
a  general  letter  of  credit  addressed  to  any  person  or  persons, 
without  any  special  designation,  was  available  in  the  hands 
of  any  person  making  the  advance,  or  granting  the  credit 
against  the  party  signing  it ;  or  whether  the  remedy  lay  ex- 
clusively between  the  letter  writer,  and  the  letter  bearer  to 
whom  it  was  given.  But  this,  too,  is  now  settled,  and 
there  is  no  doubt  that  as  soon  as  any  person  accepts  the 
proposition  tendered  at  large,  and  on  his  so  doing,  a  con- 
tract is  at  once  completed  between  himself  and  the  letter 
writer,  and  it  is  the  same  in  effect  as  if  it  had  been  specially 
addressed  to  him,  for  there  springs  up  at  once  a  direct 
privity  between  him  and  the  letter  writer.*  And  this  ap- 
plies not  only  to  cases  where  the  letter  purports  on  its  face 


1  Story  on  Bills,  §  462. 

'^  Robins  v,  Bingham,  4  Johns,  476;  Walsh  v.  Bailie,  10  Johns,  180;  Taylor 
V.  Wilmore,  10  Ohio,  490 ;  2  Robinson's  Prac.  (new  ed.),  284. 

^  See  vol.  I,  §§  550  to  570.  In  Marchington  v.  Vernon,  Guildhall,  Trin.,  27  Geo, 
III.  B.  R.  (quoted  in  Story  on  Bills,  §  462,  note  i),  which  was  assumpsit  by  the 
holder  of  a  bill  against  the  assignee  of  the  drawee,  who  had  given  a  promise  to 
the  drawer  to  honor  the  bill,  Buller,  J.,  said  :  "  Independent  of  the  rules  which 
prevail  in  mercantile  transactions,  if  one  person  makes  a  promise  to  another  for 
the  benefit  of  a  third,  that  third  person  may  maintain  an  action  upon  it." 

*  Lawrason  v.  Mason,  3  Cranch  (S.  C.),  492  (1806);  Watson's  Ex'rs  v.  Mc- 
Laren, 19  Wend.,  565;  26  Wend.,  425;  Birckhead  v.  Brown,  5  Hill,  642;  North- 
umberland Bank  v.  Eyer,  58  Penn.  St.,  102,  103 ;  Union  Bank  v.  Coster,  3  N. 
Y.,  214;  2  Denio,  375;  Pollock  v.  Helm,  54  Miss.,  i  ;  28  Am.  Rep.,  342,  347 
and  notes.  In  2  Ames  B.  &  N.,  783,  it  is  said  :  "  One  who  issues  a  letter  of 
credit  makes  a  distinct  contract  with  each  holder  who  takes  the  bill  on  the  faith 
of  the  letter,  i.e.,  with  each  holder  who  accepts  the  offer  contained  in  the  letter, 
and  these  distinct  contracts  are  no  more  negotiable  than  any  other  chose  in 
action."     Edwards  on  Bills,  239. 


§  1797'     TO  WHOM  letter  of  credit  available.  807 

to  be  addressed  generally  to  any  person  or  persons  whatso- 
ever, who  should  make  the  advance,  but  also  in  cases  where 
the  letter  of  credit  is  addressed  solely  to  the  person  to 
whom  the  advance  is  to  be  made,  and  merely  states  that 
the  person  signing  the  same  will  become  his  surety  for  a 
certain  amount,  without  naming  any  person  to  whom  he 
will  become  security,  if  it  is  obviously  to  be  used  to  pro- 
cure credit  from  some  third  person,  and  the  advance  is 
made  by  such  person  upon  the  faith  of  it.-^ 

In  a  case  before  the  United  States  Supreme  Court,^  the 
letter  was  as  follows :  "Alexandria,  28th  November,  1800. 
Mr.  James  M'Pherson,  Dear  Sir  :  We  will  become  your 
security  for  one  hundred  and  thirty  barrels  of  corn,  payable 
in  twelve  months.  (Signed)  Lawrason  &.  Smoat."  It  was 
held  that  the  plaintiff,  who  had  advanced  the  corn  on  the 
faith  of  the  letter,  could  recover  of  the  writers.  Marshall, 
C.  J.,  said  :  "There  is  an  actual  assumpsit  to  all  the  world, 
and  any  person  who  trusts,  in  consequence  of  that  promise, 
has  a  right  of  action." 

*  Lawrason  v.  INIason,  3  Cranch,  492  (1806)  ;  Boyce  v.  Edwards,  4  Pet.,  121  ; 
Adams  v.  Jones,  12  Pet.,  207. 

^  Lawrason  v.  Mason,  3  Cranch,  492  (1806) ;  Pollock  v.  Helm,  54  Miss.,  i. 
In  Russell  v.  Wiggin,  2  Story,.  213,  Messrs.  Wiggin,  of  London,  authorized 
parties  in  Boston,  by  a  letter  of  credit,  to  draw  bills  on  them  in  London  for  a 
certain  amount,  and  promised  to  accept  them.  The  payees,  who  had  taken  the 
bills  in  India  on  faith  of  the  letters,  sued  the  Messrs.  Wiggin.  Story,  J.,  said  : 
"I  have  understood,  and  always  supposed,  that  in  the  commercial  world  letters 
of  credit  of  this  character  were  treated  as  in  the  nature  of  negotiable  instru- 
ments ;  and  that  the  party  giving  such  a  letter,  held  himself  out  to  all  persons 
who  should  advance  money  on  bills  drawn  under  the  same,  and  upon  the  faith 
thereof,  as  contracting  with  them  an  obligation  to  accept  and  pay  the  bills.  And 
I  confess  myself  totally  unable  to  comprehend  how,  upon  any  other  understand- 
ing, these  instruments  could  ever  possess  any  general  circulation  and  credit  in 
the  commercial  world.  No  man  ever  is  supposed  to  advance  money  upon  such 
a  letter  of  credit,  ui)on  the  mere  credit  of  the  party  to  whom  the  letter  is  given  ; 
and  I  venture  to  affirm  that  no  man  ever  took  bills  on  the  faith  of  such  a  letter 
without  a  distinct  belief  that  the  drawee  was  bound  to  him  to  accept  the  bills, 
when  drawn,  without  any  reference  to  any  change  of  circumstances  which 
might  occur  in  the  intennediate  time  between  the  giving  of  the  letter  of  credit 
and  the  drawing  of  the  bills  under  the  same,  of  which  the  holder,  advancing  the 
money,  had  no  notice.  Any  other  supposition  would  make  the  letter  of  credit 
no  security  at  all,  or,  at  best,  a  mere  contingent  security  ;  and  the  money  would, 
in  effect,  be  advanced  mainly  upon  the  credit  of  the  drawer  of  the  bills,  which 
appears  to  me  to  be  at  war  with  the  whole  object  for  which  letters  of  credit  are 
given." 


8o8  LETTERS  OF  CREDIT  AND  CIRCULAR  NOTES.        §  1 798. 

§  I  798.  Negotiability  of  letter  of  credit  when  it  relates  to 
bills  of  exchange. — The  doctrine  now  established  goes  fur- 
ther than  this,  and  asserts  not  only  the  inviolability  of  the 
promise  contained  in  the  letter  of  credit  by  any  one  acting 
on  the  faith  of  it,  but  real  negotiability  when  it  relates  to 
bills  of  exchange.  In  an  English  case,  it  appeared  that  the 
A.  &  M.  Bank  gave  to  Dickson,  Tatham  &  Co.,  a  letter  of 
credit,  addressed  to  them,  authorizing  them  to  draw  bills 
upon  the  bank  to  a  certain  amount,  and  that  D.,  T.  &  Co. 
drew  accordingly,  and  sold  the  bills  to  the  Asiatic  Banking 
Corporation.  The  A.  &  M.  Bank  having  failed,  the 
Asiatic  Banking  Corporation  carried  in  a  claim  for  the 
amount  of  them,  under  the  winding  up  of  the  A.  &  M. 
Bank.  The  claim  was  resisted  on  the  ground  that  D.,  T. 
&  Co.  were  indebted  to  the  A.  &  M.  Bank  in  an  amount 
exceeding  the  amount  of  the  bills  ;  and  that  the  Asiatic 
Banking  Corporation  was  only  the  equitable  assignee  of 
D.,  T.  &  Co.,  and  were  subject  to  any  claim  arising  from 
the  state  of  accounts  between  the  bank  and  their  assignors. 
But  the  lords  justices,  before  whom  the  case  was  heard, 
held  that  persons  taking  the  bills  on  the  faith  of  the  letter 
of  credit  were  entitled  to  the  absolute  benefit  of  its  terms, 
and  were  not  subject  to  any  collateral  or  cross  claims.^ 

§  1 799.  lVhe7i  letter  of  credit  amounts  to  acceptance. — 
Sometimes  the  letter  of  credit  is  in  the  form  of  an  authority 
to  a  party  or  parties  therein  named  to  draw  a  bill  of  ex- 
change on  the  letter  writer  ;  and  its  effect  is  frequently  such 
as  to  amount  to  an  actual  acceptance  of  the  bill  drawn,  ac- 
cording to  its  tenor,  and  to  transmute  the  letter  writer's 
liability  from  a  mere  promise  contained  in  the  letter  to  that 
of  an  actual  party  to  the  bill.  In  order  for  it  to  have  this 
effect,  it  is  necessary,  (i)  That  the  letter  be  written  a 
reasonable  time  before  the  bill  is  drawn  ;^  (2)  That  the  con- 

>  Agra  &  AListerman's  Bank,  2  Law  Rep.  Ch.  App.,  297  (1867)  approved  In 
re  Blakely  Co.,  3  Law  Rep.  Ch.  App.,  154,  and  in  Arents  v.  Commonwealth,  18 
Grat.,  769  (1868). 

'  See  chapter  XIX,  §§  560  et  seq.,  vol.  i 


§   l800.         TO  WHOM  LETTER  OF  CREDIT  AVAILABLE.  809 

tents  of  the  letter  should  be  communicated  to  the  party 
who  takes  the  bill,  and  that  he  should  take  the  bill  on  the 
faith  of  the  letter.^ 

When  the  letter  designates  a  specific  bill,  which  is  drawn 
and  taken  in  pursuance  with  its  terms,  the  party  taking  it 
has  his  election  to  treat  it  either  as  an  actual  acceptance,  or 
as  a  promise  to  accept,  and  accordingly  to  sue  the  letter 
writer  as  acceptor  of  the  bill,  or  for  breach  of  promise  to 
accept.^ 

Accordins:  to  some  authorities,  the  letter  writer  can  not 
be  sued  as  acceptor  (but  only  for  breach  of  promise  to 
accept),  unless  the  letter  designates  the  specific  bill — puts 
its  finger  on  the  particular  bill,  so  to  speak ;'  but  the  better 
opinion,  as  it  seems  to  us,  is  adopted  by  others,  that  when- 
ever the  bill  corresponds  with  the  authority  under  which  it 
is  drawn  sufficiently  to  be  identified,  the  letter  writer  may 
be  sued  as  acceptor.* 

§  1800.  Conchision. — And  here  we  conclude  these  Com- 
mentaries on  the  Law  of  Negotiable  Instruments.  Nice 
and  refined  in  many  of  the  distinctions  necessary  to  be  no- 
ticed, and  strictly  technical  in  many  of  its  ramifications,  the 
subject  is,  nevertheless,  pervaded  by  a  broad,  and  liberal, 
and  catholic  spirit,  as  engaging  to  the  mind  of  the  philo- 
sophical student  of  jurisprudence,  as  it  is  instructive  and 
needful  to  the  active  practitioner  of  the  profession.  For- 
tunes, vaster  in  amount  than  the  dowries  of  monarchs,  are 
daily  committed,  in  our  commercial  cities,  to  the  keeping 
of  those  frail  but  precious  fabrics  known  as  negotiable 
papers.  With  good  faith  crowned  as  their  patron  goddess, 
and  fortune  as  their  ward,  they  attract  to  their  considera- 
tion and  protection,  not  only  the  hunters  of  wealth,  but  as 


'  Ibid.  '  Russell  v.  Wiggin,  2  Story  C.  C.  R.,  213, 

"  Boyce  v.  Edwards,  4  Pet.,  1 1 ;  Coolidge  v,  Payson,  2  Wheat.,  66  ;  Schimmel- 

pennick  v.  Bayard,  i  Pet.,  264. 

*  See  chapter  XIX,  §§  560,  561  et  seq.,  vol.  i ;  Bissell  v.  Lewis,  4  Mich.,  450; 

Nelson  v.  First  N,  Bank,  48  111.,  39  ;  Ulster  Co.  Bank  v.  McFarland,  5  Hill,  434; 

3  Den.,  553. 


8lO      LETTERS  OF  CREDIT  AND  CIRCULAR  NOTES.   ^  I  bOO. 

well  the  good  who  cherish  sentiments  of  integrity,  and  the 
learned  and  great  who  expound  the  principles  by  which  it 
shall  be  jealously  guarded  and  maintained. 

Ever  expanding  to  embrace  new  species  of  instruments 
within  its  scope  of  operation;  ever  increasing  in  conse- 
quence as  commerce  explores  new  fields  of  adventure,  in- 
dustry unlocks  new  mines  of  wealth,  and  capital  seeks  new 
subjects  of  investment,  the  law  of  negotiability  is  destined 
to  rise  into  an  importance  of  which  its  early  history  gave 
little  promise,  and  which  its  present  development  falls  far 
short  of  realizing. 

In  no  other  branch  of  jurisprudence  have  the  laws  of 
different  nations  and  different  States  so  closely  assimilated 
to  each  other.  It  is  the  pioneer  in  producing  a  homoge- 
neous code,  which  shall  prevail  throughout  the  realm  of 
commerce,  without  regard  to  the  limits  of  country,  race,  or 
language.  It  is  continuously  struggling  to  eradicate  local 
partialities,  and  prejudices,  and  temporary  expediencies,  and 
to  attain  that  which  shall  remain  stable,  because  founded 
on  principles  of  universal  justice.  It  was  in  maintaining 
the  validity,  and  enforcing  the  obligation  of  a  negotiable 
instrument  that  the  United  States  Supreme  Court  said  : 
"We  will  never  immolate  truth,  justice,  and  the  law,  be- 
cause a  State  tribunal  has  erected  the  altar  and  decreed  the 
sacrifice."^  And  for  the  facilitation  of  trade,  and  the  fair 
understanding  of  mercantile  negotiations  among  all  mercan- 
tile men,  it  is  to  be  hoped  that  the  day  is  not  far  distant, 
when  it  may  be  truly  said  (in  the  language  of  Cicero,  ap- 
provingly quoted  by  Mansfield  and  Story),  respecting  the 
law  of  our  subject,  wherever  industry  turns  a  wheel  or 
commerce  sets  a  sail :  "  Non  ei'it  alia  lex  RomcB,  alia  A  the' 
nis,  alia  nunc,  alia  posthac,  sed  et  apiid  omnes  gentes,  et 
omni  tempore,  ttna  eademqiie  lex  obtinebit." 

'  Ante,  vol.  l,  §  lo,  p.  lo,  note  i. 

END   OF   VOLUME   SECOiN'D. 


GENERAL  INDEX. 


INDEX  TO  VOLUMES  I.  AND  II. 


[The  figures  opposite  to  references  refer  to  paragraphs  marked  §.     The  Roman 
numeral  "  II."  is  prefixed  to  references  to  second  volume]. 


ABSCONDING.     See  EXCUSES,  and  II.,  1144. 

of  payor  is  excuse  for  want  of  presentment,  II.,  1 144. 

especially  if  he  is  insolvent,  II.,  1144. 

of  payor  to  another  place  in  same  State  or  country  excuses  want  of  pre- 
sentment, II.,  1 144. 

but  if  holder  knows  his  whereabouts  he  should  seek  him,  II.,  1 144. 

of  drawee,  maker,  or  acceptor  does  not  excuse  want  of  notice  to  drawer 
or  indorser,  II.,  1144. 

when  drawer  or  indorser  absconds,  notice  should  be  left  at  last  place  ol 
abode,  11.,  1144. 

or  with  party  representing  his  estate,  II.,  1144. 

ABSENCE.    See  Excuses,  and  II.,  1 114. 

as  excuse  for  non-presentment  and  notice,  II.,  11 14  to  1123. 

ACCEPTANCE.    See  Presentment  for  ;  Drawer  and  Drawee  ;  Prom- 
ises TO  Accept  ;  Partners  ;  Corporations  ;  Statute  of 
Frauds. 
I.  Nature  of,  360. 

drawer  undertakes  that  bill  will  be  accepted,  479. 

drawee  who  is  not  acceptor  may  discount  bill,  479. 

drawee  without  acceptance  not  party  to  bill.  480. 

may  be  waived,  or  dispensed  with,  481. 

in  such  case,  negotiability  of  bill  not  impaired,  481. 

what  bills  do  not  require  acceptance,  482. 

bills  payable  on  demand  do  not  require,  482. 

nor  does  bill  drawn  by  party  on  himself,  482. 

nor  bill  drawn  by  partner  on  his  firm,  482, 

nor  by  corporation  on  its  officer,  482. 

either  of  a  set  may  be  accepted  and  sued  on,  483. 

drawee  should  accept  but  one  of  a  set,  483. 

when  acceptor  bound  on  several  bills  of  a  set,  483. 

(813) 


8T  TkT  TM?  V  References  a  re  to 

1 4  1 JN  UH-A..  farasraphs  marked  % 

ACCEPTANCE— con/zm/ed. 
2.  IVAo  may  accept,  484,  485. 

bill  imports  that  drawee  is  competent  to  accept,  484, 

none  but  drawee  can  accept  unless  for  honor,  485. 

second  acceptance  is  alteration,  485. 

but  party  may  guarantee  bill,  485. 

can  not  be  series  of  acceptors,  485. 

may  be  by  any  name  party  adopts,  485. 

ambiguous  cases,  486. 

if  no  drawee  is  named,  acceptor  acknowledges  himself  drawee,  486. 

may  be  by  agent,  487. 

holder  may  exact  proof  of  agent's  authority,  487. 

whether  holder  must  take  agent's  acceptance,  487. 

if  agency  clear,  holder  must  take  acceptance  by  agent,  487, 

if  holder  takes  acceptance  from  one  falsely  assuming  agency,  and  does 

not  notify  antecedent  parties,  they  may  be  discharged,  487. 
if  hill  drawn  on  agent  individually  he  must  accept  individually,  487. 
various  and  conflicting  cases,  487. 
joint  drawees  should  accept  jointly,  488. 

if  either  joint  drawee  refuse  acceptance,  bill  must  be  protested,  488. 
but  party  accepting  bound,  488. 
one  partner  may  accept,  488. 

whether  partner's  acceptance  in  his  own  name  suffices,  362,  488,  489. 
how  partner  should  accept,  488. 

3.  When  made,  490,  491. 

may  be  before  drawing,  490. 

may  be  after  discount,  maturity,  protest,  or  refusal  to  accept,  490,  491. 
acceptances  in  blank,  142,  143,  I43«,  490- 

acceptor  in  blank  liable  for  amount  to  bona  fide  holder,  though  author- 
ity be  exceeded,  490. 
dates  from  delivery,  490. 
is  revocable  until  delivery,  490. 

usage  of  banks  respecting  dishonor  for  non-acceptance,  490. 
may  be  after  death  of  drawer,  491,  49812. 
and  after  prior  refusal  to  accept,  491. 
presumption  as  to  time  of,  491. 
drawee  may-  deliberate  twenty-four  hours  as  to,  492. 
if  drawee  refuse,  in  twenty-four  hours  bill  must  be  protested,  492. 
when  accepted  and  issued,  acceptance  is  irrevocable,  493. 
may  be  dated,  494. 

acceptance  presumed  to  be  after  drawing,  and  before  maturity,  494. 
when  drawee  should  certify  the  date,  494. 
when  amount  should  be  expressed  in,  494. 

4.  Form  and  varieties  of,  496. 

may  be  express,  implied,  verbal,  written,  by  telegram,  on  the  bill,  on 
separate  paper,  before  bill  drawn  or  afterward,  absolute,  conditional 
or  qualified,  496. 

usual  form  is  by  writing  his  name  and  the  word  "  accepted  "  on  the 
face  of  the  bill,  497,  504. 


References  are  to  TXT-nirY  RtC 

tarasraJ,Us  marked  %.  ^^  ^^■^-  ^15 

ACCEPTANCE— f^«/z«?^^^. 

signature  of  drawee  alone  suffices,  497,  504. 

or  the  word  "accepted,"  without  signature,  497. 

what  words  constitute  acceptance,  497. 

effect  of  words  "  I  will  not  accept,"  written  on  bill,  502. 

not  necessary  for  signature  to  be  across  the  bill,  498. 

position  of  signature  immaterial,  498. 

part  payment  does  not  amount  to  acceptance,  497^. 

statutory'  requirement  of  acceptance  in  writing  on  bill,  497^. 

construction  of  statutory  requirements  that  acceptance  be  written  on 
bill  and  signed,  497^. 

letter  of  drawee,  though  drawer  dead,  may  be  sufficient,  498. 

effect  of  drawee's  death,  498^;. 

drawer's  death,  after  delivery  of  bill  to  payee,  no  revocation,  491,  498a. 

what  conduct  implies,  499. 

when  keeping  bill  by  drawee  amounts  to,  499(7. 

whether  the  destruction  of  bill  by'drawee  amounts  to,  500. 

drawee  procuring  discount  of  bill  for  his  own  accommodation,  and 
promising  to  pay  it,  constitutes  himself  acceptor,  501. 

authority  to  draw  amounts  to,  501. 

drawee  promising  and  refusing  to  accept  is  bound  for  damages,  502. 

if  drawee  has  funds  of  drawer,  slight  circumstances  will  raise  presump- 
tion of  contract  to  accept,  502. 

"  I  protest  within,"  is  refusal  of,  502. 

may  be  on  separate  paper,  503. 

what  promises  amount  to,  503. 

equivocal  language  will  not  amount  to,  503. 

5.  Verbal  and  written  acceptances,  406. 

senible,  holder  may  require  written,  504,  507^. 

verbal  is  binding,  504. 

by  what  law  verbal,  controlled,  867. 

what  words  constitute  verbal,  ^o\a,  505,  506. 

promise  to  pay  on  subsequent  day,  505. 

words  used  rliust  show  clear  intent  to  accept,  506, 

must  be  addressed  to  drawer,  holder,  or  agent,  507. 

if  to  stranger,  do  not  amount  to,  507. 
holder  must  assent  to  verbal,  507^. 

6.  Absobtte,  conditional,  and  qualified,  508. 

holder  may  require  absolute,  508. 

at  his  risk  take  conditional  or  qualified,  508. 
or  may  treat  the  bill  as  dishonored,  508, 
plaintiff  must  show  performance  of  condition,  508. 
conditional  should  be  so  averred,  508. 
what  words  amount  to  conditional,  509. 
holder  refusing  conditional,  should  protest,  510. 
holder  accepting  conditional,  should  notify  parties,  510. 
protest  for  non-acceptance  precludes  holder  from  availing  himself  of 

conditional,  510. 
indorser  discharged  by  conditional,  unless  he  is  notified  of  its  terms. 

and  assents,  510,  511,  515. 


8     (■  TTSinW  References  are  '" 

lO  IINUIL^V.  J>ara£ra/>ks  murk.'J  I 

h.CCEVi:  A.'^CE—conflmeed. 

whether  or  not  drawer  discharged  by  conditional,  511. 

effect  of  neglect  to  notify,  when  conditions  complied  with,  511. 

construction  of  conditional,  512. 

to  pay  "when  infimds"  meaning  and  effect  of,  513. 

when  "  in  funds"  means  "  when  in  cash,"  513. 

when  funds  not  received  in  lifetime  of  acceptor,  administrator  receiving 

them  is  liable,  513. 
various  instances  construed,  513. 
holder  must  show  acceptor  received  funds,  513,  514. 

can  not  resort  to  drawer  until  acceptor  receives  funds  and  re- 
fuses to  pay,  513. 
acceptor  not  liable  if  funds  intercepted,  513. 
when  evidence  admissible  to  explain  conditional,  514. 
Qualified^  515. 

qualifications  as  to  sum,  time,  place,  and  mode  of  payment,  515. 
drawer  and  indorser  discharged  unless  they  assent  to,  515. 
acceptance  to  pay  at  another  town  is  qualified,  and  operates  as  altera- 
tion, 515.     II.,  1379.  1381- 
but  not  if  payable  at  particular  place  in  same  town,  515.     II.,  1380. 
may  contain  condition  for  renewal,  516. 
acceptance  for  part  of  amount  is  good/r£>  tajtto,  516. 
acceptance  for  part  discharges  antecedent  parties,  unless  assented  to, 

516. 
conditions  in,  should  be  written,  517. 

maybe  in  contemporaneous  writing,  517. 

but  in  latter  case  would  not  affect  holder  without  notice, 

517- 
conditions  in  the  body  of  the  instrument,  517. 
written  acceptance  can  not  be  altered  by  parol  evidence, 

517- 
verbal  acceptance  may  be  shown,  518. 
conditional,  can  not  be  made  after  absolute  acceptance,  518. 
conditions  as  to  acceptance  may  be  in  body  of  the  bill,  517. 
such  cases  construed,  517. 

7.  Acceptances  payable  at  a  particular  place,  519. 

House  of  Lords  decided  such  acceptances  to  be  qualified,  519. 

English  statute  on  the  subject,  519. 

does  not  affect  promissory  notes,  519. 

allegation  of  presentment  not  necessary  against  acceptor,  519. 

unless  date  be  payable  at  a  particular  place,  519. 

the  words,  "only,  and  not  otherwise  or  elsewhere,"  519. 

presentment  for,  must  be  alleged  against  drawer  or  indorser,  519. 

so  if  bill  be  drawn  payable  at  particular  place,  519. 

rule  as  to,  in  the  United  States,  520. 

in  effect,  agrees  with  the  English  statute,  520, 

8.  Acceptance  for  honor,  or  supra  protest,  521. 

happens  when  drawee  refuses  to  accept,  and  stranger  accepts  for  honor 
of  a  party,  521. 


References  are  to  t  -v-  tm.-  v  O  »  »» 

Paragraphs  marked  §.  lAUtX.  51/ 

ACCEPTANCE— r^«//;/«^rt'. 

inures  to  benefit  of  parties  subsequent  to  one  for  whose  honor  the  ac- 
ceptance is,  521. 

is  only  allowable  after  protest,  522. 

form  and  ceremony  of,  523. 

acceptor  should  notify  party  for  whose  honor  he  accepts,  523. 

any  third  person,  not  a  party,  may  accept  for  honor,  524. 

and,  it  seems,  so  may  the  drawee,  524. 

unless  he  were  bound  in  good  faith  to  accept,  524. 

rights  o{  2iCCt^\.or  supra  protest,  524,  526. 

when  he  may  recover  against  indorser,  524, 

maybe  several  acceptors  supra  protest  for  honor  of  different  parties,  525. 

acceptor  supra  protest  should  state  for  whose  honor  he  accepts,  525. 

if  he  does  not,  it  will  be  presumed  to  be  for  honor  of  the  drawer,  525. 

acceptor  supra  protest  may  sue  party  for  whose  honor  he  accepted,  and 

others  whom  such  party  could  sue,  526. 
must  prove  presentment  and  notice  when  he  sues  drawer,  526. 
acceptance  for  honor  not  absolute  engagement,  527. 
in  order  to  be  binding  (i)  bill  must  be  presented  to  original  drawee  at 
maturity,  527. 

(2)  if  second  refusal  by  dravver,  must  be  second 

protest,  527. 

(3)  and  then  bill  must  be  presented  to  acceptor 

supra  protest,  527. 

If  acceptor  supra  protest  refuse  payment,  after  these  steps  taken,  there 

must  be  another  formal  protest,  527. 
does  not  admit  signature  of  mdorser  for  wnose  honor  it  is  made,  528. 
to  what  extent  admissions  extend,  528. 
holder  not  bound  to  take,  529. 
who  may  be  sued  by  holder  taking,  529,  531. 
cases  of  protest  for  better  security,  530. 

effect  of  acceptance  for  honor  on  accommodation  parties  531. 
releases  parties  who  become  such  for  accommodation  of  the  drawer,  531. 
9.  Effect  of  accepta7tce  ;  what  it  admits,  532. 

acceptance  makes  drawee  principal  debtor,  532. 

but  drawee  can  not  charge  drawer  unless  he  pays  the  bill,  532. 

makes  acceptor  liable  like  the  maker  of  a  note,  532. 

according  to  all  the  terms  of  the  bill,  53^. 
stipulations  for  payment  of  attorney's  fees  enter  into,  533,  62a. 
if  for  accommodation,  acceptor  can  not,  nevertheless,  sue  drawer  on 

the  bill,  532. 
but  may  sue  him  for  money  paid  at  his  request,  532. 
acceptance  admits  everj'thing  essential  to  validity  of  the  bill,  533, 
that  is  to  say — (i)  signature  of  the  drawer ;  (2)  funds  in  the  hands  of 

the  drawee  ;  (3)  capacity  of  the  drawer ;  (4)  capacity  of  the  payee  to 

indorse ;  (5)  handwriting  and  authority  of  drawer's  assumed  agent, 

533.  534.  535.  536,  537-     n.,  1363. 
binds  acceptor,  though  drawer's  name  be  forged,  533. 

as  between  drawer  and  acceptor,  the  latter  may  show  he  had  no  funds ; 
but  not  as  against  bona  fide  holder,  534. 

Vol.  II.— 52 


8 1 8  INDEX.  .  ^'f'^"^"'  ''^'•t",  - 

paragraphs  marked  %. 

ACCEVT  A'^CE— confznued. 

10.  What  acceptance  does  not  admit,  538.  539,  540. 

it  does  not  admit  genuineness  of  payee's  or  other  indorser's  signature^ 
538.     II.,  1225,  1364. 

acceptor  paying  under  forged  indorsement  may  recover  back  amount, 
538. 

rule  does  not  apply  where  drawer  has  issued  bill  bearing  forged  indorse- 
ment, 538. 

reason  of  exception,  538. 

does  not  admit  indorser's  signature,  though  bill  be  payable  to  drawer's 

order,  538.     II.,  1225,  1365. 
rule  in  case  of  fictitious  drawer,  538. 
does  not  admit  agency  to  indorse,  539.     II.,  1225. 
does  not  admit  genuineness  of  terms  of  the  bill,  540. 

ACCEPTANCE  SUPRA  PROTEST,  OR  FOR  HONOR,    See  Acceptance, 
and  521  to  531. 
if  acceptor  is  responsible  for  issuing  bill  in  such  form  as  admits  of  easy 
alteration,  he  is  bound,  540. 

11.  Extinguishment  of  acceptor's  obligatio7i,  541. 

acceptor's  obligation  may  be  extinguished,  discharged,  or  waived  by — 
(i)  operation  of  law;  (2)  payment ;  (3)  release  ;  (4)  express  or  im- 
plied waiver,  541,  542,  543,  544,  545. 
bankruptcy  or  statute  of  limitations  discharges,  541. 
acceptance  discharged  by  express  renunciation,  542,  544. 
different  rule  applicable  to  other  executory  contracts  after  breach,  542. 
when  acceptance  is  for  accommodation,  543. 
where  acceptance  is  for  value,  544. 

circumstances  must  amount  to  express  renunciation,  545. 
delay  to  proceed  against  acceptor,  or  receiving  interest  from,  or  giving 

time  to  other  party,  does  not  discharge  acceptor,  546. 
effect  of  failure  of  consideration,  547. 

extending  time  in  acceptance,  547. 
accepting  after  maturity,  547. 
taking  security  from  other  party,  548. 

co-extensive  or  collateral  security  taken  from  acceptor,  548. 
when  cancellation  discharges  acceptance,  549. 
effect  of  cancellation,  549. 
every  holder  may  avail  himself  of  written  or  verbal  acceptance,  563. 

ACCEPTOR.  See  ACCEPTANCE;  Promises  to  Accept;  Corporation; 
Agent  ;  Forgery  ;  Alteration. 

there  can  be  but  one  acceptor  of  bill,  412,  485. 

the  acceptor  must  be  drawee  or  acceptor  for  honor,  412,  485. 

whether  corporation  or  officer  is  in  certain  cases,  412,  413. 

whether  principal  or  agent  is  in  certain  cases,  414. 

is  principal  party  to  bill,  532.     II.,  1236. 

whether  acceptor  of  bill  indorsed  in  blank  can  pass  good  title  before 
maturity,  78 1<^. 

if  bill  passed  out  of  his  hands  after  acceptance,  its  production  is  evi- 
dence of  payment,  II.,  1227. 


pf47:,T,:::k%%.  index.  819 

hCCEVTOR—confimted. 

when  he  pays  should  take  receipt,  II.,  1228. 

is  entitled  to  possession  of  bill,  II.,  1228. 
whether  liable  for  re-exchange,  II.,  1449,  1450. 
author's  view  that  he  is  liable,  II.,  1450. 
is  discharged  by  alteration  of  bill,  II.,  1379. 
insertion  of  place  of  payment  is  alteration,  II.,  1379. 
but  drawee  in  particular  city  may  designate  place  of  payment  therein, 

515.     II.,  13S0. 
is  bound  to  holder  who  takes  bill  after  acceptance,  though  drawer's 

name  be  forged,  II.,  1361. 
whether  he  may  recover  from  holder  when  bill  is  forged,  who  presented 

it  for  payment,  II.,  1361,  1362. 
what  acceptor  admits,  see  Acceptance  and  533. 
law  of  place  of  payment  controls  contract  of,  896. 
if  place  of  payment  not  specified,  it  is  presumably  place  of  acceptance, 

896,  918. 
liability  of  for  interest,  re-exchange,  and  damages,  918.     II.,  1449,  1450- 
when  acceptor  may  recover  amounts  paid  on  forged  and  altered  drafts. 

See  Forgery  and  Alteration,  and  II.,  1359  to  1369. 
recognized  exceptions  to  rule  generally  stated  that  acceptor  can  not 

recover  payments  of  forged  drafts,  II.,  1367. 
may  recover  (i)  when  payment  is  made  to  payee,  II.,  1367. 

(2)  where  parties  are  mutually  in  fault,  II.,  1367. 

(3)  where  party  holding  paper  has  not  exercised  customary 
precaution,  II.,  1367. 

(4)  where  payment  is  made  for  honor  of  drawer,  II.,  1368. 

ACCOMMODATION  BILLS  AND  NOTES.  See  Bona  Fide  Holder 
Consideration  ;  Diversion  ;  Principal  and  Surety. 

are  made  on  sufficient  consideration,  790. 

holder  of  bill  or  note  made  for  accommodation  need  not  show  that  he 
gave  value,  165. 

bills  and  notes  for  mutual  accommodation  valid,  187. 

member  of  firm  has  no  implied  power  to  execute  accommodation  paper 
in  firm's  name,  365. 

if  instrument  shows  on  face  that  partner  signed  firm's  name  for  accom- 
modation, holder  must  show  assent  of  other  members,  365. 

word  "  surety  "  attached  to  firm's  name  conveys  notice,  365. 

when  transaction  shows  on  its  face  that  party  signed  for  accommoda- 
tion, 365. 

bona  fide  holder  without  notice  may  recover  against  firm  whose  name 
is  used  by  member  for  accommodation,  368. 

burden  of  proof  in  such  cases,  369. 

corporation  has  no  implied  authority  to  execute,  387. 

but  is  bound  to  bona  fide  holder  without  notice,  387. 

acceptor  for  accommodation  can  not  sue  drawer  on  bill,  532. 

but  may  sue  for  money  paid  at  his  request,  532. 

may  be  indorsed  after  maturity,  and  pass  good  title,  726,  786,  790. 

fact  that  holder  knew  nature  of  paper  does  not  vitiate  his  title,  726,  786, 
790. 


t>20  INDEX.  paragrapi. .  >,u. >^,J% 

ACCOMMODATION  BILLS  AND  Y!<OTYJ^— continued. 

what  amounts  to  diversion  of,  792. 

whether  diversion  of  shifts  burden  of  proof,  790,  791, 

use  of  in  paying  pre-existing  debts  and  as  collateral  security,  793a;. 

holder  of  as  collateral  security  can  only  recover  to  extent  of  his 
debt  against  accommodation  party,  832;^?. 

generally  governed  by  law  of  place  of  delivery  and  not  of  date,  868. 

but  purchaser  without  notice  may  presum.e  ostensible  character  to  be 
real,  869. 

purchaser's  knowledge  that  bill  or  note  was  drawn,  made,  accepted,  or 
indorsed  for  accommodation  does  not  generally  affect  right  of  re- 
covery, 790. 

unless  such  knowledge  infect  the  transaction  with  usury,  750  to  753. 

usury  in  the  negotiation  of  (see  Sale),  750  to  768. 

what  amounts  to  diversion  of,  792. 

if  executed  for  general  accommodation,  party  may  use  them  in  any 
legal  way,  793. 

when  may  be  applied  in  payment  of  pre-existing  debt,  793«. 

use  of  as  collateral  security,  793a. 

recovery  by  accommodation  party  limited  to  amount  paid,  II.,  1342. 

this  rule  applicable  to  accommodation  indorser  who  is  payee,  II.,  1342. 

indorser  of  entitled  to  notice,  II.,  995. 

ACCORD  AND  SATISFACTION.    See  Discharges. 

ACCIDENT  as  excuse  for  non-presentment,  protest,  and  notice.    See  EXCUSES, 
and  II.,  1067,  1125  to  1 127. 

ACTION    OR    SUIT    ON   NEGOTIABLE    INSTRUMENTS.      See  Evi- 
dence. 

I.  General  principles  as  to  who  may  sue,  II.,  11 81. 

any  holder  who  can  trace  clear  title  may  sue,  II.,  iiSii^. 

so  may  receivers,  assignees,  trustees,  and  personal  representatives,  II., 
Ii8i«. 

donee  causa  mortis  may  sue  on  name  of  donor's  personal  representative, 
II.,  Il8lrt:. 

mere  depositary  can  not  sue,  II.,  \\Z\a. 

under  special  indorsement  only  special  indorsee  can  sue,  II.,  Ii8ia. 

party  for  accommodation  paying  may  sue  prior  parties,  II.,  ii8i«,  1206. 

but  can  not  sue  subsequent  parties,  \\%\a. 

acceptor  or  maker  for  accommodation  can  not  sue  drawer  or  indorser 
on  bill  or  note,  II.,  \\%\a. 

but  may  sue  for  money  paid  at  their  request,  II.,  Ii8ia. 

partnership  cases,  II.,  1182. 

copartner  can  not  sue  firm  on  bill  payable  to  himself,  II.,  1182. 

if  one  partner  die,  survivor  must  sue,  II.,  1182. 

under  indorsement  in  blank  any  partner  may  sue,  II.,  1182. 

if  single  woman  marries,  husband  must  join  in  suit  on  bill  or  note  pay- 
able to  her  before  marriage,  II.,  1184. 

right  of  single  to  sue  survives  to  personal  representative,  II.,  1184. 

if  husband  dies,  right  of  action  survives  to  her,  II.,  1184. 


AV  fe re tices  are  U  T  vr n T?  v  Rot 

paragrapki  marked  §.  INDEX.  5  21 

ACTION  OR  SUIT  ON  NEGOTIABLE  INSTRUMENTS— wi/r^w^^. 

on  bill  or  note  payable  to  married  woman  after  marriage,  husband  may 

sue  or  join  in  suit  with  wife,  II.,  1184. 
if  payable  to  husband  or  wife  in  alternative  he  should  sue,  II.,  1184. 
married  woman  can  not  sue  husband  on  note  executed  to  her  by  hira 

after  marriage,  II.,  1184. 
nor  on  his  joint  and  several  note  made  with  others,  II.,  1184. 
in  latter  case,  if  husband  dies,  widow  may  sue  others,  II.,  1184. 
if  payable  to  "  A.  for  use  of  B.,"  "A."  must  sue,  II.,  1185. 
indorsee  of  payee  may  sue  maker  though  guarantor,  II.,  1185. 
as  to  party  who  pays  supra  protest,  II.,  1186. 
banker  paying  acceptance  unprovided  for,  not  on  same  footing,  II., 

1 186. 
cause  of  action  indivisible,  II.,  11 86a. 
what  constitutes  entire  or  single  demand,  II.,  ii86rt;. 

2.  If  payable  to  agent  (as  to  "  A.  B.,  agent  of  C.  D.,")  suit  may  be  in  name  o( 

agent,  II.,  1187. 
agent  without  legal  title  can  not  sue,  II.,  1187. 
doctrine  that  either  principal  or  agent  may  sue,  II.,  1187. 
whether  undisclosed  principal  may  sue,  II.,  1187. 
rule  as  to  official  agents  of  States  and  corporations,  II.,  1188. 
conflicting  authorities,  II.,  1188,  1189. 

3.  When  agent's  name  is  used  by  adoption  for  principal's,  principal  may  sue, 

II.,  1189a. 

4.  Who  may  sue  on  instrument  payable  to  one  party  and  indorsed  by  anothei, 

II.,  1 190. 

5.  On  instrument  payable  in  blank  or  indorsed  in  blank,  nominal  holder  may 

sue,  II.,  1191. 
and  whether  such  holder  receive  amount  as  trustee,  agent,  or  pledgee, 

II.,  1 192. 
evidence  that  plaintiff  has  no  interest  in  instrument  admissible  when 

defence  against  owner  would  be  available,  II.,  1192. 
rule  in  England,  II.,  1192a. 
statute  in  New  York,  II.,  1192a. 
indorsement  in  blank  confers  joint  right  of  action  on  those  agreeing  to 

sue,  II.,  1 193. 
various  cases,  II.,  1193. 
holder  of  blank  note  may  fill  it  up  with  his  own  name  and  sue  on  it, 

II.,  1 194. 
holder  of  indorsement  in  blank  may  fill  up  before  or  at  trial  of  suit, 

II.,  1195. 
blank  indorsement  need  not  be  filled  at  all,  II.,  1195.     But  picry,  II., 

1195. 
if  plaintiff  omit  statement  of  all  indorsements  in  his  declaration,  he 

may  strike  out  intervening  ones,  II.,  1 196. 
whether  plaintiff  may  avail  himself  of  title  of  indorsement  stricken  out, 

II.,  1 196. 
if  not  payable  to  bearer  or  indorsed  in  blank,  holder  can  not  sue  in  his 

own  name,  II.,  1197. 
if  transferrer  indorse,  his  name  can  not  be  used  by  holder,  II.,  1197. 
rule  where  plaintiff  has  indorsed,  and  there  appear  subsequent  indorse- 
ments to  his,  II.,  1 198. 


8T~  T-N^riTTV  References  are  to 

-  -  1 JN  JJ  t  A.  Paragraphs  markc  i  §. 

ACTION  OR  SUIT  ON  NEGOTIABLE  INSTRUMENTS— r<7«//««/^^. 

holder  may  always  strike  out  special  indorsement  and  bring  suit  undei 

any  indorsement  in  blank,  II.,  1198. 
if  plaintiff's  indorsement  be  on  bill  he  may  sue,  II.,  1 198. 

6.  Right  to  sue  in  one's  name  must  exist  at  time  of  suit,  II.,  1 199. 

indorsement  after  suit  will  not  avail  to  give  right  of  action,  II.,  1 199. 
transfer  pending  suit  may  be  with  agreement  that  action  shall  continue 

for  benefit  of  transferrer,  II.,  1199. 
in  absence  of  evidence  such  agreement  presumed,  II.,  1199. 
possession  with  legal  title  vs  prima  facie  evidence  of  right  to  sue,  II., 

1 191,  1200. 
possession  in  such  only  mala  fides  can  defeat  suit,  II.,  1200. 
is  not  always  necessary  to  institute  suit,  II.,  1201. 
by  pledgee  who  is  indorsee  gives  right  to  sue,  II.,  1201. 

7.  As  a  general  rule,  holder  may  sue  all  prior,  but  not  subsequent  parties,  IL, 

1202a. 

when  general  rule  does  not  apply,  II.,  I202rt;. 

at  common  law  must  prosecute  several  actions  against  several  prior 
parties,  II.,  1203. 

by  statutes  prior  parties  may  be  sued  jointly,  II.,  1203. 

indorser  can  not  sue  acceptor  or  maker  until  he  has  paid  bill  or  note, 
II.,  1204. 

when  drawer  may  maintain  action,  II.,  1205. 

drawer  must  have  paid  bill,  II.,  1205. 

acceptor  for  accommodation  who  pays,  may  sue  for  money  paid  at  his 
request,  II.,  liSi^:,  1206. 

but  can  not  sue  on  bill  unless  he  accepted  for  honor,  II.,  1206. 

production  of  bill  by  acceptor  is  not  evidence  of  payment  by  him,  un- 
less it  passed  into  circulation  after  acceptance,  II.,  1206. 

receipt  on  back  of  bill,  handwriting  must  be  proved,  II.,  1206. 

8.  Querj',  whether  suit  may  be  brought  on  last  day  of  grace,  II.,  1207. 

action  lies  against  maker  on  day  of  maturity  after  demand  and  refusal, 

II.,  1208. 
questionable  when  note  is  payable  without  grace,  II.,  1209. 
when  demand  is  necessary,  it  must  be  made  prior  to  institution  of  suit 

on  last  day  of  grace  or  day  of  maturity,  II.,  1210. 
and  must  have  been  made  in  reasonable  hours,  II.,  12 10. 
on  due-bill  suit  may  be  brought  on  day  of  date,  II.,  121 1. 
action  against  indorser  lies  as  soon  as  notice  is  transmitted,  II.,  12 12. 
notice  must  precede  suit,  II.,  1212. 

otherwise  premature  suit  not  cured  by  reception  of  notice,  II.,  121 2. 
on   bill  dishonored   for   non-acceptance,  right  of  action  against  the 

drawer  accrues  at  once,  II.,  121 3. 
8.  How  statute  of  limitations  affects  actions  on  negotiable  instruments,  II., 

1214. 
begins  to  run  from  time  action  accrues,  II.,  1215, 
various  cases  as  to  when  it  commences,  II.,  1215. 
ADDRESS.     See  DRAWEE,  and  96,  97,  98. 
of  check,  II.,  1568. 
of  party  entitled  to  notice,  II.,  1023. 


References  are  to  INDEX.  ^23 

paragraphs  marked  %. 

ADMINISTRATORS.    See  Fiduciaries  ;  Prksentmknt  ;  Notice. 
ADMISSION.    See  Evidence  ;  Excuses  ;  Acceptance  ;  Acceptor. 

as  to  genuineness  of  paper.     See  FORGERY,  and  II.,  1352. 

of  fact  dispenses  with  further  proof,  II.,  1220. 

may  be  shown  to  have  been  made  under  mistake.  II.,  1220. 

ADOPTION. 

party  bound  by  any  name  he  adopts,  141.  304.  363.  399.  483-    II-.  "8^» 
firm  may  adopt  name  of  one  partner,  363. 
corporation  may  be  bound  by  several  names,  399. 
may  adopt  agent's  name,  399. 
may  be  bound  by  president's  name,  399^. 

cashier's  name,  417.     II.,  1188. 
when  principal  may  sue,  agent's  name  having  been  used  for  his.  II., 
1189^. 
ADVICE,  words  of,  frequently  inserted  in  bills,  IC9. 
use  of  such  words,  109. 

sometimes  "  without  further  advice"  is  inserted,  109. 
if  "  as  per  advice  "  is  inserted,  the  drawee  is  warned  not  to  pay  until 

advised,  109. 
if  he  disregards  the  intimation,  acts  at  his  peril,  109. 

AFTER   SIGHT 

in  bill  means  after  acceptance  or  protest  for  non-acceptance,  619. 

in  note  means  payment  not  to  be  demanded  until  it  is  exhibited  to 

makei,  619. 
bill  or  note  payable  a  certain  time  after  sight  are  entitled  to  grace,  617. 
bill  payable  one  day  after  sight,  counting  grace,  is  really  payable  four 
days  after  sight,  617. 
AGENTS.    See  "Banks  and  other  Agents    for  Collection";  also. 
Broker;   Bona   Fide   Holder;  Corporations;  Munic- 
ipal Bonds. 
I.  Competency  and  authority  of,  a7td gejieral principles  respecting,  272. 
infants,  married  women,  outlaws,  aliens,  and  slaves  may  be,  272. 
whether  imbeciles,  lunatics,  and  children  of  tender  years  may  be,  272. 
no  particular  form  of  authority  necessary  to  constitute,  273. 
unless  authority  be  to  execute  sealed  instrument,  in  which  case  it  must 

be  under  seal,  274. 
authority  generally  may  be  verbal  or  written,  274. 
if  written,  authority  can  not  be  disputed  by  parol  proof  of  contrary  m- 

stvuctions,  274. 
if  authority  be  to  two  or  more  jointly,  then  conjoint  action  is  necessary, 

275. 
instances,  275. 

authority  to  bind  party  means  authority  to  bind  him  separately,  277. 
unless  authority  to,  be  coupled  with  an  interest,  it  can  not  be  dele- 
gated, 277. 
using  amanuensis  not  delegation  of  authority,  277. 
if  agency  general,  acts  within  its  scope  bind  principal,  although  against 
his  instructions,  278. 


ROA  TNDFX  Refere7ices  are  to 

*-*  -^  4  liN  U  r.  A.  paragraphs  marked  %. 

AGENTS — continiud. 

unless  party  dealing  with  agent  had  notice,  278. 

if  agent  to  sell  note  indorse  it  without  authority,  principal  not  bound, 
279. 

party  chargeable  with  notice  of  extent  of  agent's  authority,  when  it 
purports  to  be  exercised  under  written  instrument,  280. 

party  not  put  on  inquiry  as  to  agent's  private  instructions,  280. 

limitations  of  general  authority,  281. 

good  faith  essence  of  agency,  282. 

party  having  notice  of  fraud  by,  affected  by  such  notice,  282. 

agent  transcending  power  to  transfer  fraudulently,  party  with  notice  can 
not  recover  against  principal,  282. 

but  principal  may  recover  paper  from  him,  282. 

"pay  A.  B.  or  order,  on  account  of  plaintiff,"  carries  notice  that  A.  B. 
can  not  pledge  paper  for  private  debt,  283. 

power  to  draw,  indorse,  or  accept  is  no  power  to  draw  on  party  with- 
out funds,  283. 

nor  is  it  power  to  draw,  indorse,  or  accept  for  accommodation,  283. 

but  principal  bound  to  holder  without  notice,  283. 

general  authority  may  be  evidence  for  jury  to  consider  on  latter  ques- 
tion, 283. 

so  that  clerk  had  given  paper  on  similar  transactions,  is  evidence,  283, 

construction  of  authority  "  to  sell,  indorse,  or  assign  notes,"  284. 

agent  betraying  trust  does  not  affect  bona  fide  holder  without  notice, 
284,  854. 

can  not  contract  with  himself,  282. 

corporation  note  to  its  trustees  void,  282. 

agent  may  prove  his  agency,  284. 

but   his   declarations   not   admissible   against   principal   until   agency 
proved,  284. 

transferring  paper  warrants  genuineness,  unless  he  discloses  his  agency, 
and  principal's  name,  284. 

contracting  in  his  own  name  warrants  genuineness  of  paper  sold,  740a. 
See  Broken. 

principal  not  bound  by  criminal  acts  of,  286. 

whether  bank  liable  for  bonds  on  special  deposit  and  stolen,  286(2;. 

conflicting  authorities,  286a. 

bank  liable  if  guilty  of  negligence,  286iar. 

losses  by  fraud  or  failure  of  third  party,  when  agent  not  liable  for,  287. 

when  party  not  liable  for  remittance  by  post,  287. 

signature  by  agent  sustains  allegation  of  signature  by  principal,  287. 

general  authority  presumed  to  continue  until  revoked,  288. 

special  authority  otherwise,  288. 

when  principal  should  give  notice  of  revocation  of  authority,  288. 

death  revokes  authority,  288^. 

war  does  not,  288a. 

notice  to  agent  is  notice  to  principal,  802.     II.,  998. 
3.  Implied  attthority  of  agent,  289. 

authority  may  be  inferred  from  circumstances,  289. 

authority  to  draw  bill  is  not  authority  to  indorse,  or  accept,  290. 


References  are  to  T  v  r-i  tt  v  O 

paragrajihs  tnarked  %.  liNJJt.A.  025 

AGENTS — cottiimted. 

authority  to  agent  to  draw  bill  does  not  authorize  drawing  in  agent's 
nan;e,  290. 

authority  to  bind  principal  in  one  form  may  be  evidence  of  authority. 

under  the  circumstances,  to  bind  him  in  another,  290. 
authority  to  sell  note  does  not  authorize  guaranty  of  payment,  290. 

collect  does  not  authorize  sale  or  indorsement,  290,  293. 
transfer  does  not  authorize  indorsement,  290, 
make  note  does  not  authorize  renewal,  291. 
sign  and  indorse  paper  payable  at  a  particular  place  does 
not  apply  to  any  other,  291. 
nor  is  authority  to  sign  for  one  purpose  good  for  another,  291. 
authority  specifying  time  of  payment  can  not  be  varied,  291. 
qualification  of  rule,  291. 
authority  strictly  construed,  292. 
effect  of  authority  "to  transact  business,"  291. 

"to  transact  all  business,"  291. 
"to  conduct  commercial  business,"  291. 
"  to  collect  debts  and  give  discharges,"  292. 
"  to   demand   and    receive   all  moneys,  and   do  all 
other  business,"  292, 

"  to  advance  a  certain  sum  of  mone}',"  294. 

"to  make  purchases  and  pay  for  them,"  494. 

"  to  buy  and  sell  goods,"  294. 
other  phrases  construed,  294. 

what  agents  have  implied  authority  to  sign  negotiable  instruments,  294. 
rule  as  to  merchant  clerks,  store  managers,  attorneys-at-law,  collecting 
agents,  farm  managers,  masters  of  ships,  supercargoes,  etc.,  294,  295. 
effect  of  course  of  business,  and  usual  conduct  of  principal,  296. 
when  jury  may  infer  authority  to  indorse  from  authority  to  draw,  296. 
prior  similar  transactions  are  evidence,  296,  297. 

when  necessary  to  show  that  instrument  was  taken  on  faith  of  prior 
similar  transactions,  297. 

3.  How  agetii  should  sign  paper,  and  haiv  it  is  construed,  298. 

"  A.  B.  by  C.  D.,"  or  "  A.  B.  by  his  agent  C.  D.,"  is  proper  form  of 
signature,  298. 

"  C.  D.  for  A.  B.,"  effect  of  these  words,  298. 

C.  D.  [for  A.  B.]  in  brackets,  effect  of  these  words,  298. 

agent  may  sign  principal's  name  and  show  authority  by  parol,  299. 

this  style  not  favored,  299. 

"C.  D.  by  procuration  of  A.  B."  equivocal,  299. 

the  words  "by  procuration  "  intimate  special  limited  authority,  299. 

person  taking  paper  so  signed  is  put  upon  inquiry,  299. 

negotiable  instrument  must  be  construed  by  its  face,  300. 

as  to  acceptance  by,  see  ACCEPTANCE,  and  487. 
General  principles  of  construction : 

(a)  If  name  of  principal  and  agent  on  paper,  signer  is  bound  unless 
it  appear  that  he  acted  for  another,  300. 

Lord  Ellenborough  says,  signer  bound  unless  he  says  plainly,  "  I 
am  the  mere  scribe,"  300. 


8-  /•  T  -NT  T^  T?  V  References  a  :-e  to 

2  vJ  1 JN  JJ  t  A.  paragraphs  marked  §. 

AG  ENTS — continued. 

test  question  is,  does  signer  apply  hand  as  instrument  of  another 

or  as  contracting  party  ?  300. 
views  of  Chief-Justice  Shaw,  300. 
word  "  agent "  added  to  name  is  mere  designatio  persona,  301 

305. 
indorsements  by  agents,  301. 
peculiar  case  in  New  York,  302. 

(b)  No  party  can  be  charged  as  principal  unless  his  name  is  on  paper 

303- 
different  rule  as  to  contracts  not  negotiable,  303. 

(c)  Not  necessary  to  use  principal's  peculiar  name,  304,  363,  399. 

principal  may  adopt  and  use  agent's  name,  or  agent,  by  authority, 
use  his  own  name  for  principal's,  304. 
{d)  If  agent  sign  his  own  name  without  disclosing  principal's,  he 
binds  himself,  305. 
suffix  of  "agent,"  is  designatio personce,  301,  305. 
this  principle  applies  although  payee  knew  of  agency,  305. 
but  in  such  case,  if  note  not  paid,  principal  may  be  sued  on 

original  consideration,  305. 
if  payee  rely  on  agent's  sole  credit,  principal  not  bound,  305. 
{e)    If  agent  exceed  authority  in  signing  principal's  name,  or  his  own 
name  for  principal,  agent  not  bound  as  party  to  paper,  306. 
307. 
but  must  be  sued  in  tort,  306,  307. 
party  signing  fictitious  name  must  be  sued  in  tort,  307. 
if  agent  not  auth9rized  to  bind  principal,  and  there  be  no  apt 

words  to  charge  himself,  instrument  is  void,  307. 
if  paper  be  ambiguous,  intent  of  agent  to  bind  himself  may  be 

inferred,  308, 
if  principal  ratify  act,  agent  can  not  be  sued  in  tort,  308. 
when  undisclosed  principal  bound,  308a,  740^. 
4.  Liability  of  agent  who  draws  on  account  of  principal  or  indorses  to  him, 
254. 
whether  agent   of  drawee  who   draws  bill  on  principal  in  favor  ol 

drawee's  creditor  is  bound  personally,  310. 
semble,  that  he  is,  310. 
conflicting  authorities,  310,  311. 
presumption  in  such  cases,  311. 

if  drawer  add  "  agent  "  to  his  name,  in  such  case  the  rule  may  be  dif- 
ferent, 311. 
question  affected  by  peculiar  circumstances,  311. 
whether  drawer  of  bill  in  favor  of  his  principal,  or  purchaser  of  goods 

from  himself  as  agent,  is  bound  to  principal,  312,  313. 
conflicting  authorities,  312. 
question  may  turn  on  course  of  business,  313. 

whether  agent  taking  bill  or  note  payable  to  himself  on  principal's  ac- 
count, and  indorsing  it  to  principal,  is  bound  by  his  indorsement  to 
him,  314. 
English  view,  314. 
if  indorsement  be  for  principal's  accommodation,  agent  not  bound,  314, 


par:{ra7^'sV:A.  index.  827 

fiGE^TS— continued. 

so  if  indorsement  be  by  principal's  instructions,  314. 

factor  under  del  credere  commission  is  liable  to  principal  for  debt  of 

party  purchasing  goods,  314. 
and  hence  bound  on  indorsement  of  bill  or  note  to  principal  given  in 

payment,  314. 
whether  agent  bound  when  not  acting  under  del  credere  commission, 

314. 

there  is  no  consideration  for  indorsement  if  he  acted  without  commis- 
sion or  compensation,  and  without  violating  instructions,  314. 

and  hence,  in  such  cases,  agent  indorsing  to  principal  not  bound,  314. 

5.  Ratification,  by  principal,  of  agent's  unauthorized  acts,  316. 

corporation  or  individual  may  ratify,  317. 

ratification  may  be  express,  or  implied  by  acts  or  circumstances,  317. 

party  can  not  ratify  without  capacity  to  contract,  318. 

if  contract  can  only  be  in  prescribed  mode,  it  can  not  be  ratified  ia 

disregard  of  it,  318. 
ratification  is  equivalent  to  previous  authority,  318. 
instances  as  to  ratification,  318,  322. 

principal  not  bound  unless  he  knew  facts  as  to  transaction,  319. 
when  he  must  restore  consideration,  319. 
contract  must  have  been  originally  lawful,  320. 
ratification  must  be  integral  and  not  partial,  321. 
what  acts  amount  to  ratification,  322. 
long  silence  may  amount  to  with  other  circumstances,  322. 

6.  Effect  of  delivering  negotiable  paper  by,  in  violation  of  instructions,  706- 

710. 
duty  of,  in  presenting  bill,  476. 

7.  Evidence  inadmissible  to  discharge  when  contract  is  in  agent's  name,  740a. 

but  admissible  to  charge  undisclosed  principal,  740a. 
AGREEMENTS.    See  Collateral  Agreements. 

to  retire,  effect  of,  II.,  1243. 

the  word  "  retire"  has  various  meanings,  II.,  1243. 

how  construed,  II.,  1243. 
ALIENS  AND  ALIEN  ENEMIES  AS  PARTIES. 

aliens  may  contract  with  citizens,  216. 

war  between  nations  interdicts  contracts  between  their  citizens,  216. 

contracts  between  alien  enemies  utterly  void,  216. 

war  interdicts  all  interchanges,  removals,  negotiations,  contracts,  and 
communications  between  citizens  of  hostile  countries,  216. 

bills  can  not  be  drawn  between  citizens  of  hostile  countries,  217. 

illustrations,  217. 

conflicting  decisions,  217. 

citizen  can  not  accept  bill  drawn  by  alien  enemy,  218. 

nor  indorse  bill  or  note  to  him,  218. 

nor  execute  note  to  him,  218. 

cases  during  late  conflict  between  the  States,  218. 

subject  can  not  be  indorsee  of  bill  drawn  by  alien  enemy  on  anothei 
subject,  unless  he  was  not  aware  of  the  circumstances  affecting  it 
219. 


Cog  References  are  ip 

^-"  liNUH-A.  paragraph s  marked  %, 

ALIENS  AND  ALIEN  ENEMIES  AS  PARTIES— f(7«//;;«^r^. 
exceptions  in  cases  of  neutrals,  220. 

prisoners  of  war,  221, 
ransom,  or  repair  of  ships,  221. 
war  does  not  revoke  agency  to  act  for  alien  enemy,  222, 

ALLONGE.     Meaning  of,  690.  * 

indorsement  may  be  upon,  690. 

ALMANAC  is  judicially  noticed,  70, 

ALTERATION  OF  NEGOTIABLE   INSTRUMENTS.    5^^  Checks. 

1.  Meaning  and  effect  of  alteration,  II,,  1373. 

in  England,  any  material  change,  whether  made  by  party  to  instrument 
or  a  stranger  avoids  an  executory  contract,  II.,  xyj'h'^- 

in  United  States,  spoliation  by  stranger  does  not  avoid  it,  unless  it  ren- 
ders paper  utterly  incomprehensible,  II.,  I373«. 

may  be  before  delivery,  II.,  1373^. 

as  to  alteration,  negotiable  instruments  stand  on  footing  of  those  under 
seal,  II.,  1374. 

in  what  alteration  consists,  II.,  1375. 

what  are  material  alterations,  II.,  1375. 

that  alteration  is  favorable  is  no  defence,  II.,  1375. 

2.  Change  of  date  is  material  as  to  prior  parties  and  sureties,  II.,  1376. 

may  be  in  year,  month,  day,  or  all  three,  II.,  1376. 
even  if  altered  to  one  day  previous,  so  as  not  to  affect  time  of  maturity 
it  is  fatal,  II.,  1376. 

query,  whether  altering  date  of  indorsement  vitiates  instrument,  II., 
1376. 

alteration  in  time  of  payment  has  same  effect  as  change  of  date,  II., 

1377- 
alteration  in  place  of  payment  is  ordinarily  fatal  as  against  parties  not 

consenting,  II.,  1378. 

change  in  place  of  date  is  material  alteration,  II.,  1378. 

what  is  deemed  "  general  acceptance  "  by  statute  in  certain  States,  II., 
1379. 

such  statutory  provisions  do  not  affect  general  rules  respecting  altera- 
tion, II.,  1379. 

if  bill  be  addressed  to  drawee  at  a  particular  city,  he  may  accept  pay- 
able at  ^  particular  place  in  said  city,  414.     II.,  1380. 

but  if  he  accepts  to  pay  in  another  city,  drawer  or  indorser  is  discharged, 
414.     II.,  1381. 

ruling  in  Kentucky  as  to  right  of  acceptor  in  blank  to  insert  place  oi 
payment  in  bill  indorsed  for  his  accommodation,  II.,  13S2. 

whether  memorandum  of  place  of  payment  is  part  of  contract,  II.,  1383, 

alteration  in  amount  of  principal,  making  it  greater  or  less,  is  ma- 
terial, II.,  1384. 

so  changing  a  bill  or  note  to  make  it  bear  interest,  or  changing  time 
when  interest  should  run,  or  the  percentage  of  interest,  II.,  1385. 

alteration  in  the  medium  of  payment  avoids  instrument,  II.,  1386. 

3.  Any  change  in  the  personality,  number  or  relatiotis  of  parties,  is  material, 

II.,  1 387-1 390. 


p3'a^r:;;f"Zrl:d%.  index.  829 

ALTERATION  OF  NEGOTIABLE  INSTRUMENTS— r<7«//«?^^^. 

query,  whether  addition  of  another  maker  discharges  the  others,  II., 

1388,  1389. 
as  to  addition  of  another  acceptor,  IT.,  1388,  1389. 
acceptor  and  indorsers  stand  on  same  footing  as  other  parties  in  respect 

to  effect  of  alteration,  II.,  1390. 
writing  waiver  of  demand  and  notice  over  indorsement  discharges  in- 

dorser,  II.,  1390. 
striking  out  indorsee's  name,  II.,  1390. 

4.  Changms;  z?isfrument  so  as  to  affect  its  obligation  or  weight  as  evidence  is 

material,  II.,  1391. 
effect  of  adding  to  a  note,  after  delivery,  names  of  witnesses  attesting 

its  execution,  II.,  1392. 
where  witness  himself  afterward  attests  at  request  of  holder,  II.,  1393. 
effect  of  erasing  witness'  name,  II.,  1393. 
effect  of  an  addition  made  to  the  statement  of  the  consideration,  II., 

1394- 
adding  the  words  "  to  order,"  or  "  bearer,"  if  accidentally  omitted,  is 

not  material,  II.,  1395. 
but  otherwise  it  is,  II.,  1395. 
and  if  non-negotiable   is  rendered  a  negotiable  instrument,  alteration 

is  material,  II.,  1395. 
adding  words  "  without  defalcation  or  set-off"  may  be  material,  II., 

1395- 
effect  of  words  written  on  back  of  bill  or  note,  II.,  1396. 
effect  of  obliterating  material  memoranda,  II.,  1397. 

5.  Alteratiofi  to  be  material  jnust  change  the  legal  effect  of  the  instrument, 

II.,  1398. 

examples  of  immaterial  changes,  II.,  1398,  1399,  1400. 

immaterial  memoranda,  II.,  1399. 

appendix  to  name  immaterial,  II.,  1399. 

parties  who  consent  to  alteration  can  not  complain,  II.,  1401. 

consent  may  be  express  or  implied,  II.,  1401. 

may  be  before  change,  or  afterward  by  ratification,  II.,  1401. 
when  may  be  inferred  or  implied,  II.,  1402,  1403,  1404. 

effect  of  change  is  a  question  for  the  court,  II.,  1401. 

whether  consent  was  given  is  a  question  for  the  jur)',  II.,  1401. 

decisions  under  the  English  Stamp  Act  respecting  such  changes,  II„ 
1401. 

evidence  of  consent,  II.,  1402. 

effect  of  subsequent  acknowledgments  and  promises  to  pay,  II.,  1402. 

changes  made  to  correct  mistakes,  supply  omissions,  or  carry  out  inten- 
tions of  parties,  do  not  vitiate,  II.,  1403,  1404. 

6.  If  party  gives  opportunity  by  negligence  for  alteration  of  instrttment,  he  is 

bound  to  a  botiafide  holder,  II.,  1405,  1409. 
when  party  deemed  guilty  of  negligence,  II.,  1405,  1406. 
examples  in  point,  II.,  1406,  1409. 
rule  applies  to  the  addition  or  subtraction  of  memorandum  on  bill  or 

note,  II.,  1407. 
charges  in  paper  perfected — conflicting  decisions,  II.,  1407a. 


C-.^  TMT^-PV  References  are  to 

030  IJNUt-A.  paragraphs  marked  % 

ALTERATION  OF  NEGOTIABLE  INSTRUMENTS- r^«//««^^. 

if  alteration  is  made  without  fault  on  part  of  maker,  drawer,  or  acceptor, 

he  is  not  bound,  II.,  1408. 
erasures,  and  other  marks  of  alteration,  convey  constructive  notice,  II. 

1408. 

7.  Effect  of  fraudulent  alteration  is  to  destroy  instrumen^t  and  extinguish 

debt,  II„  \\\oa. 
as  to  alterations  innocently  made,  ^^x&  is  conflict  of  authority,  II.,  141 1. 
effect  o^  immaterial  c\i2ingts  w'lih.  fraudulent  intent,  II.,  1416, 
immaterial  alteration  is  no  alteration,  II.,  141 6. 
when  instrument  may  be  restored,  II.,  1414,  141 5. 

8.  If  alteration  is  apparent  on  face  of  instrument,  burden  of  proof  is  on  the 

holder  to  explain  it,  II.,  1417- 
but  this  rule  not  invariable,  II.,  14.21a. 
all  surrounding  circumstances  regarded,  II.,  1421^:. 
slight  circumstances  may  shift  burden  of  proof,  II.,  1421^. 
impossible  to  fix  cast-iron  rule,  II.,  142 1«. 

presumption  must  conform  to  experience  of  mankind,  II.,  1421a. 
in  California,  held  that  plaintiff  need  not  explain  alteration  made  in 

printed  words  of  note,  II.,  1419. 
query,  as  to  alterations  made  against  the  interests  of  party  claiming 

under  it,  II.,  1420. 
where  alteration  does  not  appear  on  face  of  instrument,  burden  of  prool 

is  on  the  party  alleging  it,  II.,  1420. 
of  checks.     See  Checks,  and  II.,  1658. 

ALTERNATIVE  DRAWEES. 

If  bill  be  drawn  on  A.  and  B.  "  or  either  of  them,"  acceptance  by  one 

suffices,  488. 

ALTERNATIVE  PAYEES. 

instrument  payable  to  A.  or  B.  not  negotiable,  103. 

if  payable  to  A.,  B.,  and  C,  or  to  their  order,  or  major  part  of  them,  is 

negotiable,  103. 

AMBIGUOUS  INSTRUMENTS.    See  Irregular  Instruments. 

AMOUNT,  OR  SUM.     See  Sale,  and  749.  754- 

when  full  amount  recoverable  on  negotiable  instrument,  i. 

usually  specified  in  left-hand  comer  of  instrument  in  figures,  86. 

if  specified  in  words,  they  overrule  figures,  86. 

difference  between  words  and  figures  can  not  be  explained  by  evidence 

86. 
if  words  indistinct,  figures  may  be  looked  to,  86. 
if  expressed  in  figures  only  it  suffices,  86. 
but  query,  if  expressed  in  marginal  figures  only,  86. 
whether  figures  suffice,  if  amount  in  body  be  left  blank,  86. 
when  holder  has  authority  to  make  blank  correspond  to  figures,  86. 
when  "  dollars  "  are  understood  to  apply  to  figures,  86. 
in  England  when  pounds  understood,  86. 
informalities  of  spelling  not  fatal,  76,  86. 
marginal  figures  not  part  of  instrument,  86.     II.,  1499^. 
dollars  mean  lawful  money  of  United  States,  87. 


p3f;rTp>"Z'rk:U^.  INDEX.  8.^1 

AMOUNT,  OR  ^X^yi— continued. 

when  term  dollars  may  be  explained  by  parol  evidence,  87. 

cases  arisinjj^  out  of  late  war,  87. 

if  donee  transfer  bill  or  note  for  less  than  full  value,  holder  can  only 

recover  amount  paid,  181. 
see  sales  of  bills  and  notes  as  to  amount  of  recover)',  749,  754. 
surety,  or  accommodation  party,  can  only  recover  what  he  pays,  II.,  1342. 

AMOUNT  OF  RECOVERY.    See  Sale;  Collateral  Security;  Accom- 
modation Bills  and  Notes. 
when  whole  amount  recoverable.     And  see  Sale,  and  754,  761. 
on  coupon  bonds,  II.,  15x7^. 
on  bank  notes.     See  Bank  Notes,  and  II.,  1682. 

ANTECEDENT  DEBT.  See  Consideration,  184,  and  Pre-existing  or 
Precedent  Debt,  827  et  seg. 

APPRAISEMENT  LAWS. 

whether  waiver  of,  in  bill  or  note,  impairs  negotiability,  61. 
it  does  not,  61  and  note. 

APPLICATION  OF  PAYMENTS.    See  Payment,  and  II.,  1250,  1253. 

APPROPRIATION  OF  PAYMENTS.     See  Payment,  and  IL,  1250,  1253. 

ASSIGNMENT  OF  FUND  BY  BILL  OR  ORDER.  See  Bills  OF  EX- 
CHANGE AND  Equitable  Assignment. 

whether  unaccepted  bill  of  exchange  for  whole  amount  operates  as  as- 
signment of  fund,  15,  17,  20. 

accepted  bill  for  whole  amount  so  operates,  18. 

order  for  whole  amount  so  operates,  21. 

whether  bill  for  part  of  fund  so  operates,  22. 

order  for  part  of  fund  so  operates,  22,  23. 

New  York  decisions,  23a. 

whether  check  operates  as  assignment  of  fund  in  bank  pro  tanto,  1 1., 
1643. 

ASSIGNMENT  OF  PROPERTY.     See  Excuses,  and  II.,  11 29,  1141. 
as  excuse  for  non-presentment  or  notice,  II. ,  11 29,  1141. 

ASSIGNMENT— TRANSFER  BY. 

1.  Term  assignment  is  usually  applied  to  transfer  of  paper  not  negotiable,  and 

to  transfer  of  such  as  is  negotiable  without  indorsement,  729. 

bill  or  note  payable  to  particular  person  may  be  transferred  without  in- 
dorsement, 729. 

but  such  assignment  passes  only  equitable  title,  729. 

and  is  not  according  to  mercantile  custom,  729. 

what  is  assignment  of  legal  and  what  of  equitable  title,  729,  730,  741. 

2.  Assignor  of  legal  title  warrants — (i)  the  genuineness  of  the  bill  or  note,  731 

English  cases,  731^. 

when  instrument  forged  it  matters  not  that  some  signatures  are 

genuine,  731a. 
distinction  between  assignment  for  debt  due  or  then  created  and 

sale  by  delivery,  73i<5. 


8  T-\T'r»T?-v  References  are  to 

j2  1 JN  D t A.  paragrapirs  marked %, 

ASSIGNMENT— TRANSFER  Wl—contimted. 
distinction  not  well  taken,  73 1(^. 
contrary  view  in  Maryland,  73ti5. 

(2)  its  validity  and  legal  operation,  733. 
English  cases,  732,  733. 

decision  in  New  York  that  scienter  as  to  usury  is  necessary  to  rendei 
assignor  liable,  733«. 

(3)  the  competency  of  the  parties  to  contract,  734. 
decision  of  U.  S.  Sup.  Court  and  comments,  734^- 

in  Nebraska  and  comments,  734^. 

(4)  that  transferrer  has  a  title  to  instrument  and  right  to  transfer  same, 

735- 

(5)  that  he  knows  of  no  facts  which  show  the  paper,  originally  valid,  to 
be  worthless,  736. 

no  implied  warranty  in,  that  paper  was  not  made  for  accommodation, 

736^. 
query,  whether  assignor  warrants  the  solvency  of  the  principal,  737. 
in  such  case,  if  both  transferrer  and  transferee  are  ignorant  of  insol- 
vency of  principal  at  time  of  transfer,  the  loss  should  rest  where  it 

falls,  737. 
doctrine  of  text  as  stated  in  Rhode  Island,  737,  738. 
doctrine  in  England,  739. 
distinction  where  bill  or  note  of  third  party  was  assigned  in  payment  ol 

antecedent  debt,  and  dishonored,  not  considered  tenable,  739,  740. 
oral  warranty  of  solvency,  and  guaranty  of  payment  valid,  739«. 
liability  of  broker  or  agent  making  transfers  by  delivery.     See  Broker, 

and  740^;. 
3.  Where  bill  or  nc  It  payable  "  to  order  "  is  transferred  without  indorsement, 

transferrer  acquires  only  an  equitable  title,  741. 
holder,  in  such  case,  must  aver  and  prove  the  assignment,  741. 
possession,  in  such  case,  not  evidence  of  ownership,  741. 
holder  can  only  recover  subject  to  such  existing  defences  as  were  avail- 
able against  his  assignor,  741. 
but  he  is  protected  against  all  defences  stibseqtiently  zxismg,  741. 
doctrine  as  to  bills  and  notes  not  negotiable,  742. 
bills  and  notes  not  payable  to  bearer  or  to  order  can  not  be  transferred, 

by  indorsement  or  delivery,  so  as  to  enable  transferee  to  sue  in  his 

own  name,  except  by  express  statute,  742,  743. 
transferee,  who  has   promised,  upon  good  consideration,  to  indorse, 

may  be  sued  for  breach  of  promise,  or  compelled,  by  decree  in  equity, 

to  indorse,  744. 
whether  indorsement  relates  back  to  time  of  assignment,  745. 
indorsement  at  any  time  before  suit  brought  cuts  out  right  of  maker 

or  acceptor  to  plead  set-off,  746. 
second  assignee  who  gives  notice  of  his  assignment  is  protected  against 

prior  one  who  fails  to  do  so,  747. 
assignment  of  a  particular  claim  carries  with  it  all  securities  held  by 

assignor,  748, 
negotiable  instruments  may  be  assigned  by  a  separate  and  distinct 

paper,  deed,  or  mortgage,  conveying  them  or  all  "  choses  in  action,' 

748«. 


References  are  to  T -v  r> f  \'  O 

paragraphs  marked  %.  liNUtA.  ^33 

ASSIGNOR.     See  ASSIGNMENT,  supra,  and  741,  746. 

by  what  law  it  is  determined  whether  party  is  assignor  or  indorser,  902. 

ASSIGNS. 

instrument  payable  to  certain  party  or  assigns  is  negotiable,  99,  104. 
II.,  1496. 

ATTACHMENT.    5^^  Assignment. 

when  assignment  has  priority  over,  18,  19,  20  to  23a. 

whether  negotiable  note  subject  to  for  debt  of  payee,  800a. 

better  opinion  to  contrary  unless  note  be  in  hands  of  payee,  800a. 
AT  SIGHT.    See  After  Sight. 

bills  payable  at  sight  entitled  to  grace  by  law  merchant,  617. 

effect  of  statute  or  custom,  6x8. 

"  on  demand  at  sight  "  same  as  "at  sight,"  621. 

ATTESTATION. 

not  necessary  bill  or  note  should  be  attested  by  witness,  112. 

desirable  where  paper  signed  by  mark  or  initials^  112. 

if  there  be  attesting  witness,  he  must  prove  asgnature  or  mark,  112. 

exceptions  to  this  rule,  112. 

admission  of  party  good  evidence,  112. 

when  no  chance  for  mistake,  evidence  of  attesting  witness  not  necessary, 
112. 

statute  in  England,  112. 

when  secondary  evidence  admissible,  112. 

witnessed  and  unwitnessed  notes,  II.,  1392. 

when  adding  or  obliterating  witness'  name  is  material  alteration,  II., 
1392. 

ATTORNEY,  POWERS  OF.    See  Certificates  of  Stock. 

te  execute  sealed  instrument  must  be  sealed,  274. 

to  transfer  certificates  of  stock  may  be  in  blank,  II.,  1708^. 

whether  if  sealed,  may  be  in  blank  not  discussed,  II.,  1708^. 
ATTORNEY'S  FEES. 

whether  agreement  in  bill  to  pay  impairs  negotiability,  62,  62a. 

when  agreement  in  bill  to  pay,  binds  acceptor  and  indorser,  62a. 

when  holder  may  recover  them,  62a. 

holder  must  prove  amount,  62a. 

if  in  bill,  do  not  render  it  usurious,  62a. 

conflicting  and  various  views  as  to  effect  of  agreements  to  pay,  62,  62a. 

whether  agreement  to  pay  is  in  the  nature  of  a  penalty,  62,  62^3;. 
AU  BESOIN. 

meaning  of  term,  in. 

indicates  resort  to  second  drawee  if  first  refuses  to  honor  the  bill,  iir. 

if  drawee  "  au  besoin  "  honors  bill,  drawer  is  liable  to  him  for  full 
amount,  in. 

BANKS  AND  OTHER  AGENTS  FOR  COLLECTION. 
I.  Rights,  duties,  and  liabflities  of,  323  et  seq. 

duties  of  collecting  agents  of  commercial  paper,  323. 

Vol.  II.— 53 


Q-.  TVTTiTPV  References  are  to 

*534  liMULX.  paragraphs  marked  % 

BANKS  AND  OTHER  AGENTS  FOR   COLLECTION— r^«//««^^. 

banks  have  implied  power  to  collect  commercial  paper,  324. 

they  frequently  charge  commissions  for  collections,  324. 

but  temporary  use  of  money  is  consideration  for  undertaking  to  collect, 

324,  328. 
no  special  contract  necessary  when  paper  deposited  in  bank  for  collec- 
tion, 324,  328. 
bank  at  which  paper  is  payable  and  deposited  for  collection  is  agent  to 

receive  payment  at  maturity,  325. 
designation  of  bank  as  place  of  payment  imports  that  holder  wJl  have 

paper  there  at  maturity,  325. 
payment  may  be  made  to  bank  by  debtor  unless  he  has  notice  not  to 

do  so,  325. 
if  not  lodged  there,  and  payor  has  funds  there  to  meet  it,  he  is  not 

bound  for  future  damages  or  costs,  325. 
mere  designation  of  bank  as  place  of  payment  does  not  per  se  make  it 

agent  of  payee  to  receive  the  amount,  326. 
paper  must  be  lodged  with  it,  or  indorsed  to  it  for  collection,  in  order 

to  make  bank  payee's  agent,  326. 
without  such  or  equivalent  authority,  bank  receives  money  as  agent  of 

payor,  326. 
bank  where  paper  payable  is  agent  of  payor  to  make  payment,  326^. 
need  not  have  payor's  check,  or  draft,  to  make  payment,  326a. 
contrary  view  expressed  in  previous  editions  of  this  work  the  author 

now  deems  erroneous,  326<?. 
criticism  of  conflicting  decisions,  326^. 
whether  bank  must  pay  note  or  acceptance  of  depositor  there  payable, 

2,26b. 
if  bank  holds  paper  it  may  apply  depositor's  funds  in  payment,  326(5. 
when    presumption  of  authority  to  apply  funds  in  payment  does  not 

arise,  3261:^,  326^. 
special  agreement  or  instruction  must  be  pursued,  326/5. 
when  trust  is  impressed  on  deposit,  326^. 
when  it  may  offset  funds  against  note,  326^. 

duty  of  bank  or  other  collecting  agent  to  take  prompt  steps  for  accept- 
ance or  payment,  327. 
must  attend  to  protest  and  notice,  and  fix  liability  of  parties,  327. 
failure  in  these  regards  makes  agent  liable  to  holder  in  damages,  327. 
no  defence  to  bank  that  it  was  unaccustomed  to  such  duties,  327. 
no  defence  that  error  resulting  in  loss  was  unintentional,  327. 
receipt  by  bank  of  paper  for  collection  creates  implied  undertaking,  324, 

328. 
use  of  money  good  consideration,  324,  328. 
measure  of  damage  from  default  of  agent  is  actual  loss,  329. 
loss  \s  prima  facie  amount  of  paper,  329. 
agent  bound  to  greater  diligence  than  principal,  330. 
duty  of  in  presentment  for  acceptance,  330,  476,  477. 
principal  exonerating  holder  as  between  other  parties  and  himself  does 

not  apply  as  between  agent  and  holder,  330. 
2.  How  collecting  bank  should  give  notice  of  dishonor,  331. 


Re/ere itces  are  to  T TC Ti F  V  8  ?  ^ 

paragraphs  marked  §.  1  iMJ  t,  A .  o  j  3 

BANKS  AND  OTHER  AGENTS  FOR  COLLECTION— r(7«//«i^^^. 

sometimes  sends  notice  to  indorser  from  whom  paper  received,  331. 
to  all  parties  looked  to  for  payment,  331. 
incloses  notices  for  all  indorsers  to  last  indorser,  331. 
only  necessary  for  bank  to  notify  immediate  indorser,  331. 
agreement,  usage,  or  special  circumstances  may  vary  this  rule,  331. 
bank  holding  check  for  collection  may  present  it  at  any  time  before 

close  of  business  hours  on  day  following  its  receipt,  332. 
holder  of  check  bound  to  present  it  in  like  time,  332. 
if  holder  instead  of  presenting  check  puts  it  in  bank  for  collection,  he 

takes  peril  of  loss  by  delay,  332. 
may  forward  check  to  bank  at  distance  on  which  it  is  drawn  by  post, 

654a.     IL,  1599,  I599«. 
this  method  not  now  deemed  doubtful,  IL,  1 599. 
bank  receiving  check  for  collection  not    bound  to   pay  holder   until 

amount  received,  or  would  be  received  but  for  its  default,  333. 
habit  to  pay  before  collection  creates  no  right  of  holder  to  require  it, 

333- 

if  bank  receiving  bill  for  collection  puts  it  to  drawer's  credit,  subse- 
quent failure  of  such  bank  before  collection  gives  holder  right  to  re- 
cover back  his  bill,  332. 

as  soon  as  bank  collects  paper  it  becomes  depositor's  debtor,  334. 

especially  if  it  uses  funds,  334. 

and  although  instructed  to  hold  amount  to  holder's  order,  which  de- 
posit implies,  334. 

if  bank  takes  payment  in  specific  bills  by  order,  and  then  uses  them,  it 
is  liable  for  subsequent  depreciation,  334. 

depreciation  at  time  of  payment  falls  on  holder  depositing  paper  in 
bank,  334. 

collecting  agent  has  no  authority  to  receive  payment  in  other  than  legal 
currency  of  country,  335.     II. ,  1245,  1625. 

nor  to  take  certification  of  check  instead  of  payment,  335. 

3.  Manner  of  placing  paper  in  banks  for  collection,  and  rights  of  collecting 

bank,  336. 
better  to  indorse  paper  to  bank  specially  "  for  collection,"  336. 
necessity  for  this  precaution,  336. 
whether  subsequent  collecting  bank  could  retain  proceeds  against  real 

owner  for  debt  of  prior  collecting  bank,  337. 
doctrine  of  U.  S.  Supreme  Court,  338. 
in  New  York,  339. 
in  Connecticut,  339. 
of  U.  S.  Supreme  Court  approved,  340. 

4.  How  far  bank  is  liable  for  default  of  notary,  sub-agent,  or  correspondent 

bank,  34 1  et  seq, 

several  classes  of  cases  on  the  question,  341,  343. 

first  class  maintains  absolute  liability  of  collecting  bank  for  negligence 
of  notary,  correspondent,  or  other  sub-agent,  341,  342. 

this  view  adopted  in  New  York,  341. 

second  class  hold  collecting  bank  liable  only  to  prove  due  care  and  dili- 
gence in  selecting  sub-agent,  341. 

this  view  adopted  by  U.  S.  Supreme  Court,  341,  note. 


8/-  ^_^^„  References  are  to 

30  1 JN  U  Ji  X.  paragraphs  marked  §. 

BANKS  AND  OTHER  AGENTS  FOR  COLLECTION— f^?;^//^,;^^. 

third  class  holds  bank  bound  when  it  receives  paper  of  drawer  or 
maker  resident  at  place  of  its  location,  341. 

but  not  bound  for  default  of  correspondent  or  other  agent  at  distant 
place,  if  due  diligence  is  exercised,  341. 

first  class  of  cases,  and  New  York  doctrine,  approved,  342. 

general  usage  may  vary  rule,  342. 

stress  sometimes  laid  on  fact  that  notary  is  public  officer,  and  may  al- 
ways be  safely  employed,  343. 

Professor  Parsons  compares  notary  to  mail  service,  343. 

duty  of  bank  in  selecting  proper  notary,  343. 

if  notary  is  bank  officer,  bank  liable,  343. 

remedy  of  holder  against  collecting  banks,  344. 

whether  holder  can  sue  several  or  all  of  a  series  of  collecting  banks  for 
default  of  one,  344. 

classification  of  cases,  344. 

distinction  between  putting  paper  in  bank  for  "  collection  "  and  "  to  be 
transmitted  for  collection,"  345. 

when  any  person  interested  may  sue  collecting  bank  for  negligence, 
346. 

instructions  to  bank  or  other  collecting  agent  must  be  complied  with, 
347- 

express  companies  may  undertake  collections,  348. 

holder  has  right  to  anticipate  that  paper  will  be  paid,  349. 

he  need  not  inform  holder  for  collection  where  to  send  notices  of  dis- 
honor, 349. 

it  might  be  otherwise  if  collecting  agent  were  servant  of  holder,  349. 

duty  in  making  presentment  for  acceptance,  476. 

must  be  more  diligent  than  principal,  476. 

BANK  CHECKS.     See  Checks,  and  II.,  1556  to  1663. 
BANK  BILLS  OR  BANK  NOTES,  II.,  1664. 

1.  Definition  of,  II.,  1664. 

may  be  described  as  promissory  notes,  11.,  1664. 

usually  payable  to  bearer,  II.,  1665. 

are  payable  on  demand,  IL,  1666. 

style  of  execution,  II.,  1667. 

without  statutory  prohibition,  right  of  banking  pertains  to  every  one, 

II.,  1668. 
form  should  correspond  to  statutory  requirements,  II.,  1669. 
if  completed  and  then  stolen  bind  bank,  II.,  1669. 
otherwise  if  stolen  incomplete,  II.,  1669. 

2.  Battkers'  cash  notes,  II. ,  1670. 

3.  Post  notes  of  bank,  II.,  1670. 

4.  How  far  similar  to  money,  II.,  1672. 

pass  as  cash,  II.,  1672. 

whether  sheriff  may  take  in  execution  or  discharge  of  execution,  II., 

1672,  1673a. 
are  legal  tender  unless  objected  to,  II.,  1672a. 
differ  from  money  and  are  not  legal  tender  if  objected  to,  II.,  1672^. 


Rfffffuces  art  to  TTvTrvnv  Q  i »» 

paragrcij>/is  mar/ied%.  IJNUtA.  "3/ 

BANK  BILLS  OR  BANK  l^^OTKS—conli/tued. 

but  are  negotiable,  like  money,  IL,  1672,  1674. 

bill  or  note  payable  is  not  negotiable,  55.     IL,   1673. 
*  5.  Liability  of  tra7tsfcrrer  of  batik  notes,  IL,  1675. 

transferrer  warrants  genuineness,  IL,  1675. 

does  not  warrant  solvency,  IL,  1675,  1676,  1677. 

transferrer  may  indorse,  IL,  1675,  1676. 

but  party  receiving  forged  bank  note  must  act  diligently,  IL,  1675. 

what  diligence  required,  IL,  1675. 

if  forged  are  nullities,  IL,  1675. 

query,  whether  solvency  of  bank  is  warranted,  IL,  1676,  1676a,  1677. 

doctrine  approved  that  it  is  not,  IL,  1677. 

exception  where  transferrer  kttows  that  bank  is  insolvent,  IL,  1678. 

effect  of  warranty  of  solvency  of  bank,  IL,  1679. 

duty  of  transferee  in  such  cases,  1679. 

upon  whom  loss  of  insolvent  notes  falls,  IL,  1677. 

6.  Rights,  duties,  and  remedies  of  holder  of  bank  notes,  IL,  1680. 

^oss^ssxon  prima  facie  evidence  of  ownership,  IL,  1680. 

distinction  between  bank   notes  and  other  negotiable  instruments,   II, 

1680. 
holder  regarded  as  original  promisee,  XL,  1680a. 

holder  of  bank  bill  must  have  acquired  it  in  the  usual  course  of  busi- 
ness, IL,  1681, 

holder  has  no  preference  to  assets,  1 1.,  1681. 

holder  is  entitled  to  recover  full  amount  of  bank  note  without  reference 

to  what  he  paid  for  it,  IL,  1682. 
also  interest  from  time  of  demand,  IL,  1682. 
bank  notes  are  never  overdue,  IL,  1683. 
whether  statute  of  limitations  applies  to,  IL,  1684. 
rule  as  to  presentment  and  demand,  IL,  1685. 
may  be  presented  in  packages,  IL,  1685. 
but  each  note  is  separate  debt,  1 1.,  1686. 
trover  lies  against  finder  of  bank  notes  by  owner,  IL,  1687. 
when  assumpsit  lies,  IL,  1687. 

if  finder  has  passed  the  note  to  a  bona  fide  transferee  for  value,  the 
owner  can  not  recover,  IL,  1687. 

if  bank  receive  in  payment  or  on  deposit  counterfeit  notes  purporting 
to  be  its  own,  innocent  party  who  pays  or  deposits  them  is  not 
bound,  IL,  1688. 

7.  Payment  in  bank  notes,  and  set-off,  II. ,  1689. 

at  common  law  nothing  but  money  is  legal  tender,  IL,  1689. 
by  statute  in  many  States  banks  are  compelled  to  receive  their  own 
notes  in  payment,  XL,  1689. 

as  to  bank  notes  required  after  bank  goes  into  liquidation,  1 1.,  1689, 
1690. 

weight  of  authority  is  that  notes  acquired  after  and  with  notice  ol 

assignment  are  not  valid  tender  to  assignee,  IL,  1689. 
contrary  view  stated  and  approved,  II. ,  1689. 

while  bank  is  solvent,  debtor  can  plead  as  offsets  its  own  notes,  IL, 
1691. 


RtS  TMmrv  Referinces  are  to 

t>3^  INDEX.  paragraphs  marked  % 

BANK  BILLS  OR  BANK  '^Q>'YY.'S>— continued. 

when  bank  is  insolvent,  its  assets  must  be  marshaled,  IL,  1691. 
when  note  is  payable  in  bank  bills,  holder  is  entitled  to  recover  its  face 
value,  n.,  1692.  • 

8.  Rule  respectmg  lost  or  destroyed  bank  notes,  IL,  1693. 

contract  of  bank  is  to  pay  amount  on  surrender  of  itote,  IL,  1693. 
claim  of  owner,  who  can  not  comply  with  this  condition,  is  equitable, 

IL,  1693. 
one  who  loses  whole  of  a  bank  note,  must  bear  the  loss,  IL,  1693. 
but  if  note  be  destroyed^  he  can  recover  amount  of  the  bank  on  clear 

proof  of  such  destruction,  II. ,  1694. 
rule  when  part  of  a  bank  note  is  lost,  II. ,  1695. 
view  that  action  at  law  in  such  case  is  not  maintainable,  IL,  1695. 
and  that  bond  of  indemnity  is  requisite,  IL,  1695. 
view  that  action  at  law  is  maintainable,  IL,  1695. 
view  approved  that  action  at  law  is  maintainable  on  half  note,  IL,  1695. 
that  payment  on  such  action  is  good,  IL,  1695. 
and  that  holder  of  other  half  takes  it  subject  to  defence 
in  first  action,  IL,  1695. 
equity  will  entertain  suit  on  half  note,  IL,  1696. 
half  notes  sued  on  must  be  identified,  IL,  1697. 
facts  necessary  to  support  case  must  be  proved,  IL,  1697. 
bank  can  not  escape  responsibility  by  publishing'  notice  that  it  will  not 
be  responsible  for  .y^T/^r^'^  notes,  II. ,  1695,  note  i,  1696. 

BANKER'S  LIEN.    See  Certificates  of  Stock. 

bank  receiving  customers'  bills  for  collection  are  holders  for  advances 
on  faith  thereof,  183^. 

bank  advancing  money  to  customer  has  a  lien  on  his  securities  in  its 
hands,  334a,  337. 

but  particular  trust  or  agreement  may  affect  it,  334a. 

has  no  common  law  lien  on  its  own  stock,  held  by  debtor,  for  his  debt, 
1 1.,  1708^/. 

under  what  circumstances  such  stock  lien  exists,  IL,  1708^,  lyoM. 

balances  upon  account  are  consideration  for  bills  and  notes  deposited 
as  security  with  banker,  i83fl. 

illustrations,  183^. 
BANKRUPT. 

property  of,  goes  to  assignee,  260. 

can  not  sue  on  his  choses  in  action,  or  transfer  them,  260. 

maker  of  note  to,  can  not  deny  his  right  to  transfer,  260. 

if  he  has  transferred  bill  or  note  before  bankruptcy,  he  or  his  assignee 
may  be  compelled  to  indorse  afterward,  260. 

as  to  indorsement  by,  182,  260. 

as  to  promise  to  pay,  after  discharge,  182. 

binds  the  promisor,  and  is  on  sufficient  consideration,  182. 

as  to  note  given  after  discharge,  260. 

notice  to,  IL,  1002. 
BANKUPTCY.     See  EXCUSES. 

no  excuse  for  non-presentment  and  notice,  IL,  1171,  1172. 


References  are  to  TNrJFY  8?0 

paragraphs  marked  %.  IJNUIiA.  Ujy 

BEARER.     See  Payee. 

bill  or  note  may  be  payable  to,  99. 

check  may  be  payable  to,  99. 

bonds  and  coupons  may  be  payable  to,  99. 

certificates  of  stock  often  inure  to  benefit  of,  11.,  1708. 

instrument  payable  to  bearer  A.,  same  as  payable  to  A.  simply,  99. 

A.,  or  bearer  or  holder,  same  as  bearer,  99. 

indorsement  in  blank  makes  instrument  payable  to,  693. 

with  legal  title  may  sue,  II.,  1 191. 

burden  of  proof  when  suit  brought  by,  812,  814a. 

negotiable  instruments  payable  to,  transferable  by  delivery,  729  et  seq. 

BILL  BROKER.     See  Broker. 

BILLS  OF  CREDIT. 

provision  of  Constitution  of  United  States  that  no  State  shall  emit 
bills  of  credit,  II.,  1715. 

applies  to  States  only,  II.,  171 5>  1724- 

emit  is  appropriate  term,  II.,  17 15. 

bill  of  credit  is  negotiable  paper  designed  to  pass  as  ci^rrency  and  cir- 
culate as  money,  II.,  1716. 

Chief-Justice  Marshall's  definition  of,  II.,  1717. 

Justice  Johnson's  dissenting  views,  II.,  1718. 

bearing  interest  makes  instrument  none  the  less  a  bill  of  credit,  II.,  17 18. 

not  necessary  for  bill  of  credit  to  be  a  legal  tender,  II.,  17 19, 

comment  on  views  of  Mr.  Madison,  and  of  Hon.  R.  M.  T.  Hunter, 
Treasurer  of  Virginia,  II.,  1720. 

the  name  is  immaterial,  II.,  1721. 

being  bottomed  on  a  fund  does  not  make  instrument  any  less  a  bill  of 
credit,  II.,  1723. 

States  of  Union  only  prohibited  from  emitting  bills  of  credit,  II.,  1724, 
1715. 

State  may  charter  corporation  to  issue,  and  take  all  the  stock,  II.,  1725. 

and  the  issues  of  the  corporation  are  not  deemed  bills  of  credit,  II.,  1725. 

bonds  and  coupons  of  States  not  bills  of  credit,  II.,  1726. 

although  receivable  for  dues,  449.     II.,  1726. 

BILLS  OF  EXCHANGE. 

1.  Origin,  history,  and  use  of,  l,  2,  3,  4. 

rules  of  common  law  that  choses  in  action  were  not  assignable,  first 

relaxed  as  to,  I. 
probably  first  negotiable  instruments,  2. 
origin  and  history  of,  3,  4. 
term  derived  from  French,  4. 

used  to  perfect  contract  of  exchange,  or  bargain,  4. 
how  employed  to  assign  funds,  4. 

2.  Foreign  and  inland  bills,  6. 

are  foreign  or  inland,  6. 

are  foreign  when  drawn  in  one  State  or  country,  and  made  payable  in 

another,  6. 
inland  when  drawn  and  payable  in  same  State  or  country,  6. 


840  INDEX.  .   References  are  to 

'  paragraphs  marked  %. 

BILLS  OF  'EXCYlA.'^GE—continued. 

derive  negotiability  from  custom  ol  merchants,  6. 
foreign  bills  must  be  protested  to  charge  drawer,  7. 
inland  need  not  be,  7. 

come  within  rule  that  contracts  are  governed  by  law  of  place  where 
made,  7. 

England  and  Ireland  are  foreign  as  to  bills,  8. 

several  States  of  the  Union  are  likewise  foreign,  9,  lo. 

date  of  bill  may  show  whether  it  is  foreign  or  inland,  11. 

but  to  do  so  must  show  State  or  country  where  drawn,  11. 

courts  do  not  take  notice  of  location  of  places,  such  as  Dublin,  Phila- 
delphia, New  Orleans,  11. 

which  must  be  shown  to  be  in  foreign  States,  11. 

whether  bill  dated  in  foreign  State,  where  not  drawn,  is  foreign  bill,  13. 

innocent  third  parties  may  regard  it  as  its  face  purports,  12. 

query,  as  to  parties  having  notice,  13,  14. 

bill  inland  on  face  does  not  become  foreign  by  being  drawn  and  deliv- 
ered abroad,  13. 

bill  purporting  to  be,  is  presumed  to  have  been  drawn  abroad,  13. 

but  it  may  be  shown  that  bill  purporting  to  be  foreign  is  really  inland, 
and  void  for  want  of  stamp,  14. 

3.  Effect  of  bill  of  exchange,  15. 

whether  negotiable  bill  for  whole  of  fund  in  drawee's  hands  is  assign- 
ment thereof,  i6a,  17. 

is  assignment  as  between  drawer  and  payee,  17. 

whether  without  acceptance  bill  for  whole  fund  is  an  assignment  as 
between  payee  and  drawer,  18,  19,  20. 

doctrine  that  without  acceptance  bill  is  not  an  assignment,  18,  19,  20. 

bill  may  be  evidence  of  assignment,  20. 

view  of  author  that  bill  for  whole  fund  operates  as  equitable  assign- 
ment, 20. 

accepted  bill  operates  as  an  assignment,  18. 

after  acceptance,  no  subsequent  bill,  transfer  of,  or  process  against 
fund,  will  affect  it,  18, 

query,  19. 

holder  can  not  sue  drawee  without  acceptance  in  his  own  name,  19. 

whether  holder  may  use  drawer's  name  to  sue  drawee,  19. 

whether,  after  presentment  to  drawee,  subsequent  assignment  or  proc- 
ess will  take  priority,  19,  20. 

order  on  drawee  for  whole  of  a  fund  is  an  assignment  thereof,  21. 

such  order  not  defeated  by  subsequent  assignment  or  process,  21. 

whether  bill  for  part  of  fund  is  assignment,  22,  23,  23a. 

whether  order  for  part  of  fund  is  assignment,  22,  23,  23a:. 

decisions  in  NeW  York  as  to  order  for  part  of  fund,  23<a!. 

4.  DefinitioJi  and  essential  requisites  of,  27. 

who  are  the  parties  to  bills,  27. 
similarity  between  bills  and  notes,  29. 
bill  must  be  open — that  is,  unsealed,  31. 
whether  seal  to  bill  is  surplusage,  31. 


References  are  to  ^-,_^„  q 

parasraphs  marked  %.  lINJUii-A..  04 1 

BILLS  OF  EXCHANGE— f^«//«z/^^. 

statutes  in  some  States  put  sealed  instruments  on  same  footing  as  those 
unsealed,  33. 

whether  draft  of  corporation  under  seal  is  a  bill,  31. 

5.  Direction  or  order  to  pay  must  be  certain,  35. 

mere  request  to  pay,  not  good  bill,  35. 

"  please  pay  "  is  a  mere  civil  order,  35. 

what  phrases  are  requests,  and  what  orders  to  pay,  35. 

the  fact  of  payment  must  be  certain,  41. 

conditions  which  destroy  negotiability,  41  to  52. 

in   England  order  payable   at  certain  day,    "  or  when  realized,"  not 
deemed  a  bill,  42. 

in  U.  S.  instrument  deemed  negotiable  if  time  must  certainly  come, 

43.  44.  45- 
various  and  conflicting  authorities,  43  to  45^. 

in  Massachusetts  time  of  payment  must  be  definite,  or  be  made  defi- 
nite at  holder's  election,  to  make  instrument  negotiable,  \ia. 
if  payable  when  A.  comes  of  age  or  dies,  is  negotiable,  46. 
is  negotiable  if  payable  at  certain  time  after  notice,  47. 
so  if  payable  when  required,  47. 

payment  out  of  particular  fund  destroys  negotiability,  50. 
phrases  which  make  payment  out  of  particular  fund,  50. 

"  on  account  of  brick-work  on  certain  building,"  50. 
"  out  of  any  money  in  drawee's  hands,"  50. 
"  this  being  intended  to  stand  as  offset,"  etc.,  50. 
phrase  "  out  of  rents,"  50. 

"  out  of  growing  substance,"  50. 
"  out  of  a  certain  claim  or  certain  proceeds,"  50. 
other  phrases,  46,  47,  48. 

if  fund  be  merely  indicated  as  source  of  reimbursement,  negotiability 
not  affected,  51. 

instances  of  this  kind,  51. 

if  phrase  impairs  certainty,  it  destroys  negotiability,  52. 

6.  Amount  to  be  paid  must  be  certain,  53. 

not  negotiable  if  added  to  sum  certain  : 

"  all  other  sums  which  may  be  due,"  53. 

"  whatever  sum  you  may  collect,"  53. 

"  proceeds  of  certain  shipment,"  53. 

"  demands  of  sick  club,"  53. 

"  deducting  all  advances  and  expenses,"  53. 

"  such  additional  premium  as  may  be  due  on  policy,"  53. 
if  sum  ascertainable  from  face  of  bill,  it  is  certain,  53. 

7.  Effeci  of  addition  "  with  current  exchange,"  54,  54^. 

when  these  words  may  be  regarded  as  surplusage,  54. 

better  opinion  that  such  words  do  not  destroy  negotiability,  54,  54^. 

8.  The  fnedium  of  paymtent  niust  be  money,  55. 

not  negotiable  if  payable  in  : 

"  cash  or  specific  articles,"  55. 

"  merchantable  whiskey  at  trade  price,''  55. 


9,4  2  TNDFY  References  are  to 

^^'^  liNiJ£-A.  paragraphs  tnarked^ 

BILLS  OF  EXCHANGE— <r^«/z«z^^^. 

"  ginned  cotton  at  8  cents  per  pound,"  55. 

"  work,"  55. 

"  good  East  India  bonds,"  55. 

"  foreign  bills,"  55. 

"  notes  of  United  States,  or  either  of  the  Virginia  banks,"  55. 

"  Bank  of  England  notes,"  56. 

"  current  bank  bills  or  notes,"  56. 

"  office  notes  of  a  bank,"  56. 
"current  money,"  or  "good  current  money,"  unexceptionable  phrases,  56, 
whether  negotiable  if  payable  in  currency,  56. 
better  doctrine  is  against  negotiability  in  such  cases,  56. 
doctrine  not  affected  by  legal  tender  act,  57. 
money  may  be  that  of  any  country,  58, 

decisions  where  payment  was  to  be  "  in  Canada  money,"  and  in  "  Canada 
currency,"  58. 

contract  must  be  only  for  payment  of  money,  59,  60. 
9.  Effect  of  power  on  i?tsirument  to  confess  judgmeiit,  61. 

stipulation  to  pay  attorney's  fees,  62. 

waivers  of  benefit  of  appraisement  and  exemption  laws,  61. 
conflicting  decisions,  61,  62, 
views  of  author  that  such  clauses  do  not  destroy  negotiability,  62^1. 

BILLS  OF  LADING. 

I,  Definition  and  nature  of  ,  II.,  1727. 

generally  classed  amongst  negotiable  instruments,  II.,  1727. 

are  not  strictly  negotiable,  though  assignable  and  possessed  of  certain 

capacities  of  negotiation,  II.,  1727. 
are  deemed  ^//a^/ negotiable,  II.,  1727. 
bill  of  lading  is  carrier's  receipt  for  goods,  making  him  responsible  as 

their  custodian,  and  an  express  contract  for  their  transportation  and 

delivery,  II.,  1728. 
is  at  once  receipt  for  goods  and  contract  for  transportation,  II.,  1728. 
it  \s  prima  facie  evidence  of  quantity  and  quality  of  goods,  II.,  1729. 
clear  proof  requisite  to  show  goods  were  not  received,  II.,  1729.     See 

also,  II.,  1733,  i733«- 
as  a  receipt,  how  far  is  it  open  to  explanation  or  contradiction,  II., 

1729a. 
as  a  contract  can  not  be  contradicted  by  parol  evidence,  II.,  1729a. 
as  against  master  of  ship,  conclusive  evidence  in  favor  of  consignee 

advancing  money,  II.,  1729a. 
not  conclusive  as  to  receipt  of  goods  against  owner  of  ship,  II.,  1729a. 
how  idea  of  negotiability  of  bills  of  lading  arose,  II.,  1730. 
when   consignor  has   right  to  stop  goods  in  transitu  on  hearing  of 

vendee's  insolvency,  II.,  1730. 
if  bill  of  lading  has  been  assigned  by  consignee  to  a  bofia  fide  third 

party,  vendor's  right  of  stoppage  is  defeated,  II.,  1730. 
but  a  sale  of  goods  not  yet  received  by  vendee,  without  a  transfer  ot 

bill  of  lading,  does  not  divest  the  right  of  stoppage,  II.,  1730a. 
stoppage  in  transitu  is  an  equitable  remedy  for  protection  of  the  ven- 
dor, II.,  1730a. 


pa^'I^:;'"ZrL%.  INDEX.  843 

BILLS  OF  l.kXiVRO— continued. 

but  yields  to  the  superior  equity  of  a  bona  fide  purchaser  of  the  bill  of 
lading,  IL,  1730^?. 

bill  of  lading,  when  indorsed,  passes  property  in  same  manner  as  a 
direct  delivery  of  the  goods,  IL,  1731. 

it  is  a  symbolic  and  constructive  delivery,  IL,  1731- 

whether/;/'«r/«^  officio  as  soon  as  the  goods  are  landed  and  warehoused 
in  the  holder's  name,  IL,  1731a. 

any  common  carrier,  whether  by  land  or  water,  may  issue  bills  of  lad- 
ing, IL,  1732. 

paper  signed  by  consignor  only,  is  not  a  bill  of  lading,  IL,  1732- 

extent  of  carrier's  obligation,  IL,  1732. 

he  is  not  bound  to  specify  the  freight,  IL,  1732. 

master  of  ship  subscribes  bill  of  lading  as  agent  of  the  owners,  IL,  1733- 

he  has  no  authority  to  do  so  unless  the  goods  are  actually  on  board, 
IL,  1733- 

is  deemed  agent  with  limited  authority,  IL,  1733- 

parties  dealing  with  carrier  chargeable  with  notice  of  the  limitation,  IL, 
1733- 

master  or  shipping  agent  bound  if  he  issues  bill  without  receiving  goods, 
IL,  1733- 

conflicting  authorities  on  question  of  carriers'  obligation  when  agent 
issues  bill  without  receiving  goods,  IL,  I733<^. 
2.  Bills  of  lading  acco?npanying  bills  of  excha7ige  drawn  on  shipments,  IL, 
1734- 

effect  of  bill  of  lading  sent  to  consignee  with  bill  of  exchange  drawn  for 
purchase  money  of  goods,  IL,  1734. 

in  such  case,  consignee  can  not  retain  bill  of  lading  without  honoring 
bill  of  exchange,  IL,  1734. 

when  payee  of  bill  of  exchange  drawn  on  vendee  is  holder  of  bill  of 
lading,  he  may  require  payment  of  bill  of  exchange  before  surrender- 
ing bill  of  lading,  IL,  1734a. 

if  goods  be  deliverable  by  bill  of  lading  to  consignee,  holder  is  charge- 
able with  notice  of  his  rights,  IL,  1734a. 

if  allowable  to  order  of  consignor,  consignee  is  chargeable  with  notice, 
IL,  1734^- 

what  rights  of  parties  may  be  is  open  to  inquiry,  IL,  1734^- 

if  bill  of  lading  be  indorsed  to  agent  for  collection  of  bill  of  exchange 
drawn  on  vendee  with  instructions  to  hold  bill  of  lading  until  bill  of 
exchange  is  paid,  payment  must  be  made  before  title  passes,  IL, 
1734'^. 

acceptance  of  bill  of  exchange  in  such  case  will  not  entitle  vendee  to 
goods,  IL,  1734/^. 

if  carrier  in  such  case  deliver  goods  it  is  unauthorized,  and  consignor 
may  recover  them,  IL,  1734^^. 

otherwise,  if  there  be  agreement  that  goods  shall  be  delivered  on  ac- 
ceptance of  bill  of  lading,  IL,  1734^. 

agent  for  collection  may,  without  special  instructions,  deliver  bill  of  lad- 
ing upon  acceptance  of  bill  of  exchange,  II. ,  1734/^,  1734c. 

indorsee  of  bill  of  lading  attached  to  draft  takes  it  subject  to  agreement 
between  consignor  and  consignee,  IL,  1734^. 

in  absence  of  agreement,  when  time  draft  accompanies  bill  of  lading,  it 
is  presumed  that  acceptance  entitles  to  consignee  bill  of  lading,  IL, 
1734^- 


Q  ,  A  T-NT-r>T7V  References  are  to 

044  ^^  ^  ^■^'  i>aragraphs  marked  {. 

BILLS  OF  l^kTiV^Q— continued. 

holder  of  bill  of  lading  can  not  withhold  its  delivery  unless  shipper 

could,  II,,  1734^'. 
generally  holder  of  bill  of  lading  with  draft  attached  can  not  require 

acceptance  of  draft  without  delivering  bill  of  lading,  IL,  1734^. 
and  if  he  protests  draft,  it  is  without  cause,  IL,  1734c  " 
party  discounting  bill  of  exchange  on  faith  of  indorsement  of  bill  of 

lading  acquires  lien  on  goods,  IL,  I724.C. 
party  discounting  bill  of  exchange  need  not  inquire  into  genuinenness  of 

bill  of  lading  in  order  to  hold  liable  drawer  of  letter  of  credit,  IL, 

1734^. 
3.  Form  and  contents  of  bills  of  lading,  II. ,  1735. 

usually  issued  in  sets  of  three  ;   one  for  consignor,  one  for  consignee, 

and  one  for  the  carrier,  IL,  1735. 
the  carrier's  bill  of  lading  (or  "  ship's  bill ")  is  not  evidence  respecting 

the  agreement  of  the  parties,  IL,  1735. 
usually  bill  of  lading  mentions  consignee  to  whom  the  goods  are  to  be 

delivered,  II.,  1736. 
sometimes  made  out  for  delivery  to  the  consignor  or  his  assigns  or  in 

blank,  IL,  1736. 
effect  in  each  case,  IL,  1736. 
use  of  negotiable  words,  IL,  1736. 
bill  of  lading  transferable  by  delivery  whether  such  words  be  used  or 

not,  II. ,  1736. 
if  consignee  advance  money  on  bill  of  lading,  he  is  owner  to  extent  of 

reimbursement,  IL,  1736. 
if  the  several  sets  of  a  bill  of  lading  are  indorsed  to  different  parties, 

the  property  passes  by  the  bill  first  indorsed,  IL,  1737. 
bill  of  lading  should  contain  the  quantity  and  marks  of  merchandise, 

names  of  shipper,  consignee,  and  master  of  ship,  places  of  departure 

and  discharge,  and  the  price  of  the  freight,  IL,  1738. 
limitations  usually  inserted  in  the  contract,  are  acts  of  God,  public 

enemies,  fire,  and  other  dangers  and  accidents  of  seas,  rivers,  and 

navigation,  IL,  1738. 
payment  of  demurrage  sometimes  stipulated,  IL,  1738. 
effect  of  stipulation  in  bill  of  lading   that   goods   immediately  upon 

delivery  by  carrier  shall  be  at  shipper's  risk,  IL,  1739. 
if  a  particular  vessel  be  designated  in  bill  of  lading,  carrier  can  not 

send  goods  by  another  without   being  responsible  for  whole  risk  of 

loss  or  damage,  II.,  1740. 
carrier  can  not  exclude  liability  for  negligence,  IL,  1740a. 
liability  of  railroad  corporation  for  damage  by  fire  or  explosion,  occa- 
sioned by  sparks  from  its  own  locomotive,  IL,  1740^;. 
where  the  goods  are  deliverable  to  order,  carrier  should   require  the 

production  of  the  order,  IL,  1740a. 
in  case  of  losses  by  perils  of  sea,  what  it  is  incumbent  on  carrier  to 

show,  II. ,  1 741. 
where  loss  from  "  rust,   leakage,  or  shrinkage  "  is  excepted,  shipper 

must  show  negligence  on  part  of  carrier,  IL,  1741. 
carrier  is  always  liable  for  negligence  in  case  of  loss,  IL,  1741. 
exclusion  of  liability  for  theft  does  not  apply  to  theft  by  purser  of  ship, 

IL,  1741- 


Ke/ereKces  are  to  Tismir  v  Q  /i  p 

paragraphs  marked  %.  IJNUCA.  O45 

BILLS  OF  'LhDmO—contimted. 

recital  that  goods  were  "received  in  good  order  and  condition  "  is 
mert-ly  presumptive  evidence  that  they  were  free  from  nternal  in- 
juries, IL,  1742, 

if  the  admission  be  limited  to  the  apparent  condition  of  the  goods,  a 
latent  defect  may  be  shown  by  the  carrier,  IL,  1742. 

rule  where  delay  of  vessel  is  caused  by  the  forcible  detention  of  the 
government,  II.,  1742. 
4.    Who  may  transfer  bills  of  lading,  IL,  1743. 

strictly  speaking,  only  the  consignee,  when  bill  is  made  out  in  his  name, 
can  pass  legal  title  to  the  goods  by  indorsement  of  bill,  II.,  1743. 

but  if  shipment  is  made  on  account  of,  and  at  the  risk  of  consignor,  as 
owner  of  goods,  he,  by  assignment  of  bill  of  lading  or  by  separate 
instrument,  may  pass  the  legal  title  to  the  same,  IL,  1743. 

bill  of  lading  must  be  delivered  in  order  to  pass  the  goods,  IL,  1743. 

putting  it  in  the  post-office  addressed  to  the  indorsee  or  to  another  for 
him,  is  a  valid  delivery,  IL,  1743. 

indorsement  for  value  presumed,  IL,  1743. 

no  difference  between  bill  of  lading  indorsed  in  blank,  and  one  indorsed 
to  a  particular  person,  II. ,  1744. 

indorsement  of  bill  of  lading  with  conditions,  is  of  same  effect  as  like 
indorsement  of  bills  of  exchange  and  promissory  notes,  II. ,  1745. 

instances  of  such  restricted  indorsement,  II. ,  1745. 

bill  of  lading  as  contract  with  carrier  is  chose  in  action,  IL,  1745a. 

transferee  might  sue  carrier  for  conversion  of  goods,  1 1.,  1745^. 

but  at  common  law  could  not  sue  carrier  for  breach  of  contract  of  trans- 
portation, IL,  1745^. 

statute  in  England  allows  suit  by  transferee  on  carrier's  contract,  IL, 
1745^. 

in  United  States,  assignee  of  chose  in  action  can  generally  sue  in  his 
own  name,  IL,  I745«. 

between  original  vendor  and  vendee,  the  transmission  or  indorsement 
of  bill  of  lading  only  serves  as  evidence  of  their  relations,  IL,  1746. 

the  transfer  is  important  only  as  between  Consignor  and  consignee  on 
the  one  hand,  and  the  transferee  as  the  representative  of  the  goods 
to  a  bona  fide  purchaser  on  the  other,  II.,  1746. 

how  the  common  law  on  the  subject  of  bills  of  lading  has  been  modi- 
fied by  statute  in  England,  II. ,  1747. 

although  statute  makes  bill  of  lading  negotiable,  all  incidents  applicable 
to  negotiation  of  bills  and  notes  do  not  arise,  IL,  1747^?,  1750. 

purchaser  of  lost  or  stolen  bill  of  lading  acquires  no  title,  1 1.,  1747^, 
1750. 

and  is  not  like  purchaser  of  bill  or  note,  IL,  1747^,  1750. 

but  if  bill  of  lading  be  fraudulently  obtained,  transferee  may  acquire 
good  title,  II. ,  1750a. 

difference  between  consignee  and  vendee,  II.,  1748. 

at  common  law,  a  mere  consignee  or  factor  differed  from  vendee  in  re- 
spect to  his  power  to  pass  the  property  therein  by  indorsement  of 
bill  of  lading,  IL,  1748. 

now,  in  England,  factor  may  give  validity  to  pledge  as  well  as  to  sale 
of  goods,  IL.  1748. 

consignor's  right  of  stoppage  will  be  defeated  by  assignment  of  bill  to 
one  from  whom  mcHiey  has  been  borrowed  on  the  faith  of  it,  IL,  1748 


Q./r  TMnirv  References  are  to 

"4^  IJNUJiA.  ^^  ragraphs  marked  \ 

BILLS  OF  l^KDV^G—contimied. 

rights  of  consignee  and  indorsee  under  the  bills  of  lading  act,  IL,  1748 

transfer  of  bill  of  lading  to  affect  vendor's  right  of  stoppage  in  transitu, 
must  be  to  a  bona  fide  third  party,  IL,  I749- 

bona  fides  of  such  person  is  not  affected  by  notice  that  the  goods  have 
not  been  paid  for,  II. ,  1749. 

it  is  otherwise  where  transferee  knew  at  time  of  transfer  that  the  con- 
signee was  insolvent,  or  was  in  anywise  party  to  a  fraud  upon  the 
consignor,  II. ,  1749. 

mere  possession  of  bill  of  lading  indorsed  in  blank,  is  not  such  a  title  to 
the  goods  as  like  possession  of  bill  of  exchange  or  negotiable  note, 
IL,  1750. 

if  it  be  lost  or  stolen,  the  finder  or  thief  can  not  confer  a  title  on  inno- 
cent third  party,  IL,  1750a. 

but  title  oi  bona  fide  third  party  is  good  against  vendor  who  has  actually 
transferred  bill  of  lading  to  the  vendee,  though  induced  to  do  so  by 
vendee's  fraud,  IL,  1750a. 

transfer  obtained  by  fraud  is  not  void,  but  voidable,  II. ,  1750a. 

indorsee  of  bill  of  lading  may  libel  vessel  in  which  are  shipped  for  fail- 
ure to  deliver  them,  IL,  1751. 

though  he  be  an  agent  or  trustee  for  another,  IL,  1751. 

consignee  may  libel  both  the  carrier  vessel  and  one  by  whose  tortious 
collision  with  carrier  vessel  the  goods  were  lost,  IL,  1751. 

BLANK,  NEGOTIABLE  INSTRUMENTS  EXECUTED  IN.    See  Alter- 
ation. 
parties  may  sign  names  as  makers,  acceptors,  drawers,  or  indorsers,  to 

blank  papers,  142. 
they  then  operate  as  letters  of  credit  for  indefinite  sums,  142. 
if  so  intrusted  to  third  party's  custody,  whether  for  his  accommodation 

or  not,  the  purchaser  may  recover  on  them,  although  the  custodian 

exceeds  authority  in  filling  them  up,  142,  143. 
authority  implied  by  signature  to  blank,  143. 

party  will  be  bound,  although  holder  pervert  it  to  unintended  use,  143. 
or  pervert  his  authority  as  to  time  or  conditions  prescribed,  143. 
if  date  blank,  holder  may  insert  true  date,  143. 
and  bona  fide  holder  not  affected  if  wrong  date  be  inserted,  143. 
marginal  figures  are  not  limits  of  authority  to  fill  up  blanks,  143. 
blank  may  be  filled  as  negotiable  or  non-negotiable  instrument,  144. 
if  blank  intended  for  bill,  party  will  be  bound  to  bona  fide  holder, 

although  it  be  filled  up  as  note,  144. 
acceptance  of  bill  blank  as  to  drawer  is  valid  in  hands  of  creditor,  143a. 
holder  for  value  of  such  bill  may  insert  his  name,  and  so  may  his  per- 
sonal representative,  143a. 
acceptor  of  such  instrument  is  bound  to  bona  fide  holder,  though  name 

of  drawer  be  wrongfully  inserted,  143a. 
if  payee  be  left  blank,  holder  may  insert  his  own  name,  145. 
such  instruments  intended  to  facilitate  transfers  without  recourse,  145. 
they  pass  by  delivery,  145. 

holder  must  actually  fill  blank  before  he  can  recover,  145. 
his  apparent  privity  with  maker  or  drawer  may  be  shown  not  to  be 

real,  145. 


I 


Rf/erences  are  to  T-VTTkfV  Q  ,1  •» 

faragraphs, narked  %.  INDEX.  547 

BLANK,  NEGOTIABLE  INSTRUMENTS  EXECUTED  \n— continued. 

unless  filled  up,  paper  can  not  be  described  in  indictment  as  bill  or  note, 

145. 
holder,  where  there  is  indorser,  but  no  payee,  may  insert  indorser's 

name  as  payee,  146. 
skeleton  notes  and  bills  may  be  filled  up,  146. 
holder  knowing  authority  has  been  exceeded,  can  not  recover,  146. 
if  holder  exceeded  authority,  he  can  acquire  no  benefit  from  it,  147. 
whether  knowledge  that  paper  was  blank  in  custodian's  hands  puts 

holder  on  inquiry  as  to  extent  of  his  authority,  147. 
better  doctrine  is,  it  does  not,  147. 
views  of  Mansfield,  Story,  and  Parsons,  147. 

bond-stands  on  different  footing  from  negotiable  instruments,  148. 
but  if  bond  be  negotiable,  rule  applicable  to  bills  and  notes  applies,  148. 
action  on  paper  indorsed  in  blank,  IL,  1191  to  1196. 
bona  fide  holder  of,  IL,  1758. 

BONA    FIDE   HOLDER,    RIGHTS    OF.      See   Collateral  Security 
Mortgage  ;     Negotiable     Instruments     executed     in 
Blank  ;    Sale. 

1.  Nature  and  rights  0/  bona  fide  holder,  769  to  862. 

general  principle  as  to  immediate  parlies  to  contract,  769. 

who  is  a  "  purchaser  "  or  "  holder  "  of  negotiable  paper,  769^. 

summary  of  recognized  principles  which  establish  the  title  to  negotia- 
ble instruments,  and  the  right  to  recover  upon  the  same,  769(7. 

holder  must  have  acquired  the  paper  in  good  faith  from  his  predeces- 
sor, 76917,  770,  775. 

and  when  so  acquired,  no  equitable  or  other  defences  pleaded  by  prior 
parties  affect  his  title,  769^. 

early  English  rule  made  bona  fides  test  of  holder's  superior  rights,  771. 

option  rule  was  adopted  that  if  circumstances  were  such  as  to  excite 
suspicions  of  prudent  man,  holder  could  acquire  no  superior  title. 
772. 

this  rule  carped  at,  and  "  gross  negligence  "  made  the  test,  773. 

early  rule  as  to  bona  fides  restored  in  England,  774. 

this  rule  generally  prevails  in  the  U.  S.,  775. 

and  is  adopted  by  U.  S.  Supreme  Court,  776.     IL,  1503. 

gross  negligence  not  now  considered  to  affect  holder's  title,  774,  775, 
776.     IL,  1503. 

meaning  and  effect  of  "  gross  negligence  "  on  part  of  holder,  772,  773, 

774.775.776.  IL,  I  SOS- 
may  be  evidence  oi  tjtala  fides,  774,  "J^d. 

but  is  not  the  same  thing,  774,  "]"](>. 

history  of  the  existing  rule,  771,  7"]^. 

2.  Holder  must  have  acquired  instrument  for  a  valuable  consideration,  777. 

meaning   of  phrases   "  valuable   consideration,"   "  full    value,"    "  fair 

value,"  and  "  for  value,"  777. 
when  value  shown,  amount  of  consideration  only  important  as  bearing 

on  question  of  notice,  777. 
presumption  of  bad  faith  where  the  price  paid  is  utterly  trifling,  777a. 
various  cases,  778,  779,  779^. 


Q  ,Q  TXTTiTTV  References  are  to 

<->4^  liNiJCA.  f,aragraj>hs  }narked%, 

BONA  FIDE  HOLDER,  RIGHTS  OY— continued. 

line  of  demarcation  between  negligence  and  notice,  779. 
how  knowledge  of  solvency  of  parties  may  affect  question  of  notice, 
779a. 

3.  Holder  must  have  acquired  paper  in  the  ustial  course  of  business,  780. 

transfer  in  payment  of  pre-existing  debt  is  good,  780. 

query,  where  transferred  as  mere  collateral  security,  780. 
See  Collateral  Security,  and  820  to  833. 

receivers  of  courts  do  not  acquire  title  to  negotiable  instruments  in  reg- 
ular course  of  commercial  dealing,  781. 

nor  does  assignee  of  a  bankrupt  or  insolvent  person,  781. 

nor  trustee  for  benefit  of  creditors,  781. 

in  Iowa,  it  was-  held  that  indorsement  of  a  note  by  sheriff,  who  had 
levied  on  it,  was  of  same  effect  as  if  made  by  the  holder,  781, 

4.  Who  can  ostetisibly  transfer  g-ood  title. 

drawer  of  bill  payable  to  his  order  can,  78 1«. 

whether  acceptor  of  bill  indorsed  in  blank  may,  78i<5. 

held  that  he  can  in  England  and  South  Carolina,  781^,  and  p.  732, 

note  I. 
held  otherwise  in  New  York,  781^,  and  p.  731,  note  4. 
author's  views  changed,  and  now  coincide  with  English  decision,  7%ib, 

and  notes, 
party  not  payee  of  unindorsed  bill  or  note  can  not,  781a. 

5.  Holder  jnust  become  possessed  of  instru7tient  before  maturity  to  have  a  better 

title  than  his  transferrer,  782. 
unless  he  received  it  after  maturity  from  a  bona  fide  holder  for  value 

and  without  notice  before  maturity,  782.   See  also  726,  786,  803,  805. 
when  bills  at  sight  and  bills  and  notes  on  demand  are  deemed  overdue, 

783. 
it  is  always  presumed  that  holder  acquired  instrument  before  maturity, 

784. 
presumption  slight  in  its  nature,  784. 

held  not  to  apply  where  note  is  payable  in  one  day  after  date,  785. 
the  rule  that  if  the  paper  is  overdue  at  time  of  transfer,  it  is  of  itself 

notice  to  holder,  does  not  apply  to  accommodation  paper,  if  indorser's 

title  unimpeachable,  786. 
and  indorsee  may  acquire  good  title. after  maturity  of  accommodation 

paper,  786.     See  also  726  and  notes, 
note  payable  by  instalments  is  overdue  when  first  instalment  is  unpaid 

after  maturity,  787. 
rule  is  different  if  mere  instalment  of  interest  is  overdue,  787.  II.,  1506. 
rule  where  there  are  several  notes  upon  same  consideration,  787. 
whether  note  is  current  up  to  close  of  business  hours  on  last  day  ot 

grace,  query,  787a. 
what  defences  available  against  purchaser  after  maturity,  724^7,  725  et 

seq. 

6.  Holder  must  have  acquired  instru7nent  without  notice  of  its  dishonor.,  788 

actual  notice  of  dishonor  of  bill  by  non-acceptance  before  maturity,  788. 
marks  of  dishonor  apparent  on  face  of  bill  or  note  are  "death  wounds," 

788. 
knowledge  by  holder  of  fraud,  defect  of  title,  illegality  of  consideration. 


Ke/irences  are  to  yN'T^TTV  Q/</~k 

paragraphs  marked  %.  I^DEX,  349 

BONA  FIDE  HOLDER,  RIGHTS  OY— continued. 

or  other  fact  impeaching  instrument  in  transferrer's  hands,  vitiates 

same,  789. 
constructive  notice  sufficient,  789a,  795^.  795^. 
notice  must  exist  at  time  paper  is  acquired,  789dr. 
subsequent  notice  will  not  affect  holder,  789^. 
if  notice  is  communicated  before  paper  is  paid  for,  although  contracted 

for,  it  charges  purchaser,  789a. 
and  if  he  has  paid  part  when  he  receives  notice,  is  only  protected  pro 

tatito,  jSga. 
mere  want  of  consideration  between  original   parties  does  not  prevent 

purchaser  from  becoming  a  bona  fide  holder,  790. 
even  when  he  is  purchaser  after  maturity,  790,     See  also  726,  782,  80^, 

805. 
nor  where  the  consideration  is  an  executory  contract,  without  notice  to 

him  of  its  breach,  790. 
purchaser  of  accommodation  paper  not  prima  facie  a  bona  fide  holder 

when  he  knows  terms  have  been  violated,  790. 
in  such  case  burden  of  proof  is  on  defence  to  show  diversion,  without 

holder's  knowledge,  790,  814. 
in  New  York  the  rule  is  different,  791. 
to  constitute  misappropriation  or  diversion  of  accommodation   paper, 

there  must  be  a  fraudulent  diversion  from  its  original  purpose,  792. 
precise  conformity  with  agreement  in  such  case  is  not  material,  where 

no  fraud,  792,  793. 
rule,  accommodation  paper  is  applied  to  payment  of  pre-existing  debt, 

793«- 
and  where  pledged  as  collateral  security,  793a. 

when  note  is  designed  to  take  up  other  paper  of  person  giving  accom- 
modation, it  is  a  misappropriation  not  to  have  it  discounted,  794. 
express  notice  of  transferrer's  defective  title  destroys  purchaser's  better 

position,  795. 

7.  Implied,  constructive,  or  circumstantial  notice,  7%a  to  800. 

in  what  cases  notice  may  be  implied  by  appearance  of  paper,  795a. 

rule  as  to  paper  payable  to  a  trustee,  795^. 

constructive  notice  from  extrinsic  circumstances,  795<5. 

may  be  as  effectual  as  personal  observation,  801. 

views  of  Story  as  to  circumstantial  notice,  796. 

circumstances  must  create  presumption  of  fraud,  796. 

mere  statement  of  nature  of  consideration  in  a  bill  or  note  does  not  put 

the  holder  on  inquiry,  797. 
one  taking  note,  knowing  the  maker  to  be  dead,  but  not  that  it  was  for 

accommodation,  may  recover,  798. 
father  who  bought  note  of  daughter  given  her  by  her  betrothed,  held  a 

bona  fide  holder,  798. 
notice  of  particular  fraud,  etc.,  not  necessary  to  affect  purchaser,  799. 
sufficient  if  he  be  told  that  there  is  "  something  wrong  "  about  the  note. 

799- 
so  if  he  knows  that  maker  denies  liability,  799. 

8.  Public  records  and  legal  proceedings  not  notice,  800  to  801. 

holder  not  bound  to  take  notice  of  public  records  or  litigation,  800. 

Vol.  II.— 54 


Qm  TVTVcv  References  are  to 

^5"  IJNDliX.  i,aragraphs  marked  % 

BONA  FIDE  HOLDER,  RIGHTS  OY— continued. 

doctrine  of  lis  pendens  does  not  apply  to  negotiable  instruments,  Zooa^ 

but  if  transferred  overdue  pending-  suit  are  subject  to  equities,  Zooa, 

if  compelled  by  law  to  pay  to  another  party,  holder  can  not  recover 
Zooa. 

better  opinion  is  that  garnishment,  attachment,  and -trustee  process  can 
not  affect  indorser  before  maturity  without  notice,  8ooa. 

notice  of  fraud  or  other  defence  between  prior  parties,  derived  from 
circumstances,  may  be  as  effectual  as  personal  observation  or  hear- 
ing of  facts  in  question,  80 1. 

notice  to  agent  is  notice  to  principal,  802. 

qualification  of  this  rule,  802. 

9.  Purchaser,  as  a  general  rule,  can  not  be  placed  on  worse  footing  than  his 

transferrer ,  802a. 
holder  can  recover,  whatever  may  be  defences  between  prior  parties,  if 

his  indorser  is  a  bona  fide  holder  for  value,  without  notice  of  such 

defences,  803. 
illustrations  of  doctrine  in  Louisiana  and  Indiana,  804. 
exception  where  payee  is  purchaser  of  note  invalid  between  him  and 

maker,  805. 
defences  against  which  a  bona  fide  holder  is  not  protected,  806,  809. 

(i)  incapacity  of  party  assuming  to  contract,  806,  806a. 

(2)  interdiction  of  contract  by  statute,  807. 

(3)  forgery  or  subsequent  alteration  of  instrument,  809. 

(4)  when  agent  exceeds  authority  in  certain  cases,  809. 

(5)  when  party  signed  under  duress,  809. 

holder  stands  to  his  transferrer  on  same  footing  as  payee  to  maker,  810. 

10.  Burden  of  proof  on  party  impeaching  consideration,  810. 

negotiable  instrument  imports  consideration,  810. 

consideration  open  to  inquiry  between  parties  in  privity,  810. 

rule  wholly  different  as  to  anterior  parties,  811. 

possession  of  instrument  as  to  them  prijna  facie  proof  of  acquisition  for 
full  value,  812. 

no  difference  in  case  of  notes  and  bills  to  bearer,  812. 

presumption  of  bona  fide  ownership  for  value  does  not  arise  unless 
instrument  be  payable  to  bearer  or  duly  indorsed,  812. 

what  defendant  can  not  deny,  813. 

holder  not  affected  by  proof  of  want  of  consideration  between  original 
parties,  814. 

nor  by  proof  of  failure  of  consideration,  814. 

nor  of  misapplication  of  instrument,  814. 

when  bearer  must  show  he  was  not  payee,  814a. 

when  payee  procures  note  by  fraud,  holder  must  prove  full  value  paid, 
815. 

so  if  consideration  illegal,  815. 

so  if  loss  of  instrument  be  shown,  815. 

what  circumstances  may  shift  burden  of  proof,  815^. 

no  fixed  and  invariable  rule  practicable,  815a. 

fraud  must  be  committed  upon  maker  to  shift  burden  of  proof,  818. 

defendant  must  prove  actual  notice  to  holder  of  facts  impeaching  in- 
strument, when  holder  shows  he  gave  value,  819, 


References  are  to  TVm?Y  RcT 

paragraphs  marked  %.  liNJJUA.  ^O 

BONA  FIDE  HOLDER,  RIGHTS  OY— continued. 
II.  Holder  under  various  circumstances,  837  to  862. 

delivery  of  complete  instrument  is  necessary  to  consummate  its  validity 

837. 
but  when  stolen  and  put  in  circulation,  whether  payable  to  thief  or 

bearer,  a  bona  fide  holder  is  entitled  to  recover,  837.     II.,  1582. 
maker  must  have  done  some  act  which  ought  to  seal  his  mouth,  838. 
when  instrument  is  perfected  and  laid  away  in  desk  or  safe  of  maker, 

it  is  at  his  risk,  839. 
conflicting  decisions,  839,  840. 
when  incomplete  instrument,  which  is  signed,  is  stolen,  maker  is  not 

bound  unless  guilty  of  negligence,  841,  842. 
English  decision  as  to  stolen  blank  acceptance,  842a. 
maker  bound  when  blank  instrument  is  intrusted  to  another  and  filled 

up,  and  a  bona  Jide  holder  acquires  it,  843,  844. 
if  note  or  bill  is  written  over  signature  of  party  on  blank  paper  without 

authority,  it  is  invalid,  unless  agency  or  trust  was  reposed,  845. 
instrument  has  no  validity  if  procured  by  imposing  on  infirm  or  illiterate 

person,  there  being  no  negligence  in  signing  party,  847. 
otherwise,  if  executed  by  mistake  or  misrepresentation  under  circum- 
stances which  imply  negligence,  850. 
what  amounts  to  negligence,  849a,  850,  851,  85 la,  852. 
conflicting  decisions,  851,  851a,  852. 
rule  as  to  note,  whether  perfect  or  in  blank,  which  has  been  negotiated 

by  custodian  thereof  contrary  to  instructions,  854. 
authorities  at  variance  on  this  subject,  854,  855,  856. 
if  instrument  be  intrusted  to  payee,  negotiation    by  him    is  binding, 

though  condition  be  violated,  855. 

distinction  between  perversion  of  negotiable  instruments  and  those  un- 
der seal,  856. 

duress  between  immediate  parties  annuls  instrument,  857,  858. 

must  be  such  as  to  influence  man  of  ordinary  constancy  to  affect  bona 
fide  holder,  857. 

when  holder  is  protected  by  estoppel  in  pais,  859. 

estoppel  is  whereby  party  is  concluded  by  his  own  act  from  saying  the 
truth,  859. 

estoppel  exacts  good  faith,  and  if  holder  commits  fraud,  he  can  not 

claim  benefit  of  estoppel,  861. 
certificates  of  validity,  862. 
bona  Jide  holder  of  checks,  II.,  1582,  1583. 

altered  bills  and  notes,  II.,  1405. 

bank  notes,  II.,  1680. 

lost  and  destroyed  bills  and  notes,  II.,  1461. 

coupon  bonds,  II.,  1502,  1550. 

BONDS.    See  CORPORATIONS ;    COUPON  BONDS ;    Municipal  Corpora- 
tions ;  Escrow. 

not  negotiable  at  common  law,  31,  32. 

are  by  statute  in  some  States,  33. 
BROKER. 

transferring  bill  or  note  without  disclosing  agency  is  principal,  740a. 

may  expressly  warrant  genuineness  of  instrument,  740^. 


Sr- o  T-\TT->T7'V  References  are  to 

0-^  llNDliX.  paragraphs  marked^ 

BROKE  R — c  out  in  tied. 

may  agree  not  to  be  liable  for  genuineness  of  instrument,  740a. 
selling  bill  or  note  in  his  own  name  is  bound  as  principal  whether  he 

discloses  principal  or  not,  740^. 
contract  in  his  own  name  in  writing  binds  him,  and  parol  evidence  is 

inadmissible  to  discharge  him,  740^. 
exception  when  his  name  is  by  adoption  used  to  bind  another,  740a. 
evidence  generally  admissible  to  charge  undisclosed  principal,  740a. 
but  inadmissible  to  discharge  agent  contracting  in  his  own  name,  740a. 

BURDEN  OF  PROOF.  See  Evidence  ;  Bona  Fide  Holder  ;  Partner- 
ship. 

as  to  partner's  liability,  368,  369,  370. 

mere  possession  of  negotiable  instrument  under  ostensible  title  suflficient 
to  recovery,  812. 

proof  of  want  of  consideration,  or  misapplication  of  paper,  does  not 
shift  burden  on  plaintiff,  814. 

when  bearer  must  show  he  was  not  original  payee,  814a. 

what  circumstances  shift  burden  on  plaintiff,  815. 

what  circumstances  restore  plaintiff's /r/;«« /a^,?  case,  819. 

plaintiff  not  bound  to  prove  negative,  819. 

as  to  notice,  II.,  1047  to  1058. 

as  to  signature,  II.,  12 18. 

as  to  payment,  II.,  1227  to  1229. 

as  to  alteration,  II.,  141 7  to  1421. 

CALENDAR  MONTH.    5^^  Month. 

CANCELLATION.    See  Acceptance. 
effect  of,  549. 
when  instrument  regarded  as  cancelled  and  incapable  of  reissue,  549. 

CASHIER.    See  Corporations. 

authority  of  cashier  of  bank,  392. 
eflfect  of  signature,  "A.  B.,  cashier,"  417. 
when  payee  is  "A.  B.,  cashier,"  II.,  1188. 
CAPACITY.    See  Infants;  Lunatics;  Aliens;  Bankrupts;  Married 
Women;  Fiduciaries;  Persons  under  Guardianship. 
maker  warrants  payee's  capacity  to  indorse,  93,  136,  139,  227,  242. 
acceptor  warrants  payee's  capacity  to  indorse,  536. 
drawer's  capacity  to  draw,  585. 

CAUSE  OF  ACTION.    See  Action. 
is  indivisible,  II.,  ii86a. 
what  constitutes  entire  demand,  II.,  Xi86a. 

CERTIFICATE  OF  PROTEST.     See  PROTEST. 

CERTIFICATES  OF  DEPOSIT. 

origin  and  nature  of  certificates  of  deposit,  II.,  1698. 

is  a  promissory  note  for  the  payment  of  amount  which  it  certifies  to  be 

deposited  in  bank,  II.,  1698. 
very  similar  to  goldsmiths'  or  bankers'  cash  notes,  II.,  1698a. 


Re/erencef  are  to  ^^  q 

paragraphs  marked  §.  i^Nuri/.-v..  "JO 

CERTIFICATES  OF  V)Y.VO%YY—contimied. 

Mr.  Chitty's  description  of  them,  II.,  1698a. 

usual  for  depositor  to  take  certificate  of  deposit  if  he  wishes  his  fund  to 
run  on  interest,  II.,  1698a. 

represents  money  to  be  held  for  depositor,  II.,  1638^. 

what  Morse  says  as  to  power  of  banks  to  issue  certificates  of  deposit, 
II.,  1699. 

the  criterion  in  such  case  is  its  authority  to  issue  promissory  notes  or 
drafts  payable  a  certain  time  after  date,  II,,  1699. 

bank  which  pays  amount  of  certificate  to  a  bona  fide  holder  on  a  forged 
indorsement  of  depositor's  name  can  not  recover  amount  so  paid 
from  depositor,  II.,  1700. 

when  certificate  is  signed  by  bank  president  in  his  own  name,  depositor 
may  show  that  the  bank  itself  is  bound,  II.,  1700. 

transfer  of  certificate  of  deposit  for  a  debt  is  presumably  only  condi- 
tional payment,  II.,  1701. 

if  payment  is  refused,  creditor  may  resort  to  the  original  considera- 
tion, II.,  1701. 

but,  query,  when  he  makes  use  of  it  for  his  own  purposes,  not  demand- 
ing prompt  payment,  II.,  1701. 

transfers  of  certificates  of  deposit  are  governed  by  the  rules  which 
obtain  in  other  promissory  notes,  II.,  1702. 

if  payable  to  bearer,  may  be  transferred  by  delivery ;  if  to  order,  must 
be  indorsed,  II.,  1702. 

liability  of  indorser  same  as  in  other  promissory  notes,  II.,  1702. 

if  transferred  when  overdue,  transferee  takes  it  subject  to  equitable  de- 
fences, II.,  1702,  i'jo2a. 

when  regarded  as  overdue,  II.,  lyoza. 

certificates  of  deposit  are  negotiable  if  expressed  in  negotiable  words, 
II.,  1703. 

certificate  which  contains  no  word  of  promise  to  pay  amount  is  only  a 

receipt,  II.,  1704. 
and  can  not  be  basis  of  action  against  bank,  nor  a  transferable  security, 

II.,  1704. 

the  word  "  certify  "  is  of  no  weight  as  purporting  a  contract,  II..  1704. 
where  certificate  is  payable  to  "  A.  B.  or  order,"  or  to  bearer,  there  is 
no  doubt  of  its  negotiability,  II.,  1705. 

to  be  negotiable,  it  must  be  certain  in  respect  to  parties  and  to  time 
and  mode  of  payment,  II.,  1706. 

whether  negotiable  in  States  where  there  are  certain  statutory  acts  of 
negotiability,  II.,  1706a. 

causes  which  deprive  bills  and  notes  of  negotiability,  affect  it  in  a  like 
manner,  II.,  1706. 

for  example,  if  payable  "in  currency"  or  "  U.  S.  six  per  cent,  interest- 
bearing  bonds,"  II.,  1706. 

when  statute  of  limitations  runs  against,  II.,  1707. 

true  principles  applicable,  II.,  ijoya. 
CERTIFICATES  OF  RECEIVERS. 

not  regarded  as  negotiable,  $oa. 
CERTIFICATES  OF  STOCK. 

I.  Definition  and  7iaiure  of ,\\.,  1708. 

are  not  negotiable,  II.,  170S. 


854  INDEX.  ,l'£:i;^'ZUU%. 

CERTIFICATES  OF  ^^TOZYi— continued. 

are  termed  "  quasi  "  negotiable,  II.,  1708. 

are  assignable,  II.,  1708. 

are  not  debts,  money,  nor  securities  for  money,  II.,  \'joZa. 

are  incorporeal  personal  property,  II.,  1708a. 

are  muniments  of  title,  II.,  1708a, 

are  choses  in  action,  II.,  1708a. 

stockholders'  interest  subject  to  execution  and  attachment,  II.,  1708a. 

usual  method  of  levy,  II.,  1708a. 

2.  Beneficial  interest  generally  passes  by  assignment  and  delivery,  11.,  17081^. 

between  parties  equitable  interest  transferable  whatever  be  rights  ot 

others,  II.,  I'jo^b. 
statutory  restrictions  not  generally  applicable  to  immediate  parties  to 

transfer,  II.,  1708^. 

3.  When  corporate  charter  gives  corporation  lien  on  stock  for  debt  of  holder, 

assignment  can  not  defeat  it,  II.,  1708^,  lyoSd. 
corporation  has  no  lien  on  stock  for  holder's  debt  at  common  law,  II., 

1708^. 
whether  corporation  may  create  such  lien  by  by-laws,  II.,  lyoSd. 
policy  of  law  opposed  to  secret  liens,  II.,  ijoSd. 
when  lien  enforceable  against  parties  with  notice,  II.,  lyoSd. 
notice  of  lien  on  face  of  certificate  is  effectual,  II.,  lyoSd. 

4.  Assignment  of  defeats  sitbseque}it  attachittent  or  execution,  II.,  17081?. 

assignment  of  certificate  defeats  subsequent  assignment,  XL,  1708/'. 

usual  method  of  transfer  of,  II.,  1708^. 

transfers  by  agents  under  blank  powers  of  attorney,  II.,  1708^^. 

holder  trusting  agent  with  blank  powers  of  attorney  to  transfer,  con- 
fers apparent  ownership  of,  II.,  i7o8_^. 

such  agent  may  pass  good  title  to  bona  fide  holder  without  notice, 
although  guilty  of  fraud,  II.,  i7o8f. 

this  doctrine  rests  on  principles  of  estoppel,  II.,  1708^. 

if  certificate  with  blank  assignment  and  power  of  attorney  be  lost  or 
stolen,  purchaser  can  not  acquire  title,  II.,  i7o8_^. 

lis  pendens  does  not  apply  to,  II.,  1708^. 

sealed  powers  of  attorney  in  blank  not  discussed,  II.,  1708^- 

5.  Corporation  shoidd  require  surrender  of,  before  making  transfer  on  books 

II.,  1709. 
else,  may  be  liable  to  bona  fide  purchaser  of  certificates,  II.,  1709. 

CERTIFICATES  OF  VALIDITY, 
effect  of,  862. 

CERTIFICATION  OF  CHECKS.    See  Checks. 

CERTIFIED  NOTES.    See  Irregular  Instruments,  and  132,  133. 

CHARGES.    See  Exchange  ;  Costs  ;  Protest. 
what  recoverable,  II.,  1457. 
notarial  charges,  when  recoverable,  II.,  933. 

CHECKS  FOR  BAGGAGE. 

not  negotiable,  II.,  171 1. 


References  are  to  tvttmt'V  'i.  r  r 

paragraphs  marked %.  IJNUH-A..  O55 

CHECKS. 

I.  DefiHitio7t  and  description  of  a  check,  II.,  1566. 
(i)  it  is  a  draft  or  order,  II.,  1567. 

(2)  on  a  bank  or  banker,  II.,  1568. 

(3)  purports  to  be  drawn  on  a  deposit,  II.,  1569. 

(4)  for  the  payment  at  all  events  of  a  certain  sum  of  money,  II.,  1 570. 

(5)  and  is  payable  to  a  certain  named  person,  or  to  him  or  order,  or  to 

him  or  bearer,  or  to  bearer,  II.,  1571. 

check  payable  to  "  the  order  of  bills  payable,"  or  to  a  certain  num- 
ber, is  payable  to  bearer,  II.,  1571. 

bank  has  reasonable  time  to  ascertain  genuineness  of  indorser's  sig- 
nature if  the  check  is  payable  to  order,  II.,  1571. 

(6)  check  is  instantly  payable  on  demand,  II.,  1572. 
which  feature  is  its  essential  characteristic,  II.,  1572. 

query,  whether  a  draft  on  a  bank,  payable  at  future  day  named  after 

date,  is  check,  II.,  1573. 
setnble,  as  to  draft  payable  so  many  days  after  sight  or  date,  II.,  1 573. 
draft  or  order  on  bank  not  immediately  payable,  has  the  qualities  of 

bill  of  exchange,  II.,  1574. 
check  is  not  entitled  to  grace,  II.,  1575. 
whether  particular  usage  can  control  general,  II.,  1576. 
that  a  draft  payable  at  future  day  is  not  check,  II.,  1576. 

2.  Formal  parts  and  varieties  of  checks,  II.,  1576. 

check  should  be  dated,  II.,  1577. 

may  be  ante  or  post  dated,  II.,  1578. 

need  not  be  expressed  in  any  set  form  of  words,  II.,  1579. 

sufficient  if  bank  be  plainly  directed  to  pay,  II.,  1579. 

amount  should  be  designated  in  words  and  figures,  II.,  1580. 

check  may  be  addressed  to  the  bank  or  to  the  cashier,  II.,  1581. 

must  be  dehvered,  II.,  1582, 

it  is  issued  as  soon  as  it  is  in  hands  of  party  who  can  demand  payment, 
II.,  1582. 

if  lost  or  stolen,  finder  or  thief  can  not  demand  payment  of  drawer, 
II.,  1582. 

bank  held  harmless  if  it  pay  lost  or  stolen  check  payable  to  bearer, 
II.,  1582. 

what  are  "memorandum  "  checks,  II.,  1583. 

examples  of  these,  II.,  1584. 

ordinary  check  can  not  be  proved  by  parol  to  have  been  intended  as  a 

memorandum  check,  II.,  1584,  1585. 
crossed  checks,  and  English  statutes  and  decisions,  II,,  1585a. 
when  indorsed  by  party  as  "  surety  "  considered  in  Louisiana  not  to 

be  used  in  usual  manner,  II.,  1585^5. 

3.  Preseftiment,  protest,  and  notice,  II.,  1586. 

holder  has  no  recourse  upon  drawer  until  check  is  presented  and  pay- 
ment refused,  II.,  15S6. 

distinction  as  to  presentment  and  notice  between  bills  and   checks 

II.,  1587. 
drawer  not  discharged  unless  injured  by  delay  in  presentment  or  notice 

II..  1587. 


8^6  INDEX.  References  are  to 

'-'  *  paragraphs  marked  §. 

CHECKS — continued. 

if  due  presentment  and  notice  is  not  made,  burden  of  proof  is  on  plaintiff 

to  prove  no  injury  to  drawer  by  such  default,  II.,  1588. 
if  bank  be  solvent  and  check  is  refused,  drawer  is  liable  as  in  other 

cases  of  debt  on  protested  note,  II.,  1589. 
check  should  be  presented  within  reasonable  time,  II>,  1590. 
if  drawer  and  payee  and  the  batik  are  in  the  same  place,  check  received 

in  course  of  one  day  should  be  presented  the  next,  II.,  1590. 
stoppage   of    payment    by  bank    during    business    hours   is    excuse, 

II.,  1591- 
if  received  at  place  distant  from  bank,  it  should  be  forwarded  by  mail 

the  day  after,  II.,  1592. 

if  check  is  presented  on  day  it  is  drawn,  and  payment  be  tendered, 
holder's  refusal  to  receive  it  is  at  his  own  risk,  II.,  1 593. 

between  indorser  and  indorsee,  the  rule  is  same  as  between  drawer  and 
payee,  II.,  1594. 

as  between  indorser  or  assignee,  and  the  drawer,  no  transfer  or  transfers 

can  prolong  dravv^er's  risk,  II.,  1595. 
duty  of  bank  or  other  collecting  agent  as  to  presentment,  332. 
check  intended  for  immediate  payment,  II.,  1595. 

what  will  excuse  failure  or  delay  in  presenting  check  and  giving  notice 
of  dishonor,  II.,  1596. 

(i)  when  no  funds  of  drawer  are  in  bank,  II.,  1596. 

(2)  when  drawer  directs  bank  not  to  pay,  II.,  1596. 

(3)  when  bank  is  restrained  by  order  of  court,  II.,  1596. 
indorser  in  such  case  stands  on  differejat  footing  from  drawer,  II.,  1596. 
holder  should  notify  drawer  if  he  be  prevented  from  presenting  check 

by  removal  of  bank  or  other  cause,  II.,  1596. 

failure  to  do  so  discharges  drawer,  II.,  1596. 

if  bank  remove,  and  check  returned,  debt  remains  due,  II.,  1596. 

drawer  o{  over-check  is  bound  without  demand  or  notice,  II.,  1597. 

drawer  may  waive  neglect  or  delay,  II.,  1598, 

time  for  presentment  not  prolonged  by  check  being  put  in  agent's 
hands,  II.,  1598. 

bank  has  right  to  actual  presentment,  II.,  1599. 

whether  sending  check  by  post  with  demand  of  payment  is  a  good  pre- 
sentment, II.,  1599. 
presentment  by  post  to  drawee  bank  is  proper,  II.,  1599a. 
rule  respecting  protest  of  checks,  II.,  1600. 
whether  on  same  footing  as  bills,  II.,  1600. 
4.    What  is  meant  by  "  certification  "  of  checks,  II.,  1601. 
effect  of  certification  of  checks,  II.,  \6o\a. 
recent  origin  of  custom  to  certify  checks,  II.,  1602. 
bank  by  certifying  becomes  principal  and  only  debtor,  II.,  i6oia,  1603. 

acknowledges  funds,  II.,  1603. 
certified  check  is  shorthand  certificate  of  deposit,  II.,  1603. 
bank  certifying  can  not  plead  forgery  of  drawers'  names,  II.,  1603. 
drawer  can  not  revoke  after  certification,  II.,  1603. 
bank  does  not  warrant  terms  of  check  by  certification,  II.,  1603. 
holder  by  taking  certificate  of  bank  discharges  drawer,  XL,  i6oia,  1604. 


pJ^asZpl"mark'ed%.  INDEX.  ©57 

CHECKS — continued. 

certified  checi<  circulates  as  cash  by  usage  of  merchants,  II.,  1605. 

no  particular  form  of  certification  is  requisite,  II.,  1606. 

ordinary  mode  of  certifying  is  to  write  "  good  "  across  face  of  check, 

II.,  1606. 
whether  promise  to  pay  is  equivalent  to  certification,  II.,  1606a. 
when  communicated  to  holder  it  is,  II.,  i6o6a. 
if  certificate  state  time  of  payment,  it  binds  holder,  II.,  1606b. 
officer  of  bank  should  not  certify  check  unless  there  be  funds  to  meet 

it,  II.,  1607. 
officer  or  agent  of  bank  can  not  certify  his  own  check,  II.,  1607. 
special  authority  required  by  officer  to  certify  other  than  commercial, 

II.,  1607. 
certified  without  indorsement  of  payee  in  hands  of  third  party,  II.,  1607^!. 
if  holder  be  assignee  for  valid  consideration  entitled  to  recover  money, 

II.,  1607a. 
bank  protected  in  paying,  II.,  1607a. 
certification  made  through  mistake  or  fraudulent  misrepresentation  may 

be  revoked,  II.,  1608. 
unless  in  hands  of  holder  without  notice,  II.,  1608. 
what  officers  of  bank  may  certify  checks,  II.,  1609. 
president  or  board  of  directors  may,  II.,  1609. 
cashier  and  teller  may,  II.,  1610. 
assistant  cashier  can  not,  II.,  i6iob. 
limitation  on  implied  power  of  president  or  other  officer  to  certify 

checks,  II.,  161 1, 
officer  certifying  his  own  check — certificate  carries  notice,  II.,  161 1, 

5.  Whose  check  should  be  paid  by  bank,  II.,  16 12. 

bank  should  require  signature  to  be  identical  with  depositor,  II.,  1612. 
in  case  of  partnership,  check  should  be  signed  in  copartnership  name, 

II.,  1613. 
in  cases  of  joint  depositors,  II.,  1613. 
lawful  for  bank  to  show  that  deposit  in  name  of  one  partner  belongs  to 

firm,  II.,  1614. 
as  to  personal  representatives  and  trustees,  II.,  161 5. 
deposits  by  corporations,  II.,  1616. 
usage  and  custom  of  corporations  may  justify  payment  of  checks  though 

not  signed  by  proper  officers,  II.,  \6\6a. 

6.  What  checks  should  be  paid  by  bank,  II.,  1617. 

holder  can  demand  payment  on  presentment,  II.,  1617,  1617a. 

checks  should  be  paid  in  order  of  presentment,  II.,  1617a. 

"  first  come  first  served,"  II.,  1617a. 

must  pay  in  usual  course  of  business,  II.,  i6i8a. 

must  pay  to  actual  payee,  II.,  1618. 

bank  should  not  pay  check  alter  notice  of  loss  or  before  it  is  due, 

II.,  i6i8a. 
query,  whether  it  should  pay  after  death  of  drawer,  II.,  1618^. 
review  of  the  question  and  the  decisions,  II.,  161 8a. 
if  not  in  funds,  it  should  at  once  refuse  payment,  II.,  161 9. 
how  long  bank  may  retain  check,  II.,  1619. 


O -O  T-M-riTTV  Refert'tces  are  to 

Oy^  IJNUliX.  faragra^hs  marked %, 

QYiYsCYUsi— continued. 

custom  of  London,  II.,  1619. 

holder  is  not  bound  to  receive  part  payment,  II.,  1620. 

bank  not  bound  to  pay  in  part  unless  holder  surrenders  check,  II., 

1620. 
passing  amount  of  check  to  holder's  credit  is  payment,  II.,  1620. 
when  so  credited,  whether  bank  can  return  check  on  discovery  of  no 

fund  to  meet  it.?  II.,  1621. 
per  contra,  if  discovery  of  no  funds  or  overdraft  is  made  before  drawef 

is  debited  and  holder  credited  with  amount  ?  II.,  1621. 

7.  Paymetit  by  checks,  II.,  1623. 

taking  check  implies  that  it  is  regarded  as  payment  only  when  cashed, 

II.,  1623. 
rule  in  England  when  bank  or  other  agent  of  collection  receives  check 

as  payment,  II.,  1624. 
in  the  United  States,  agent  acts  at  his  peril  in  so  doing,  II.,  1625. 
certified  checks  taken  for  debts  are  not  payment,  II.,  1626. 
effect  of  certification  is  only  to  give  additional  credit  and  currency  to 

check,  II.,  1627, 
bank  on  which  check  is  drawn  can  not  plead  as  offset  amount  due 

holder,  II.,  1628. 

8.  Over-checks,  II.,  1629. 

fraud  to  draw  them,  II.,  1629. 

if  drawn  with  authority  from  bank,  they  are  in  the  nature  of  a  loan,  II., 

1630. 
bank  officer  should  not  pay,  II.,  1630^. 

9.  Cancelled,  dishonored,  and  stale  checks,  II.,  163 1. 

are  taken  at  holder's  peril,  II.,  1632. 

what  are  "  marks  "  of  dishonor,  II.,  1631. 

when  check  is  deemed  "  stale  "  depends  upon  circumstances,  II.,  1633, 

1634. 
excuse  for  want  of  presentment  and  notice,  1634^. 
a  declaration  that  check  would  not  be  paid  by  drawer  before  maturity 

would  excuse  want  of  presentment  and  notice,  1634a. 

10.  Whether  holder  of  tmcertified  check  can  sue  bank  for  refusal  to  pay,  II., 

1635- 
review  of  conflicting  authorities,  II.,  1636,  1636^,  16361^,  1637. 

views  of  text,  II.,  1638,  1639. 

general  conclusions  are — (i)  holder  may  sue  drawer  and  bank  in  one 

action,  II.,  1640. 

(2)  he  may  sue  drawer  on  the  dishonor  of  check,  and  the  bank  for 
money  had  and  received,  II.,  1641. 
depositor  may  recover  nominal  damages  from  bank  for  dishonoring  his 

check,  II.,  1642. 
and  a  trader  substantial  damages,  II.,  1642. 

11.  How  far  check  is  an  assignment  of  the  fund  in  bank,  II.,  1643. 

generally  deemed  assignment /r<7 /a«/£i,  II.,  1643. 

English  rule,  II.,  1645. 

general  assignment  for  benefit  of  creditors  does  not  defeat  checkholder, 

II.,  1643. 
nor  does  appointment  of  receiver,  II.,  1643. 


References  are  to  TNnFX  8^0 

paragraphs  marked  §.  ^^  Uli A.  O  0  V 

Q.YiY.CYi'S)— continued. 

nor  does  garnishment  or  attachment  of  fund,  II.,  1644. 
English  doctrine,  II.,  1645. 

12.  Checks  as  evidence,  II.,  1646. 

check  imports  debt  from  drawer  to  payee  after  payment  is  demanded 

and  refused  by  bank,  II.,  1646. 
sefnble  as  to  indorsee,  II.,  1646. 
the  natural  inference  is  that  check  is  given  in  payment  of  debt  from 

drawer  to  payee,  II.,  1646. 
what  check  imports  in  hands  oi  bank,  II.,  1647. 
in  hands  oi  drawer  it  is  a  receipt,  II.,  1648. 
custom  of  banks  to  rfl:«(r^/ checks  when  paid,  II.,  1649. 
when  money  is  lent  by  check,  statute  of  limitations  runs  from  time  the 

money  is  paid,  II.,  1650. 

13.  Negotiability  of  checks,  II.,  1 65 1. 

check  payable  in  "  bank  bills  "  or  in  "  currency  "  is  not  negotiable 

paper,  II.,  1651. 
check  when  negotiable  is  subject  to  same  principles  as  obtain  in  bills  of 

exchange  as  to  rights  oi  bona  fide  holder,  II.,  1652. 
check  payable  to  bearer  may  be  transferred  by  indorsement,  II.,  1653. 
effect  of  such  indorsement,  II.,  1653. 

14.  Forgery  of  checks,  II.,  1654. 

in  what  it  differs  from  forgery  of  other  negotiable  paper,  II.,  1654. 

bank  is  bound  to  know  signature  of  the  drawer,  II.,  1654a. 

not  bound  to  know  other  signatures,  II.,  1654a. 

whether  bank  can  recover  back  amount  paid  on  forgery  of  drawer's 

name,  II.,  1655,  1655a. 
doctrine  approved  that  bank  may  recover  where  it  acts  promptly  and 

holder  can  lose  nothing,  II.,  1656. 
general  application  of  the  doctrine  in  the  United  States,  II.,  1656. 
views  of  Chitty  and  Parsons,  II.,  1655a. 
certain  exceptions  to  the  rule  where  bank  has  certified  or  paid  forged 

check,  II.,  1657. 

15.  Alterations  of  checks  after  issue,  II.,  1658. 

"  raised  "  checks,  II.,  1658. 

generally  bank  can  only  credit  drawer  with  original  sum,  II.,  1658. 

bank  may  credit  drawer  with  entire  amount  of  "  raised  "  check  when 
drawer  by  carelessness  afforded  opportunity  for  the  fraud,  II.,  1659, 
1660. 

when  it  may  recover  back  excess  paid  on  altered  check,  II.,  1661. 

after  certification  bank  may  show  alteration,  II„  1661. 

doctrine  approved  that  it  may  recover  back  unless  holder  would  be  in- 
jured, II.,  1662. 

bank  not  bound  to  know  signature  of  indorser,  II.,  1663. 

holder  of  checks  warrants  genuineness  of  all  prior  indorsements,  II., 
1663. 

if  bank  pays  check  on  forged  indorsement  of  payee's  name,  it  can  re- 
cover back,  II.,  1663. 

semble  as  to  special  indorsee,  II.,  1663. 


Q/^r\  TMnTTY  References  are  to 

^^O  INDt-X.  i,aragraphs  marked %. 

CHOSE  IN   ACTION.    See  Assignment,  and  Equitable  Assignment, 

meaning-  of,  i,  15. 

not  assignable  at  common  law,  i. 

first  relaxation  of  rule  as  to  non-assignability  made  as  to  bills  of  ex- 
change, I,  15. 

rule  gradually  disappeared,  i,  15. 

difference  between  ordinary  chose  in  action  and  negotiable  instru- 
ment, I. 

certificates  of  stock  are,  II.,  1708a. 

CHRISTMAS  DAY.    See  Holiday. 

CIRCULAR  NOTES. 

description  and  use  of,  II.,  1657. 

CIRCUMSTANCES.      See  EXCUSES. 

may  amount  to  notice  to  purchaser  of  negotiable  instrument,  789a. 
795a,  795<5,  796,  801,  8i5<z. 
CLERK. 

whether  notary's  clerk  may  make  presentment  as  ground  of  protest, 

579  to  587. 
effect  of  custom  on  question,  587. 

whether  presentment  may  be  to  clerk  of  drawee,  588,  600. 
whether  notice  may  be  given  to  clerk,  II.,  68. 

COLLATERAL  AGREEMENTS. 

contemporaneous  contract  affecting  bill  or  note  is  construed  with  it,  156. 

thus  if  note  bear  interest,  mortgage  securing  it,  making  interest  paya- 
ble annually  will  control,  156. 

so  contract  to  pay  additional  sum  in  certain  contigency  will  be  bind- 
ing, 156. 

after  bill  or  note  executed,  it  is  subject  of  contract,  like  other  contracts, 
and  choses  in  action,  157. 

evidence  admissible  to  show  subsequent  bargains,  157. 

as  for  instance,  to  extend  time  of  payment,  or  that  payment  be  made 
by  third  persons,  or  rescinding  prior  contract  for  which  paper  was 
given,  157. 

when  subsequent  agreement  on  valid  consideration,  is  to  do  or  receive 
something  else  instead  of  note,  it  discharges  it,  158. 

but  if  agreement  be  executory,  it  can  only  be  enforced  in  another  suit, 
158. 

instances,  158. 

agreement  to  renew  note  is  binding,  159. 

but  one  renewal,  unless  otherwise  specified,  will  be  presumed  to  be  in- 
tended, 159. 

contemporaneous  agreement  to  renew  not  binding  unless  written,  159. 

subsequent  oral  agreement  binding  if  on  valid  consideration,  159. 

if  agreement  for  renewal  on  separate  paper,  can  not  be  noticed  in 
declaration,  159. 

in  England  held  that,  if  there  is  valid  subsequent  agreement  for  re- 
newal, defendant  must  show  he  applied  for  renewal,  1 59. 

agreement  between  maker  and  payee,  not  in  face  of  paper,  will  not 
affect  bona  fide  holder  for  value  without  notice,  159. 


/?</jr^Y"«''7v£  INDEX.  86 1 

paragraphs  marked  %. 

COLLATERAL  AGREEMENTS— <r^«//««^^. 

payee  indorsing  estopped  from  showing  restrictions  on  negotiability, 
159. 
COLLATERAL  SECURITY.    See  Mortgage. 
passes  by  transfer  of  paper  it  secures,  834. 
when  holder  of  bill  and  note  transferred  as  collateral  security  for  debt 

is  bona  fide  holder  for  value  without  notice,  820,  834. 
should  be  first  determined  whether  holder  has  formal  legal  title,  821. 
should  be  next  ascertained  whether  or  not  he  holds  as  agent  of  owner, 

or  has  agency  coupled  with  interest,  822. 
if  he  is  agent  only,  defendant  may  plead  any»defence  available  against 

transferrer,  822. 
if  agent  only,  authority  revocable  at  any  time,  823. 
should  be  ascertained  if  there  has  been  change  of  legal  title,  823. 
indorsee  is  entitled  to  full  protection  as  bona  fide  holder : 

(i)  when  bill  or  note  has  been  indorsed  to  him  for  debt  then  con- 
tracted, 824. 
same  rule  as  to  transferee  by  delivery  of  paper  payable  to  bearer, 
824. 

(2)  so  if  debt  not  due,  and  there  be  agreement  for  delay,  825. 
when  agreement  for  delay  presumed,  825. 

no  presumption  of  agreement  for  delay  when  collateral  matures 

later  than  debt  secured,  825^. 
if  title  to,  and  property  in  paper  transferred,  pre-existing  debt  is 

good  consideration,  and  holder  protected,  826. 

(3)  when   pre-existing  debt  is   novated,  or  securities  surrendered, 

holder  protected,  627. 
views  of  U.  S.  Supreme  Court,  827. 
State  decisions,  627. 
if  present  consideration  at   time  of  transfer,  holder  protected, 

627. 
views  of  Story,  Byles,  and  Willis,  JJ.,  827,  828. 
rights  of  holder  accompany  duty  of  holder,  828. 

(4)  rule  when  no   novation  of    pre-existing  debt,  and   no  security 

surrendered,  829. 

agreement  for  forbearance  is  good  consideration,  825,  829a. 

views  of  Redfield,  C.  J.,  829a. 

so  is  implied  suspension  of  debt,  830. 

note  indorsed  on  account  of  pre-existing  debt  impliedly  suspends  it, 
830. 

when  such  implication  does  not  arise,  831. 

becoming  a  party  to  the  instrument  transferred  as  collateral  for  pre- 
existing debt  alone  protects  transferee  as  bona  fide  holder,  831a. 

the  question  so  decided  by  United  States  Supreme  Court,  831^. 

New  York  decisions,  831^. 

when  instrument  is  transferred  in  absolute  payment,  832. 

if  paper  indorsed  in  payment  of  pre-existing  debt,  purchaser  protected 
against  equities,  832. 

amount  and  mode  of  recovery,  832^. 

holder  of  bill  or  note  as  collateral  security  can  only  recover  to  extent  0/ 
his  debt  when  there  is  defence  to  bill  or  note,  832a. 


QA^  TTSI'n'PV  References  are  to 

^^^  IISDEX.  paragraphs  marked  %. 

COLLATERAL  SECURITY— f^«/z«K^^. 

holder  of  collateral  may  generally  file  bill  in  chancery,  or  sell  collateral 
after  giving  notice  of  sale,  833. 

holder  of  bill  or  note  as  collateral  must  sue  upon  it,  or  file  bill  in  chan- 
cery, 833. 

maker  entitled  to  return  of  collateral  security  when  payment  is  de- 
manded, 833. 

demand  insufficient  without  return,  833. 

COLLECTING  AGENTS.    See  Agents  ;  Banks. 
COMITY  OF  NATIONS.    See  Conflict  of  Laws. 
COMMERCE. 

interdiction  of,  as  excuse  for  non-presentment,  protest,  and  notice.  See 
Excuses,  and  II.,  1063. 

COMMON  LAW. 

interdicted  assignment  of  choses  in  action,  I,  15. 
whether  promissory  notes  were  negotiable  by,  5. 
presumptions  as  to,  891a,  892. 

COMPOUNDING  FELONY.    See  Consideration  is  Illegal  Consider- 
ation, 196. 

COMPROMISE. 

of  doubtful  claim  good  consideration,  196. 
by  part  payment,  see  II.,  1289. 

COMPUTATION.    5^^  Time  ;  Days;   Grace;  Month;  Style;  Usance 
CONDITION. 

what  destroys  negotiability,  39,  40,  52. 

right  to  show  delivery  on,  68. 

CONDITIONAL  ACCEPTANCE.    See  Acceptance,  and  508,  521. 

CONDITIONAL  AND  ABSOLUTE  PAYMENT. 

I.  Presumption  of  paytnent  from  taking  bill  or  note,  II.,  1259. 

debtor's  note  taken  for  precedent  debt  not  presumed  to  discharge  it, 

II.,  1260. 
but  there  may  be  express  or  implied  contract  of  discharge,  II.,  1260. 
query,  whether  debtor's  note  for  contemporaneous  debt  discharges  it,  II., 

1261. 
whether  taking  bill  or  note  of  stranger  ior  precedent  debt  indorsed  or 

unindorsed  discharges  it,  II.,  1262. 
party  indorsing   must   have  notice   of  dishonor,  else  it  is  payment, 

II.,  1262. 
stranger's  note  for  contemporaneous  debt  unindorsed  operates  as  dis- 
charge, II.,  1264. 
note   of   same    description   indorsed    is    only   conditional    payment, 

II.,  1265. 
new  bill  or  note  in  renewal  of  another,  which  is  retained,  only  suspends 

original  debt,  IL,  1266. 
effect  of  renewing  note  at  bank,  IL,  1266. 

whether  delivery  of  old  note  creates  presumption  of  payment,  IL,  1266^;. 
when  debt  would  be  lost,  renewal  not  deemed  payment,  II.,  1 266(5. 
whether  renewal  of  note  in  bank  extinguishes  prior  note,  IL,  1266^. 


References  are  to  TVDEX  86^ 

paragraphs  marked  %.  IINUILA.  «Jv-'J 

CONDITIONAL  AND  ABSOLUTE  PAYMENT— fw//«z/<?^. 

presumptions  of  payment  are  always  open  to  rebuttal,  II.,  1267. 

how  intention  of  parties  affects  question,  II.,  1267. 

receipt  of  payment,  or  payment  in  full,  not  conclusive,  II.,  1267. 

but  query,  II.,  1267. 

presumption  of  payment  does  not  apply  where  creditor  abandons  pre- 
vious security,  II.,  1267. 

agreement  to  take  bill  or  note  in  payment  need  not  be  express,  II., 
1268. 

all  the  circumstances  may  be  looked  to,  II.,  1268. 

misrepresentation  of  debtor  as  to  solvency  of  parties  to  bill  or  note  is 
fraud  upon  creditor,  II.,  1269. 

it  is  sufficient  defence  to  action  on  a  debt  to  plead  delivery  of  note  or 
bill  for  amount  payable  to  order  or  bearer,  II.,  1270. 

if  paper  payable  to  agent  without  authority,  it  is  not  payment,  II.,  1270. 

if  bill  of  third  person,  taken  by  direction  of  debtor,  is  dishonored,  lia- 
bility revives,  II.,  127 1. 

no  notice  of  dishonor  is  necessary  in  such  case,  II.,  1271. 

other  cases,  II.,  1271. 

2.  Suspension  of  original  debt  by  taking  bill  or  note,  II.,  1272. 

debt  is  suspended  until  dishonor  of  bill  or  note,  II.,  1272. 

upon  dishonor  for  non-acceptance  or  non-payment  debt  revives,  II., 
1272. 

and  creditor  may  retain  and  collect  it,  or  proceed  on  original  cause  of 
action,  II.,  1272. 

if  debtor  fails  to  perform  entire  agreement,  there  is  no  suspension  of 
debt,  II.,  1273. 

it  is  better  to  have  written  agreement  as  to  effect  of  taking  bill  or  note, 
II.,  1273. 

remedy  on  sealed  instrument  not  suspended  by  bill  or  note,  II.,  1274. 

even  though  judgment  be  gotten  on  the  bill  or  note,  II.,  1274. 

taking  bill  or  note  for  arrears  of  rent  does  not  prevent  distress  for  same, 
II.,  1274. 

taking  forged  bill  or  note  does  not  discharge  original,  although  sur- 
rendered up,  II.,  1274. 

nor  is  indorser  of  original  discharged  if  fixed  by  notice,  II.,  1274. 

usurious  security  stands  on  same  footing  as  forged,  II.,  1274, 

3.  Rights  and  duties  of  holder  of  bill  or  note  taken  in  conditional  payment, 

II.,  1275. 

in  suit  on  original  cause  of  action  must  produce  or  account  for  bill  or 
note,  II.,  1275. 

if  note  lost  and  negotiable,  suit  must  be  in  equity,  II.,  1275. 

if  draft  on  third  party  given  on  conditional  payment,  creditor  must 
present  it  duly,  and  give  notice  of  dishonor,  II.,  1276. 

default  in  either  respect  makes  loss  fall  on  creditor,  II.,  1276. 

same  rule  when  creditor  takes  paper  by  indorsement,  II.,  1276. 

if  bill  or  note  given  as  collateral  security,  creditor  may  pursue  his  rem- 
edy on  the  collateral  and  on  principal  debt  at  same  time,  XL,  1276. 

whether  creditor  loses  original  rightof  action  when  in  default  as  to  pre- 
sentment or  notice,  II.,  1276. 

conflict  of  authorities,  II.,  1277. 


or  ,  T-KTTM7V  References  are  to 

0O4  IJNUJiX.  paragraphs  marked%. 

CONDITIONAL  AND  ABSOLUTE  Y kX'S\YM1—conti7iued. 

if  transferrer  indorse  as  collateral  security  merely,  loss  of  creditor  lim- 
ited  to  damage  occasioned  by  his  negligence,  II.,  1277a. 

when  debtor  transfers  bill  or  note  to  creditor  by  delivery,  he  is  not  en- 
titled to  require  strict  presentment  and  notice,  II.,  1278. 

he  is  bound,  however,  to  use  due  diHgence,  II.,  1278.    ^ 

debtor  in  such  cases  must  show  laches  of  creditor,  II.,  1278. 

CONDITIONAL  INDORSEMENT.     See  INDORSEMENT,  and  424, 

CONFEDERATE  STATES. . 

accorded  belligerent  rights,  49. 

war  between,  and  United  States,  gave  rise  to  numerous  peculiar  cases, 

49- 

effect  of  bill  or  note  payable  "  six  months  after  peace  is  declared  be- 
tween C.  S.  and  U.  S.,"  49. 

similar  cases,  49. 

term  "  dollars  "  used  in,  during  war,  explainable  by  parol  testimony,  87. 

stamp  act  of  U.  S.  held  not  applicable  in,  during  war,  127. 

during  war  citizens  of,  alien  enemies  to  citizens  of  United  States,  218, 
219. 

effect  of  war  between,  and  U.  S.,  as  excuse  for  delay  in  presentment 
and  notice,  218. 

CONFLICT  OF  LAWS.    See  Federal  Courts. 

each  State  sovereign  under  Federal  Constitution,  863. 

each  State  foreign  as  to  others,  863. 

Federal  courts  enforce  contracts  between  citizens  of  different  States, 

864. 
general  principles  as  to  validity  and  interpretation  of  contracts,  865. 
comity  of  nations  leads  to  enforcement  by  one  country  of  laws  of  an- 
other, which  are  not  binding, /^r  se,  beyond  its  territory,  866. 
but  no  nation  should  enforce   laws   of  another  violating  its  0V..1,  or 

against  sound  morals  and  public  policy,  866. 
place  of  contract  regulates  its  validity,  interpretation,  and  legal  effect, 

867. 
note  void  where  made,  void  everywhere,  867. 
bill  indorsed  in  France,  but  not  passing  property  by  French  law,  would 

have  no  greater  effect  in  England,  though  sued   on  there,  where 

such  indorsement  sufficed,  867. 
bill  drawn  in  Michigan,  on  drawee  in  Illinois— held,  parol  acceptance 

binding  according  to  Illinois  law,  though  not  by  Michigan  law,  867. 
place  of  contract  is  place  of  delivery,  and  not  of  signature  or  date,  868. 
limitations  of  doctrine,  as  to  holder  without  notice,  869,  870. 
nature,  obligation,  and  terms  of  contract  ascertained  according  to  their 

meaning  and  effect  at  place  of  contract,  871,  872,  873. 
law  in  force  at  time  of  contract  controls  it,  871. 
defence  or  discharge  impeaching  validity,  governed  by  law  of  place  of 

contract,  874. 
discharge  Df  contract  by  law  of  place  where  it  was  not  made,  will  not 

be  valid  in  any  other  country,  875. 
under  what  circumstances  law  of  parties'  domicile  determines  cature  of 

contract,  876,  877,  878, 


References  are  to  TVmrv  QA - 

paragraphs  marked  %.  i.NUr^A.  ^O") 

CONFLICT  OF  'L\\^?>—cou1imced. 

place  where  contract  is  to  be  performed  is  real  place  in  regard  to  which 
it  was  made,  and  will  control,  879. 

thus  if  note  made  in  Massachusetts,  payable  in  Virginia,  it  would  not 
be  negotiable  unless  payable  at  bank,  although  if  payable  in  Massa- 
chusetts it  would  be  negotiable,  879. 

what  law  determines  negotiability,  879. 

law  presumes  paper  payable  where  made,  880. 

rule  as  to  paper  payable  generally  and  negotiated  in  foreign  country, 
881. 

remedy  on  contract  controlled  by  law  of  the  forum  where  suit  is 
brought,  882. 

this  rule  controls : 

as  to  who  may  sue,  883. 

the  time  within  which  suit  may  be  brought,  884. 

the  form  of  action,  885. 

the  extent  of  the  remedy,  886. 

the  competency  of  evidence,  887,  888. 

the  admissibility  of  set-off,  890. 

exemption  laws  are  part  of  remedy,  890. 

but  as  to  the  effect  of  evidence,  the  law  of  place  of  contract  controls. 
888. 

so  law  of  place  of  contract  fixes  the  relations  of  the  parties,  888,  S89. 

courts  take  no  judicial  notice  of  foreign  laws,  891. 

foreign  law,  whether  presumed  same  as  local,  891. 

presumption  as  to  the  common  law,  891^;,  892. 

real  estate,  in  respect  to  validity  and  form  of  conveyance  governed  by 
law  of  its  location,  893. 

whether  mortgage  in  one  State  to  secure  loan  in  another  is  governed  by 
law  of  place  where  property  is  located,  or  that  where  loan  is  to.be 
paid,  894. 

when  married  women  may  bind   separate  estate,  and  it  consists  of 
realty,  law  applicable  to  note  given  is  that  where  realty  situate,  894a. 
law  of  place  of  execution  controls  liability  of  maker  of  note,  895. 
same  rule  as  to  acceptor  of  bill,  896. 
and  letters  of  credit,  897. 

liability  of  drawer  of  bill  and  of  indorser  of  bill  or  note  different  from 

that  of  maker  or  ^ceptor,  895. 
as  to  maker  of  note,  895. 
as  to  acceptor  of  a  bill,  896. 

contract  of  drawer  is  to  pay  at  place  where  bill  is  drawn,  898. 
rate  of  interest  that  of  place  where  bill  drawn,  898. 
indorser  undertakes  to  pay  at  place  of  indorsement,  899. 
even  though  note  expressly  payable  elsewhere,  899,  900. 
doctrine  as  to  liability  of  drawer  and  indorser  subject  of  criticism,  901. 
whether  transferrer  is  liable  as  indorser  or  as  assignor,  determined  bv 

law  of  place  of  transfer,  902. 

questions  as  to  what  law  determines  validity  and  effect  of  transfer,  903. 
transfer  in  country'  where  note  is  made  not  of  same  efficacy  where  suit 
is  brought,  904. 

Vol.  II.-55 


Q  A  A  T  -M  rM7  V  References  are  to 

OOO  INDLX.  Paragraphs  mar ked%. 

CONFLICT  OF  l^PC^S—conftmied. 

suit  can  not  be  brought  anywhere  as  between  trattsferrer  and  trans- 
feree on  instrument  made  in  one  country  and  transferred  in  another, 

if  transfer  is  not  valid  by  law  of  latter  place,  905. 
as  between  transferee  and  maker,  law  of  place  of  contract  prevails,  905. 
each  holder  has  same  rights  against  maker  or  acceptor  as  original 

payee,  906. 
if  note  is  non-negotiable  where  made  and  negotiable  where  indorsed, 

right  of  action  by  indorsee  against  maker  is  controlled  by  law  of 

forum,  907. 
what  constitutes  due  presentment  is  governed  by  law  of  place  in  which 

bill  is  drawn,  or  at  which  note  is  payable,  908. 
protest  should  be  at  time,  in  manner,  and  by  persons  prescribed,  where 

bill  not  accepted  and  note  refused  payment,  909. 
notice  distinguished  in  America  from  presentment  and  protest,  910. 
in  England,  placed  on  same  footing,  911. 
latter  view  adopted  text,  912. 

general  principle  as  to  revenue  laws  of  different  countries,  913. 
if  unstamped  bill  or  note  be  absolutely  void  by  law  of  place  where 

made,  it  is  void  everywhere,  914. 
contra,  where  it  is  only  inadmissible  in  evidence,  914. 
whether  stamp  be  necessary  to  render  contract  valid,  determined  by 

law  of  place  where  made,  914,  915. 
amount  to  which  party  entitled  depends  upon  currency  of  place  where, 

according  to  contract,  the  debt  is  payable,  916. 
must  be  calculated  by  real,  not  nominal,  par  of  exchange,  916. 
different  rule  in  some  States,  916. 

rate  of  interest  determined  by  law  where  bill  or  note  expressly  or  im- 
pliedly to  be  paid,  918. 
if  no  place  specified,  interest  computed  by  law  of  place  where  drawing, 

making,  indorsement,  or  acceptance  was,  918. 
interest  as  much  part  of  debt  as  principal,  919. 
may  be  allowed  as  damages,  though  note  payable  "  without  interest," 

919. 
distinction  between  drawer  of  bill  and  indorser  of  bill  or  note,  920. 
rule  as  to  interest  applies  to  "  damages,"  921. 
what  rate  of  interest  surety  bound  for,  921. 
election  of  law  of  place  as  to  interest,  922. 

1.  Where  contract  is  valid  in  on^lace  and  invalid  in  another, 

922. 

2.  Where  rate  of  interest  greater  than  allowed  at  the  place 

where  contract  made,  but  allowable  at  place  of  payment, 
923- 

3.  If  usurious  at  both  places,  law  of  place  where  made  governs 

legal  consequences  of  usury,  924. 
when  contract  is  a  mere  shift  to  cover  usury,  it  is  void  everywhere,  925, 
when  corporation  may  plead  usury,  925, 
CONSIDERATION     OF     NEGOTIABLE     INSTRUMENTS.        See    Re- 
NEWAL ;  Bills  of  Exchange  ;  Bona  Fide  Holder. 
I.    What  instruments  import  consideration,  160. 
meaning  of  consideration,  160. 
the  phrase  "-valuable  consideration,"  160. 


Re/eirences  are  to  INDEX.  S67 

paragraphs  marked  \.  ' 

CONSIDERATION  OF  NEGOTIABLE  INSTRUMENTS— <r^«/«««?^. 

by  common  law,  promise  without  invalid,  i6o. 

most  ancient  exception,  instrument  under  seal,  160. 

negotiable  instruments  ^rz;««/ii«V  import,  160. 

and  it  is  unnecessary  to  aver  or  prove  consideration  of  them,  161. 

if  bill  payable  out  of  particular  fund,  it  does  not  per  se  import  consid- 
eration, 161. 

nor  if  payable  on  condition,  or  in  other  thing  than  money,  161. 

words  "  value  received  "  import,  161. 

if  terms  consistent  with  want  of  consideration,  it  does  not  import  it, 
161. 

if  order  imply  funds  in  drawee's  hands,  his  acceptance  is  admission, 
161. 

at  common  law,  action  not  sustainable  on  note  as  importing  debt,  162. 

and  plaintiff  must  declare  in  assumpsit,  and  aver  and  prove  considera- 
tion,  162. 

note  might  be  given  in  evidence,  162. 

by  statute  of  Anne,  action  of  debt  sustainable  on  note  without  alleging 
or  proving  consideration,  162. 

statutes  and  decisions  in  United  States,  163. 

burden  of  proof,  and  preponderance  of  evidence,  164. 

against  indorsee,  party  prior  to  indorser  must  not  only  show  want  or 
failure  of  consideration  between  himself  and  his  successor,  but  also 
between  indorser  and  indorsee,  165. 

plaintiff  not  obliged  to  prove  consideration  by  proof  of  party  antece- 
dent to  indorser,  either,  that  paper  was  executed  without  considera- 
tion, 165. 

or  for  accommodation,  165. 

or  was  intended  as  a  gift,  165. 

or  for  an  erroneous  balance,  165. 

subsequent  failure  of  consideration  stands  on  same  footing,  165. 

rule  as  to  accommodation  paper,  165. 

fraud  and  illegality  of  original  consideration  shifts  burden  of  proving 
botta  fide  ownership  for  value  on  plaintiff,  166. 

defendant  need  not  give  plaintiff  notice  to  prove  consideration,  167. 

obsolete  rules  on  the  subject,  167. 

consideration  of  guaranties.     See  Guaranty,  and  II.,  1765  to  1767. 

2.  By  what  laws  consideration  governed,  168. 

laws  in  force  at  time  paper  is  executed  govern  it,  168. 

laws  of  State  or  country  where  paper  executed  are  applied  to  it,  169. 

the  comity  of  nations,  as  to.     See  Conflict  of  Laws. 

principles  applied  to  Confederate  contracts,  170,  171,  172,  173. 

3.  Betweefi  what  parties  cottsideration  open  to  inqitiry,  174. 

between  drawer  and  acceptor,  174. 

drawer  and  payee,  generally,  174. 

maker  and  payee,  174. 

indorser  and  immediate  indorsee,  174. 

but  want  of  failure  of  consideration  can  not  be  shown  in  suit  by  in- 

dorsee  against  maker,  174. 
nor  indorsee  against  prior,  but  not  immediate  indorser,  174. 


8A  Q  T  M  n  -p  Y  References  are  to 

0  O  1  IN  U  h,  A ,  paragraphs  marked  % 

CONSIDERATION  OF  NEGOTIABLE  INSTRUMENTS— /:fl«//««^^. 

payee  against  acceptor,  174. 

in  the  last  class  of  cases,  defendant  to  prevail  must  ctiallenge 
{a)  the  consideration  which  he  received  originally,  and 
(p)  the  consideration  which  plaintiff  gave  subsequently,  174. 

who  are  immediate  parties  to  paper  not  always  disclosed  on  its  face, 

175- 
instances  where  apparently  remote  are  really  immediate  parties,  176. 

between  parties  privy,  it  is  good  defence 
that  bill  or  note  was  lost  or  stolen,  177. 
that  it  was  executed  under  duress,  177. 
or  under  fraudulent  misrepresentation,  177. 
or  for  fraudulent  or  illegal  considerations,  177. 
other  instances,  177. 

renewal  subject  to  same  defence  as  original,  177. 
consideration  of  bills  purchased  for  remission  of  money,  178. 
four  parties  contemplated  in  such  transaction,  178. 
how  such  bills  differ  from  others,  178. 
4.  Whaf  are  sufficient  and  legal  cotmderatzofis,  ijg. 
love  and  affection  insufficient,  179. 

note  made  as  gift  can  not  be  enforced  against  donor  or  his  estate,  180. 
nor  can  indorsee  enforce  against  indorser  note  indorsed  as  a  gift,  180. 
evidence  as  to  what  was  gift,  180. 
pecuniary  circumstances  not  evidence  of  want  of,  180, 
gift  of  negotiable  instrument  of  third  party  is  not  negotiation  in  usual 

course  of  business,  181. 
if  donee  transfer  it  for  less  than  value,  his  indorsee  can  only  recover 
from   prior  party   having  defence  against  donor,  what  he  himseli 
paid,  181. 
but  donee  or  his  indorsee  might  recover  whole  amount  against  party 

without  defence  against  donor,  181. 
moral  obligation  insufficient,  182. 
but  sufficient  if  coupled  with  precedent  duty,  182, 
thus  promise  of  adult  to  pay  for  necessaries  furnished  in  infancy  suf- 
fices, 182. 
so  promise  to  pay  debt  discharged  by  bankruptcy,  182. 
or  barred  by  limitation,  182. 
or  voluntary  release,  183. 

where  contract  viodable,  bill  or  note  to  pay  it  is  valid,  182. 
generally  otherwise,  if  it  were  void,  182. 
if  usury  law  repealed,  note  to  pay  debt  with  usurious  interest  is  valid, 

182. 
so  note  to  discharge  contract  void  under  statute  of  frauds,  182. 
what  promise  of  bankrupt  does  not  revive  liability,  182. 
money  paid,  advances  made,  credit  given,  work  and  labor  done,  are 

sufficient  considerations,  183. 
so  receiving  bill  or  note  for  collection,  183-2. 
balance  upon  account  with  banker  consideration  for  bills  and  notes 

deposited  as  securi.ty,  183a. 
rule  as  to  precedent  debt,  184. 


References  are  to  i  v  i^  i-  v  Q  /^  ^ 

paragraphs  marked  §.  1  .M^  i:.  A .  O  O  9 

CONSIDERATION  OF  NEGOTIABLE  INSTRUMENTS— ^tf«//««^^. 

rule  as  to  collateral  security,  184. 

debts  of  third  persons,  185. 
note  by  widow  to  husband's  creditor  without  consideration,  186. 
Massachusetts,  Marj'land,  and  Alabama  cases,  186. 
forbearing-  to  sue,  or  guaranty  or  assumption  of  debt,  valid  considera- 
tion, 185. 

cross-notes  and  acceptances  sufficient  considerations  for  each  other,  187. 

so  agreement  between  accommodation  endorsers  to  share  losses,  187. 

other  and  miscellaneous  instances,  187. 

marriage  and*  promise  to  marry  a  good  legal  consideration,  187a. 

professional  and  other  services  sufficient,  188. 

service  to  procure  enactment  of  law  illegitimate,  188. 

rule  as  to  service  to  procure  pardon,  I08. 

5.  Accommodation  bills  and  notes,  189. 

between  accommodation  and  accommodated  parties  without  considera- 
tion, 189. 

but  as  to  remote  parties,  accommodation  party  must  impeach  their 
title,  189. 

payee  may  necover  against  accommodation  maker  or  acceptor,  although 
he  knew  it  to  be  accommodation  paper  when  he  took  it,  190. 

amount  of  recovery  by  accommodation  indorser  against  maker,  190. 

if  member  of  firm  obtains  accommodation  note  payable  to  himself,  and 
indorses  it  to  third  party,  who  reindorses  it  to  firm,  it  can  not  recover 
against  maker,  190. 

until  negotiated,  any  party  to  accommodation  paper  may  withdraw,  191. 
accommodation  indorser  for  payee  of  note  made  for  his  accommoda- 
tion, is  subject  to  obligations  and  rights  of  ordinary  indorser,  192, 

if  obliged  to  take  up  such  note,  accommodation  maker  can  not  set  up 
fraud,  192, 

6.  Fraudulent  considerations,  193. 

"  fraud  cuts  down  everything,"  193. 

inadequacy  of  consideration  an  element  of  evidence  of  fraud,  193. 

when  consideration  must  be  returned,  193. 

fraud  on  third  parties  vitiates  consideration,  194. 

fraud  in  composition  with  creditors  where  one  stipulates  for  all  of  his 
debt,  194. 

whether  maker  of  note  may  plead  fraud  upon  others,  194. 

7.  What  are  illegal  considerations,  195. 

those  which  violate  rules  of  religion,  morals,  or  public  decency,  195. 
those  which  violate  public  policy,  195. 
numerous  instances,  196. 

when  instrument  void  by  statute,  no  one  can  recover  on  it  against  orig- 
inal contracting  parties,  197. 
but  bona  fide  holder  may  recover  against  indorser,  197. 

policy  of  making  negotiable  paper  void  in  all  hands,  no  longer  prevails 
in  England,  197. 

but  does  in  many  of  the  States,  197. 

various  statutory  provisions  considered,  198. 

if  paper  capable  of  legal  interpretation,  it  must  be  so  construed,  198. 


8T  x'  TMT  -v  References  a  re  to 

70  liNiJtX.  paragraphs  marked %. 

CONSIDERATION  OF  NEGOTIABLE  INSTRUMENTS— r^«//««^^. 
patent  right,  as  consideration,  199(2. 
effect  of  knowledge  of  illegal  use  of  article  sold,  200. 
8.  Partial  want,  failure,  and  illegality  of  cotisideration,  201. 

when  defendant  can  go  into  question  of  consideration,  he  may  show 

partial  as  well  as  total  want  of  it,  201. 
when  breach  of  warranty  of  value  of  article  may  be  pleaded  in  action 

on  paper  given  in  payment,  202. 
total  failure  of  consideration  is  good  defence,  203. 
and  partial  failure  is  good  pro  tanto,  203. 
but  partial  failure  must  be  distinct  and  definite,  203. 
partial  illegality  of  consideration  distinguishable  from  partial  failure,  204. 

vitiates  bill  or  note  "  z;z  toto,"  204. 
mortgage  to  secure  paper  based  on  partial  illegal  consideration  is  void, 

204. 
if  legal  portion  distinctly  severable,  party  may  recover  it  by  action, 

though  not  on  bill  or  note,  204. 
where  legal  part  of  consideration  exceeds  amount  of  note,  it  is  valid, 

204. 
decision  where  bill  given  in   renewal  of  others,  one  of  which  was 

illegal,  204. 
renewal  bills  and  notes  open  to  same  defence  as  original,  204,  205,  206. 
how  illegality  of  consideration  may  be  purged,  207. 

CONSOLIDATION  OF  RAILROADS. 

effect  of  on  municipal  subscriptions,  II.,  1523^. 

CONSTITUTION.    See  Bills  of  Credit,  and  II.,  171 5. 

forbidding  legislatures  to  subscribe  to  certain  public  purposes,  does  not 
forbid  their  conferring  such  power  on  municipalities,  II.,  1524. 

the  converse  is  equally  true,  II.,  1524. 

of  U.  S.  prohibits  States  from  emitting  bills  of  credit,  II.,  17 15. 
See  Bills  of  Credit,  II.,  171 5. 

of  U.  S.  prohibits  States  from  impairing  obligation  of  contracts,  II.,  970a. 

therefore  State  can  not  change  law  of  notice  as  to  existing  instru- 
ments, II.,  970a. 

what  is  considered  to  impair  obligation  of  contracts,  II.,  970a. 

CONTRACTING  CAPACITY.    See  Capacity. 

COlf^TRACTS,  OBLIGATION  OF. 

can  not  be  impaired  by  States,  II.,  970. 

CONTRIBUTION.    See  Principal  and  Surety. 
whether  indorser  bound  for,  704. 
when  cosureties  bound  for,  II.,  I340»  I34l- 

CONVERSION. 

who  may  be  sued  for,  748a.     II.,  1468,  1469. 
whether  finder  may  sue  for,  II.,  1674. 

COPARTNERSHIP.     See  PARTNERS,  and  350  to  375. 


References  are  to  1 N  D  l" X .  "  7  ^ 

paragraphs  marked  §. 

CORPORATIONS  AS   PARTIES   TO   NEGOTIABLE   INSTRUMENTS. 
5^v  Coupon  Bonds;  Municipal  Corporations  ;  Municipal 
Bonds  ;  Drafts  or  Warrants. 
I    Power  of  corporation  to  execute  negotiable  instrttment,  first  inquiry,  377- 
corporate  act  beyond  its  powers  is  called  "  ultra  vires,"  and  is  void.  377. 
definition  of  corporation  by  Chief-Justice  Marshall,  378. 
express  and  implied  powers  of,  378. 

powers  must  be  express  or  incidental  to  its  existence,  378. 
nature  of  private  and  public  corporations,  379. 
trading  and  banking  corporations  may  issue  bills  and  notes,  380. 
corporation  to  supply  city  with  water,  can  not  in  England,  380. 
nor  can  railway  company,  380. 
authorities  in  United  States  liberally  uphold  corporate  powers  to  issue 

negotiable  instruments,  381. 
whenever  it  can  contract  debt,  may  give  bill  or  note  in  payment,  381. 
views  of  Parsons,  381. 

in  this  country  these  principles  regarded  as  settled,  382. 
first,  that  corporation  may  contract  like  individual,  when  necessary  or 

convenient  in  its  legitimate  business,  382. 
second,  when  it  may  contract  debt,  it  may  borrow  to  pay,  382. 
•bird,  when  it  may  contract  debt  or  borrow  money,  it  may  give  bill  or 

note  in  payment,  382, 
Vice-chancellor  Sandford's  views,  382. 

in  United  States,  it  has  been  held  that  debts  may  be  contracted  and 
money  borrowed  by  companies  incorporated  to  build  railroads,  3«2. 

383. 
to  build  plank-roads,  383. 
to  hold  real  estate  and  erect  buildings,  383. 
have  power  to  hold  property  for  religious  purposes,  383. 
may  borrow  money  to  operate  flouring  mill,  383. 
build  a  monument,  383. 
buy  and  sell  lands  or  goods,  383. 
advance  money  on  goods,  383. 
manufacture  glass,  383. 
carry  on  building  fund  association,  383. 
may  take  bill  or  note  for  debt  due  it,  384. 
but  can  not  generally  loan  out  funds,  384. 

prohibition  of  banking  powers  is  prohibition  of  making  discounts,  384. 
insurance  companies  can  not  execute  negotiable  instruments,  384. 
corporations  with  power  to  take  bills  and  notes  may  indorse  them,  385. 
borrow  money  may  borrow  bill  or  note  and 
indorse  it,  385. 
power  to  "sell  and  convey"  bills  and  notes  implies  power  to  indorse, 

385- 

when  corporation  has  power  to  execute  negotiable  instruments  they 
ai-e  presumed  to  have  been  executed  in  scope  of  its  business,  380. 

can  not  impliedly  execute  or  indorse  or  guarantee  paper  for  accommo- 
dation, 386. 

but  bona  fide  holder  of  its  accommodation  paper  without  notice  may 
recover,  386. 


872  INDEX.  .  ^'■^'''^"""''J'l/s. 

I  paragraphs  marked  %, 

CORPORATIONS  AS  VhKllY.'^,— continued. 

il  corporation  bound  by  paper,  agent  or  officer  exceeding  his  powers 

can  not  be  sued  by  holder,  386. 
accommodation  transaction  not  presumed,  386. 
corporator  can  not  plead  illegality  of  corporation,  386. 
2,  Authority  of  agent  to  bind  corporation,  387. 

if  charter  prescribes  what  agents  shall  sign  for  corporation,  none  others 

can,  387. 
if  charter  prescribes  what  forms  must  be  pursued,  they  must  be  followed, 

387. 
instances,  387. 

substantial  compliance  with  charter  or  statute  suffices,  387. 
instances,  387. 
whether  or  not  parties  so  describing  themselves  are  really  officers  or 

agents  of  corporations,  388. 

best  evidence  of  agency  is  record  of  appointment,  388. 

officers  acting  and  recognized  by  corporation  maybe  regarded  as  such, 
388. 

common  law  doctrine  that  corporation  must  contract  under  seal  obso- 
lete, 388. 
whether  or  not  officer  or  agent  may  do  particular  act,  389. 
general  agents  bind  corporation  within  scope  of  authority,  389. 
special  agents  can  only  act  within  special  authority,  389. 
official  agents  may  bind  corporations  within  usual  sphere  of  duties,  389. 
doctrine  of  United  States  Supreme  Court  on  the  subject,  389, 
cases  illustrating  it,  389,  390. 

corporation  held  bound  where  president  of  railroad  overissued  stock 

certificates,  390. 
cashier  issued   false  certificate  of  de- 
posit, 390. 
cashier  and  teller  wrongfully  certified 
checks,  390. 

where  treasurer  issued  fraudulent  stock  certificate,  390. 

where  one  of  two  innocent  parties  must  suffer,  loss  falls  on  one  who 
created  trust,  391. 

this  doctrine  applies  between  original  parties  and  also  in  favor  of  in- 
dorsers  and  holders  without  notice,  391. 

if  insti-ument  all  right  on  its  face,  it  is  binding  in  favor  of  all  holders 
bona  fide  without  notice  of  defect,  391. 

what  officers  have  implied  power  to  bind  corporation  as  party  to  nego- 
tiable instruments,  392. 

cashier  of  bank  may  indorse  for  collection,  392. 

but  can  not  transfer  non-negotiable  paper,  judgments,  or  personal  prop- 
erty, 392. 

may  draw  bills  and  checks  on  funds  of  bank,  392. 

may  certify  checks,  392. 

receipt  for  and  issue  certificates  of  deposit,  392. 

borrow  money  and  issue  certificates  of  deposit,  392. 

accept  bills.     But  query  ?  392. 

buy,  sell,  and  indorse  bills  and  notes,  392. 

but  can  not  release  debt,  392,  393,  394,  395,  396,  397. 


{ 


References  are  to  T V n F  v  %*1 1 

Paragraphs  marked  §.  -^-^  ^  ^'^'  "/J 

CORPORATIONS  AS  Yk^T\YJ~>— continued. 

or  execute  paper  for  accommodation,  392. 

but  accommodation  paper  would  be  valid  to  bona  fide  holder  without 
notice,  392. 

president  of  bank  may  take  charge  of  its  litigation,  393. 

receipt  for  deposits,  393. 

can  not  release  a  debt,  392,  393. 

query,  if  he  may  draw  checks,  393. 

if  president  of  mining  company  may  bind  it  by  note,  393. 

bank  president  by  authority  of  directors  may  indorse  bills  or  notes  pay- 
able to  bank,  393. 

semble,  he  may  indorse  bank's  negotiable  paper,  394. 

effect  of  usual  course  of  business  as  to  president  of  insurance  company, 
394- 

power  of  treasurer,  394. 
secretary,  396. 

allegation  that  corporation  contracted  by  treasurer  or  other  officer  suffi- 
cient, 394. 

president  and  cashier  of  bank  can  not  release  its  debts,  395. 

officers  have  no  implied  authority  beyond  sphere  of  official  duty,  396. 

their  authority  rests  on  general  usage,  396. 

joint  authority  to  two  or  more  officers  must  be  exercised  jointly,  397. 

if  all  agree  to  the  act,  it  may  be  carried  out  by  paper  signed  by  one 
397. 

3.  Interpretation  of  instrument,  398. 

if  marks  of  official  character  predominate,  paper  is  deemed  to  be  cor- 
porate, 398. 

corporations  may  adopt  and  use  several  names,  399. 

misnomer  immaterial  if  corporation  identified,  399. 

firm  may  style  itself  as  corporation,  399. 

and  may  use  firm  style  or  corporate  name,  399. 

•corporation  may  adopt  and  use  agent's  name,  399. 

illustration,  399a. 

as  to  who  is  maker  of  a  Jtofe,  400. 

corporation  name  should  be  signed  after  words  importing  corporate 
promise,  400. 

if  officer  or  agent  add  "  for  company  "  it  suffices,  400. 

if  obligatory  tenor  of  paper  indicate  corporate  obligation,  official  signa- 
ture will  be  deemed  affixed  for  corporation,  400. 

4.  Effect  of  words  : 

"  I  promise — signed  for  A.  B.  &  Co.,  C.  D.  (the  agent),"  401. 

"We,  the  subscribers,  jointly  and  severally  promise  " — "signed  for 
A.  B.  &  Co.,  C.  D.,"  401. 
>       "  We  jointly  and  severally — signed  A.  &  B.  for  C.  D.,"  401. 

"  The  President  and  Directors  of  the  A.  B.  Company  promise,"  402. 
other  instances,  402. 
addition  of  official  character  at  foot  of  instrument  not  alone  sufficient 

to  indicate  intention  to  bind  corporation,  403. 
but  will  be  deemed  an  earmark  or  descriptio  persona,  403. 
numerous  cases,  403. 


Q I-,  A  T\T\T?-v  References  are  to 

074  IxN  D EX.  ^aragra^hs  marked  §. 

CORPORATIONS  AS  VA.WI\Y,S— continued. 

Parsons'  views,  404. 

official  designation  m  body  of  instrument,  often  deemed  sufficient  to 
indicate  that  instrument  binds  corporation,  405. 

numerous  cases,  406.  ^ 

English  and  Kentucky  cases,  406. 

sometimes  additional  indications  of  intent  to  bind  corporation  are  suffi- 
cient, 407. 

English  and  Indiana  cases,  407,  408. 

same  principle  applies  to  drawer  of  bill  as  to  maker  of  note,  409. 

where  direction  is  to  place  to  official  account  on  bill,  it  does  not  alofn 
make  it  bill  of  corporation,  410. 

but  direction  to  place  to  particular  account  is  often  material  indication, 
411. 

instances,  411. 

can  be  but  one  acceptor  of  bill  unless  for  honor,  412. 

who  is  drawee  of  bill,  often  satisfies  inquiry  who  is  drawer,  412. 

if  bill  be  drawn  on  drawee  individually,  he  can  not  by  official  designa- 
tion, or  words  of  procuration,  bind  corporation  as  acceptor,  412. 

and  if  bill  be  drawn  on  corporation  and  accepted  by  officer  or  agent, 
with  appropriate  designation,  only  corporation  will  be  bound,  412. 

if  drawee's  full  official  character  be  added  to  his  designation,  he  is 
nevertheless  bound  personally  by  acceptance,  412. 

English  cases  strongly  sustaining  this  doctrine,  413. 

in  United  States  authorities  conffict,  413. 

if  drawee  be  addressed  as  "A.  B.,  agent,"  and  accept  in  like  manner, 
he  is  personally  bound,  414. 

if  drawee  addressed  personally  as  H.,  and  he  writes  across  bill,  "Ac' 
cepted ;  Empire  Mills,  by  H.,  Treasurer"  he  is  not  personally  bound, 
because  it  is  not  his  acceptance,  414. 

nor  is  company  bound,  because  it  is  not  drawee,  414. 

as  to  whether  corporation  or  its  agent  is  payee  or  indorser,  415, 

if  official  designation  added  to  agent's  name,  he  is  nevertheless  deemed 
personally  the  payee,  415. 

so  held  where  payee  designated  as  "A.  B.,  Treasurer  of  C.  D.  Com- 
pany," 315. 

and  as  "  A.  B.,  for  value  received  of  C.  D.  Company,"  315. 

contrary  decisions  in  New  York,  315. 

if  corporation  be  payee,  and  indorsement  be  by  officer  with  official 
designation,  he  is  deemed  to  act  for  company,  416. 

instances,  416. 

cashiers  of  banks  exceptions  to  general  rule,  417. 

designation  of  "cas.,"  "cash.,"  or  "cashier,"  added  to  name  intimates 
that  signer  acts  for  bank,  417. 

parol  evidence  admissible  in  some  cases  to  explain  obscure  and  am- 
biguous instruments,  418. 

as  between  original  parties,  it  may  be  shown  who  was  intended  to  be 
bound  on  equivocal  and  uncertain  instruments,  418. 

instances,  418. 

doctrine  of  U.  S.  Supreme  Court,  419. 


paV/^i;-"ztk:i%.  INDEX.  875 

COSTS.     See  EXCHANGE. 

what  recoverable,  II.,  1459. 

when  attorney's  fees  recoverable,  62. 

COUPON  BONDS.    5^^  Municipal  Corporations;  Corporations;  and 
Municipal  Bonds. 

1.  Definiiion  and  nature  of ,  II.,  i486. 

individuals,  private  and  municipal  corporations,  and  governments  may- 
issue  them,  II.,  1487. 
"coupon  bond"  is  complete  in  itself,  but  consists  of  obligation  to  pay 

money,  with  coupons  annexed  for  interest,  II.,  1488. 
meaning  of  "  coupon,"  II.,  1489. 
may  be   severed  from  bond,  and  pass  as  separate  and  independent 

security,  II.,  1489. 
coupon  serves  as  voucher  when  interest  is  paid,  but  contract  is  in  bond, 

II.,  1444- 
authority  to  issue  bond,  implies  coupons  also,  II.,  1489. 
coupons  are  assimilated  to  promissory  notes,  II.,  1490. 
not  intended  for  indefinite  circulation,  II.,  1490. 
are  not  intended  for  acceptance  when  drawn  on  banks,  II. 

1490^. 
not  entitled  to  grace,  II.,  1490(3. 
conflicting  decisions,  II.,  1490,  1506. 

are  simply  notes  payable  on  very  day  of  maturity,  II.,  1490a. 
bonds  and  coupons  not  bills  of  credit,  II.,  1491. 
coupon  is  part  of  mortgage  debt,  when  bond  is,  II.,  1491a. 
all  of  same  series  share  ratably,  II.,  1491a. 
if  bond  be  repudiated,  original  consideration  revives,  II.,  1491^. 
the  bonds  of  a  county  are  debts,  II.,  1491^. 

2.  Formal  farts  of  bo7ids  and  coupons,  II.,  1492. 

how  such  instruments  are  generally  framed  and  signed,  II.,  1492a. 
expressions  in  coupons  immaterial  if  they  indicate  by  whom  due,  and 
*  amount  and  time  of  payment,  II.,  1493. 

words  of  promise  in,  not  essential,  II.,  151 1. 
coupons  sometimes  in  form  of  notes,  II.,  1493. 

checks,  II.,  1493. 

drafts  or  bills,  II.,  1493. 

ticket,  token,  or  warrant,  II.,  1493. 
in  all  such  cases  are  authority  to  receive  interest,  and  may  be  sued  on 

without  producing  bond,  II.,  1494,  1509,  1510,  1511. 
interest  on  bond  not  recoverable  without  producing  coupons,  II.,  1509. 
no  payee  need  be  named  in  coupon,  II.,  1494. 
payee  may  be  blank,  II.,  1499. 
bond  need  not  be  sealed,  II.,  1495,  1501. 
idea  that  States  and  corporations  must  contract  under  seal  obsolete, 

II.,  1495,  "501- 
coupons  and  bonds  may  be  payable  to  bearer,  or  to  order,  or  to  holder 

or  to  certain  party,  or  his  assign,  II.,  1496. 
if  bond  contain  no  negotiable  words,  not  negotiable,  II.,  1496,  iscxj. 
may  be  payable  at  particular  place  in  or  out  of  State,  II.,  1497. 


O.71C  TxmTTY  References  are  to 

^70  INDEX.  paragrai,hs  marked  %, 

COUPON  V>OY^T)?)—conHmied. 

must  be  delivered,  II.,  1498. 

if  stolen  incomplete,  not  binding,  II.,  1498. 

otherwise,  if  complete,  II.,  1498. 

if  payee  blank,  citizen  of  foreign  State  may  insert  his  name  and  sue  in 
Federal  court,  II.,  1499. 

if  coupons  refer  to  bonds,  holder  chargeable  with  notice  of  what  bonds 
contain,  II.,  1499. 

figures  marking  series  not  part  of  bonds,  II.,  1499^. 

indorsement  of  bonds,  II.,  1499(5. 

where  bonds  prepared  for  issue  and  sale  promise  payment  in  lawful 
money  and  guaranteed  by  a  State,  II.,  I499(5. 

that  they  shall  be  paid  in  coin  subsequently  indorsed,  binds  only  cor- 
poration, II.,  1499^. 
3.  Negotiability  of  and  rights  of  Jiolder,  II.,  1500. 

bonds  and  coupons  with  negotiable  words  are  negotiable,  II.,  1500. 

bond  not  so  expressed  is  not  negotiable,  II.,  1500. 
necessarily  sealed,  II.,  1495. 

registered  bonds,  II.,  \y:>\b. 

the  provision  "  registered  and  made  payable  by  transfer  only  on  the 
books  of  the  company,"  II.,  1501^. 

does  not  of  itself  make  it  non-negotiable,  II.,  iz^oib. 

if  for  uncertain  sum  not  negotiable,  II.,  1502. 

holder  stands  on  same  footing  as  holder  of  bill  or  note,  II.,  1502. 
should  inquire  (i)  as  to  right  of  party  to  execute,  II.,  1502. 

(2)  as  to  right  of  agent  to  act  for  principal,  II., 
1502. 

(3)  as  to  formalities  being  complied  with,    II., 
1502. 

(4)  as  to  usury  in  inception,  II.,  1502. 
gross  negligence  will  not  defeat  purchaser  or  holder  of,  II.,  1503. 
rules  as  to  right  o{  bona  fide  holder,  II.,  1503. 

holder  with  notice  not  affected  if  his  transferrer  had  good  title,  II.,  1503. 

English  decisions  about  similar  instruments,  II.,  1504. 

coupon  becomes  due  on  very  day  of  maturity,  II.,  1505. 

after  maturity  is  dishonored,  and  purchaser  is  subject  to  equi- 
ties, II.,  1505. 

whether  entitled  to  grace,  II.,  1505. 

one  instalment  of  interest  being  overdue  does  not  disgrace  bonds  or 
other  coupons,  II.,  1506^. 

but  terms  of  bond  may  alter  this,  II.,  i5o6fl. 

holder  of,  presumed  to  be  bona  fide,  before  maturity,  and  without  no- 
tice of  defects,  II.,  1506. 

lis  pe7idens  does  not  apply  to  this  class  of  securities  before  maturity,  II., 
1 506^. 

coupons  need  not  be  presented  on  day  of  maturity  to  bind  maker,  II., 
1507. 
must  be  presented  in  reasonable  time  to  charge  guarantor, 
II.,  1507. 
meaning  of  words  making  coupon  payable  when  "  presented,"  "  sur- 
rendered," or  "delivered,"  II.,  1508. 


References  are  to  tmtm?-v  0»t"i 

^ragraphs  marked  §.  IJNWtX.  677 

COUPON  ^O^V>S—contimied. 

provision  by  statute  in  Alabama,  II.,  1 508a. 
4.  Action  on  negotiable  bonds  and  coupons,  II.,  1509. 

holder  of,  may  sue  in  his  own  name,  if  payable  to  bearer  or  holder, 

II.,  1509. 
interest  on  bond  can  not  be  collected  without  producing  coupon,  II., 

1509^. 
coupons  should  be  identified,  II.,  15 10. 

coupon  may  be  sued  on  without  producing  bond,  II.,  1501,  1506,  1509, 

1509^,  1 5 10,  151 1, 
payment  or  surrender  of  bond  does  not  affect  coupon,  II.,  15 10. 
words  of  promise  in  coupon  immaterial,  II.,  1512. 
coupons  admissible  in  evidence,  under  money  counts,  II.,  1512a. 
aggregate  amount  of  coupons  determines  jurisdiction  of  Federal  courts, 

II.,  1512a. 

interest  on  coupons  recoverable  from  maturity,  II.,  15 13. 

contrary  decisions,  II.,  1513. 

prior  demand  of  payment  not  necessary  to  the  recovery  of  interest  on 
coupons,  II.,  1 514. 

semble,  as  to  exchange,  II.,  15 14. 

demand  at  particular  place  not  necessary  to  recover  interest,  II.,  1514. 

but  if  defendant  show  readiness  to  pay  at  such  place,  interest  is  abated, 
II..  1515- 

statute  of  limitations  applies  to  coupon  in  same  manner  and  time  as  to 
bond,  II.,  1516. 

but  runs  against  coupon  from  its  maturity,  II.,  1516. 

when  coupon  bonds  pledged  as  collaterals,  they  may  be  sold  after  de- 
mand and  notice,  II.,  15 17. 

debtor  entitled  to  notice  of  time  and  place  of  sale,  II.,  1517. 

but  if  he  has  knowledge,  no  formal  notice  is  necessary,  II.,  1517. 

when  negotiable  bonds  wrongfully  put  in  circulation,  purchaser  may 
recover  full  amount,  II.,  1517a. 

COVENANT  NOT  TO  SUE. 

not  to  sue  maker  or  acceptor  extinguishes  debt  as  to  them,  II.,  1291. 

and  discharges  drawer  and  indorsers,  II.,  1291. 

does  not  discharge  joint  party,  II.,  1291. 

g^ven  by  one  of  two  creditors  does  not  operate  as  release,  II.,  1291. 

not  to  sue  for  limited  time  will  not  effect  release  between  the  parties, 

unless  stipulated  that  it  may  be  pleaded  in  bar,  II.,  1291. 
but  will  discharge  sureties,  II.,  1291. 
not  to  sue  for  limited  time  is  not  discharge,  II.,  1291. 

COVERTURE.    See  Married  Woman. 

CROSS-NOTES  AND  ACCEPTANCES.    See  Consideration,  and  188. 

CROSSING  CHECKS.     See  Checks,  and  II.,  1585a. 

CURRENCY. 

instrument  payable  in,  whether  negotiable,  56,  57,  5S.  II.,  1245,  1651. 
judgment  on  such  instruments,  II.,  1245,  and  notes, 
what  law  applies  to  currency  of  payment,  916. 


0_Q  T-v^T-»T?v  References  are  to 

O  /  a  1 JN  UJi  A.  paragraphs  marked  $. 

CUSTOM. 

of  merchants  made  bills  negotiable,  6. 
as  to  presentment  by  notary's  clerk,  579. 

mode  of  presentment,  658,  662. 

mode  of  notice,  II.,  1007,  1012. 

grace,  621,  622. 

grace  on  drafts,  and  as  to  whether  draft  is  check,  II.,  1576. 

DAMAGES,     See  EXCHANGE,  and  II.,  1438,  1460. 
for  negligence  in  collection,  329. 

for  breach  of  agreement  to  accept  for  accommodation,  564. 
what  law  applies  to,  918,  921. 
on  coupon  bonds,  II.,  IS'S- 
for  laches  in  respect  to  presentment  and  notice,  II.,  1277a. 

DATE  OF  NEGOTIABLE  INSTRUMENTS.    See  Sunday. 
delivery  on  day  of  date  presumed,  65. 
or  at  least  before  maturity,  65. 
presumption  may  be  rebutted,  65. 

law  of  place  of  delivery  controls  paper  dated  elsewhere,  867,  868,  869. 
if  delivery  subsequent  to  date,  instrument  only  binding  from  delivery,  65 
but  time  computed  from  date  by  relation,  66,  630. 
not  necessary  to  aver,  but  sufficient  to  state  it  was  drawn,  or  made  on 

certain  day,  66. 
on  Sunday  does  not  vitiate,  if  delivery  on  other  day,  69. 
usually  written  in  right-hand  corner  of  instrument,  83. 
is  usual,  but  not  essential,  83. 
no  consequence  where  it  is  written,  83. 

if  no  date,  will  be  presumed  to  have  been  dated  when  executed  83,  630. 
evidence  admissible  to  show  when  executed,  or  to  show  mistake  in 

date,  83. 
if  note  be  made  for  accommodation,  and  undated,  party  accommodated 

may  fill  in  date  as  he  sees  fit,  83. 
indorsee  may  prove  mistake  of  date,  83. 
even  though  it  cuts  off  defense  valid  against  payee,  83. 
maker  can  not  show  mistake  of  date  against  innocent  holder  without 

notice,  83,  630. 
mistaken  date  may  be  rectified  in  equity,  83,  630. 
may  drawee  refuse  to  accept  undated  bill  ?  84. 

negotiable  instruments  may  be  post-dated  or  ante-dated,  85,  II.,  1578. 
negotiation  prior  to  date  not  a  suspicious  circumstance,  85. 
if  party  die  before  ostensible  date,  holder  not  affected,  85. 
if  dated  before  maker  comes  of  age,  but  really  executed  afterward,  in- 
strument is  valid,  85. 
so  in  respect  to  other  incapacities,  85. 
if  instrument  is  void  for  incapacity  when  executed,  date  as  of  time 

when  incapacity  did  not  exist  will  not  cure  it,  85. 
if  date  be  false  to  evade  law,  instrument  is  void  in  hands  of  all  having 

notice,  85. 


References  are  to  TvrTtirv  Q  ►'^ 

paragraphs  marked  %.  IJNJJISA.  0/9 

DATE  OF  NEGOTIABLE  INSTRUMENTS— r^«/z«z^^r^. 

if  date  does  not  accord  with  declaration,   discrepancy  must  be  ex- 
plained, 85. 

no  variation   to  allege  instrument  to  have  been   made  on  certain  day, 
when  it  bears  date  on  another,  85. 

holder  may  fill  in  true  date  if  it  be  omitted,  143. 

and  though  he  put  wrong  date,  bona  fide  holder  without  notice  not 
affected,  143. 

of  acceptance.     See  Acceptance,  and  494. 

if  date  of  paper  be  impossible — as  for  instance,  31st  September,  com- 
putation will  be  from  30th,  625. 

place  oi  prima  facie  place  of  payment,  639,  879. 

alteration  of.     See  Alteration,  and  II.,  1376. 

of  bank  notes  not  evidence  when  issued,  II.,  1666. 

of  checks,  II.,  1577. 

checks  may  be  post-dated  or  ante-dated,  II.,  1666. 

as  evidence  of  drawer's  residence,  II.,  1030. 

indorser's  residence,  II.,  1031,  1032. 

misdate  as  e.xcuse  in  respect  to  presentment  and  notice,  II.,  1180. 
DAYS.    See  Sunday  ;  Holidays  ;  Grace. 

how  computed,  626. 

day  of  date  excluded  in  computing  number  of  days  paper  has  to  run, 
626. 

if  paper  payable  so  many  days  after  sight,  demand,  or  certain  event, 
the  day  of  sight,  demand,  or  happening  of  event,  excluded,  626. 

if  paper  presented  one  day  and  accepted  on  another,  day  of  acceptance 
excluded,  626. 

"  in  thirty  days  "  —  "  in  thirty  days  from  date  "  —  "  at  thirty  days  "  — 
and  "  thirty  days  after  date  " — mean  same  thing,  626. 

DEATH.    See  Delivery  ;  Excuses. 

revokes  agency  not  coupled  with  interest,  288. 

dissolves  partnership,  369^. 

right  of  surviving  partner,  yjob,  y]\b. 

of  drawer  no  revocation  of  bill,  if  delivered  before,  498^. 

otherwise  if  paper  not  previously  delivered,  64. 

of  party  as  excuse  for  non-presentment  and  notice,  II.,  1177. 

of  joint  party.     See  II.,  1298. 
DEBT.    See  Pre-existing  Debt. 

drawer  and  indorser  released  from,  by  failure  in  respect  to  demand  and 
notice,  452.    II.,  971,  1276. 

execution  of  note  imports  contemporaneous  debt,  71. 

also  imports  settlement  of  previous  demands — this  presumption   open 
to  rebuttal,  71, 

and  does  not  include  previous  notes,  71. 
DEBTOR. 

effect  of  making  debtor  personal  representative,  269. 
DELAY.    5^1?  Excuses  ;  Diligence. 

in  presentment  for  acceptance  when  excused,  469,  473,  474,  478. 
payment  when  excused.  II.,  ic6o,  1068a. 


QQ,-.  T-MT»T?v  References  are  to 

«oO  1JMJ11.A.  iiaragrapis  marked  % 

DELAY — continued. 

in  giving  notice  when  excused,  II.,  1060,  \o6?>a,  1069,  1070, 

when  cause  of  delay  ceases,  diligence  should  be  exercised,  II.,  1070. 

DEL  CREDERE. 

agent  acting  under  del  credere  commission,  how  bound,  314. 
in  Pennsylvania  only  warrants  solvency  of  principal,  314. 
in  England  and  generally  in  United  States  regarded  as  bound  for  debt, 
and  on  indorsement  of  bill  remitted,  214. 

DELIVERY.    See  Sunday  ;  Assignment  ;  Sale. 

bill,  note   or  check,    or   other    negotiable   instrument    must    be   de- 
livered, 63. 

bill  or  note  in  hands  of  agent  not  delivered,  63. 

not  necessary  to  aver,  63. 

by  indorser  necessary,  664. 

if  maker  die  before  delivery,  instrument  void,  63. 

even  though  he  leave  directions  to  deliver,  unless  they  are  valid  as  a 
testament,  63. 

may  be  constructive,  63. 

drawee  accepting,  but  detaining  bill,  delivery  unnecessary,  64. 

bill  or  note  in  payee's  hands  presumed  to  have  been  delivered,  65. 

presumed  to  have  b'een  on  day  of  date,  or  at  least  before  maturity,  65. 

presumption  may  be  rebutted,  65. 

law  of  place  of  delivery,  controls,  and  not  that  of  place  of  date,  868^ 
869. 

exception  to  rule  as  to  holder  without  notice,  869. 

instrument  takes  effect  by  and  on  delivery,  65. 

if  delivery  after  date,  only  binding  then,  65. 

but  time  of  maturity  is  computed  from  date,  65. 

instrument  should  be  described  as  dated,  66. 

if  no  date,  time  computed  from  delivery,  66. 

not  necessary  to  aver  date,  66. 

sufficient  if  to  father  of  minor  son,  (>"]. 

trustee  of  cestui  que  trust,  67. 
agent,  67. 

both  minds  must  concur  in  assent  to,  67. 

insufficient  to  leave  check  on  clerk's  desk,  or  bank  counter,  without 
knowledge  of  clerk  or  officer,  67. 

when  sufficient  to  deliver  to  postman,  67. 
deposit  in  post-office,  67. 

right  of  stoppage  in  transitu,  67. 

a  party  to  a  note  after  delivery  and  passage  of  consideration  between 
original  parties,  incurs  no  liability,  67^. 

unless  there  be  a  new  consideration  and  a  redelivery  of  the  note,  67a. 

signing  in  presence  of  payee  is  not  redelivery,  67^. 

delivery  as  escrow,  68. 

difference  between  negotiable  and  other  instruments  delivered  as  es- 
crow, 68. 

by  common  law  may  be  on  Sunday,  69. 


Re/i'rences  are  to  TTvTr\-cv  OO, 

paragraphs  marked  §.  *-^  iJ£.A.  C)  O  I 

DELIVERY— £-<7«//«?^<?^. 

statutes  changing  common  law,  69. 

bills,  notes,  and  indorsements  coming  within  statutory  interdictions,  69. 

must  be  in  lifetime  of  party  to  be  bound,  266. 

if  firm  dissolved  before  delivery,  paper  does  not  bind  it  without  assent 
of  all,  371. 

not  necessary  to  sale,  753. 

DELIVERY  ORDERS. 

differ  from  bills  of  lading,  and  are  not  negotiable,  IL,  17 12. 

DEMAND,     See  PRESENTMENT, 

DEPOSIT  BOOK. 

of  savings  bank  not  negotiable,  II.,  1185, 

DESTROYED  BILLS  AND  NOTES.    See  Lost  Bills  and  Notes. 

whether  destruction  of  bill  by  drawee  is  acceptance,  500. 

how  maker  sued  for  destroying,  II.,  1468, 
DILIGENCE. 

in  presentment  for  acceptance,  467,  475, 

in  seeking  maker  or  acceptor  to  present  for  payment,  640.     II.,  11 15, 
1 1 16. 

in  giving  notice,  II.,  1058. 

whether  question  of  law  or  fact,  466.     II.,  iioo. 
DIRECTORY. 

consulting  to  ascertain  party's  residence,  IL,  note,  11 15. 

DISEASE,  EPIDEMIC. 

as  excuse  for  want  of  presentment,  protest,  and  notice.     See  Excuses, 
and  II. ,  1066,  1 125. 

when  epidemic  excuses  delay  in  presentment,  protest,  and  notice,  IL, 
1066. 

DISCHARGES  OF  BILLS  AND  NOTES.  See  Acceptance;  Payment; 
Conditional  and  Absolute  Payment;  Merger;  Re- 
lease; Part  Payment;  Covenant  not  to  Sue;  Joint 
Bills  and  Notes;  Partners;  Principal  and  Surety. 

1,  Discharge  by  pay77ient,  II.,  1221  to  1282.     See  Payment. 

2,  Discharges  by  operation  of  law,  II,,  1283, 

(r)  by  a  general  bankrupt  or  insolvent  law,  IL,  1283. 

(2)  by  merger  of  bill  or  note  in  a  judgment,  IL,  1283, 

(3)  by  appointment  of  maker  or  acceptor  as  executor  of  holder,  II 
1283. 

(4)  by  gift  or  bequest  to  maker  or  acceptor,  II.,  1283. 

(5)  by  any  matter  of  discharge  by  local  law,  II.,  1283, 

cases  other  than  judgment  obtained  which  operate  to  extinguish  debt 

by  merger.     See  Merger,  and  II.,  1284,  1285. 
legacy  by  drawer  to  payee  who  is  holder  does  not  satisfy  bill,  IL,  1286. 
what  entry  in  testator's  book  amounts  to  discharge,  II.,  1286. 

3,  Discharges  by  agreement  between  the  parties,  IL,  1287. 

(i)  an  accord  and   satisfaction  between  maker  or  acceptor  and   the 
holder,  IL,  1288, 

Vol.  II.— 56 


Q  Q  o  T  XT  rv  T7  V  References  are  to 

•^02  INDbX.  paragraphs  marked\ 

DISCHARGES  OF  BILLS  AND  '^OTYJi—cojitiniied. 

satisfaction  by  one  partner  discharges  all,  II.,  1288. 

if  one  executory  contract  consideration  for  another,  both  may  be 
rescinded,  II.,  1288. 

contract  upon  an  executed  consideration  can  not  be  discharged 
before  or  after  breach,  save  by  a  release  or  Satisfaction  for  valu- 
able consideration,  II.,  1288. 

part  payment  of  a  bill  which  has  fallen  due  only  extinguishes  it 
pro  tatito,  II.,  1289. 

but  will  not  discharge  whole  debt,  although  so  agreed,  unless  the 
agreement  was  by  way  of  compromise,  II.,  1289,  1289a. 

when  part  payment  is  compromise,  II.,  1289. 

when  part  payment  will  support  agreement  to  accept  it  in  satisfac- 
tion, II.,  1289a. 
'if  before  maturity,  II.,  1289a. 

if  made  by  stranger,  II.,  1289a. 

if  made  by  bill  or  note  with  a  surety,  II.,  1289a. 

or  collateral  security,  II.,  1289a. 

if  in  any  way  more  advantageous  to  creditor,  II.,  1289a. 

(2)  release  of  party  to  bill  or  note  by  any  agreement  for  valuable  con- 

sideration is  as  effectual  as  if  made  under  seal,  II.,  1290. 
it  discharges  joint  party  and  all  subsequent  parties,  II.,  1290. 

(3)  general  covenant  not  to  sue  maker  or  acceptor  operates  extinguish- 

ment as  to  him,  II.,  1291. 

(4)  what  is  effect  of  substitution  of  other  debtor  or  security  depends 

upon  special  agreement  between  parties,  II.,  1292. 

(5)  bill  or  note,  as  other  simple  contracts,  is  merged  in  bond  or  cove- 

nant taken  to  secure  claim,  II.,  1293. 

4.  What  constitutes  a  joint  note,  II.,  1294. 

when  maker  of  a.  joint  note,  or  a  joint  acceptor  or  indorser  is  discharged 
by  release,  those  jointly  bound  with  him  are  discharged,  II.,  1294. 

rule  in  case  oi partnership,  II.,  1295. 

judgment  against  joint  promisor  is  bar  to  action  against  both,  II.,  1296. 

otherwise  where  liability  \s  joint  and  several,  II.,  1296. 

covenant  not  to  sue  one  of  joint  makers  does  not  discharge  others,  IL, 
1297. 

nor  does  giving  time  to  one  discharge  others  jointly  bound,  II.,  1297. 

at  common  law  death  of  one  obligor  discharges  obligation  as  to  him 
II.,  1298. 

rule  changed  by  statute  in  many  States,  II.,  1298. 

5.  Whether  giving  separate  note  by  one  of  several  partners,  for  partnership 

debt,  discharges  other  partners,  II.,  1299,  1300. 

burden  of  proof  on  party  alleging  it  to  show  that  note  in  such  case  was 
taken  in  extinguishment  of  debt,  and  not  as  collateral  security,  II., 
1300. 

renewal  in  firm's  name  after  dissolution,  II.,  1300a. 

if  after  dissolution  creditor,  without  notice,  take  from  one  of  the  for- 
mer partners  bill  or  note  in  firm's  name,  binding  on  firm,  II.,  1300a. 

but  not  so  if  notice  of  dissolution  to  creditor,  II.,  1300a. 

when  no  new  security  taken,  a  mere  promise  to  look  to  one  partner 
only  not  binding,  II.,  1301. 

if  third  parties  induced  to  enter  into  arrangement  on  faith  of  promise 
would  be  otherwise,  II.,  1301. 


.  ^'-^'"■^^"'"''/Se  INDEX.  883 

paragraphs  marked  %  ^ 

DISCOUNT  OF  BILLS  AND  NOTES.     See  Sale. 

DISHONOR    OF    NEGOTIABLE    INSTRUMENTS.      See   Bona    Fidb 
Holder;  Overdue. 
what  amounts  to,  782.     IL,  930,  931,  932. 
effect  of,  724^7.  782,  787^;,  788. 
if  shown  on  paper  is  "death  wound,"  788. 
statement  of,  in  protest,  II.,  954. 

DISSOLUTION.    See  Partners. 

DIVERSION.     See  BONA  Fide  Holder. 

whether  it  shifts  burden  of  proof  on  plaintiff  to  show  bona  fide  ownership 

for  value,  790,  791,  814. 
what  amounts  to  in  respect  to  accommodation  paper,  792,  793,  794. 

DIVIDEND  WARRANTS. 

whether  negotiable,  II.,  1710a. 

DIVORCE.    See  Married  Woman. 

DOCK  WARRANTS. 

unlike  bills  of  lading  and  not  negotiable,  II.,  1713. 

DOLLARS. 

meaning  of  term,  87. 

DONATIO  MORTIS  CAUSA. 

gift  in  contemplation  of  death,  24. 
requisites  to  validity  of  such  gifts — 

1.  Must  be  made  in  view  of  donor's  death,  24. 

2.  Donor  must  die  of  his  then  ailment  or  peril,  24. 

3.  Must  be  a  delivery,  real  or  symbolic,  24. 

4.  Must  be  accepted  by  donee,  24. 

such  gift  originally  limited  by  law  to  chattels  passing  by  delivery,  24. 

bank  notes,  lottery  tickets,  and  securities  transferable  by  delivery,  or  in- 
dorsement then  permitted,  24. 

subsequently  extended  to  bonds,  24. 

later  cases  hold  notes  not  negotiable,  or  if  negotiable  not  indorsed,  but 
delivered,  to  pass  by  such  donation,  24. 

right  to  use  name  of  representative  of  promisee  also  passed  to  donee,  24. 

rule  so  extended  that  if  donor  indorse  bill  or  note  of  third  party,  dona- 
tion will  be  valid,  but  not  bind  donor's  estate  as  indorsement,  24. 

in  England  held  that  donee  could  compel  donor's  executors  to  in- 
dorse, 24. 

in  United  States  held  that  bank  deposit  book  may  be  subject  of,  24a. 

rule  in  relation  to  cestid  que  trust,  2\a. 

delivery  may  be  to  donee  or  to  another  for  him,  24a. 

deposit  to  another's  credit,  effect  of,  24a. 

donee's  note  may  be,  25. 

donor's  own  note  not  subject  of,  25. 

check  of  another  may  be,  25. 

nor  is  his  draft  on  third  person,  25. 

theory  of  the  law  to  guard  against  fraud,  25. 


CO  ,  T-vr-nirv  References  are  to 

'-'O4  IJNUll-A.  paragraphs  marked  % 

DONATIO  MORTIS  ZK\3^k— continued. 

whether  donor's  check  may  be  subject  of,  26. 

if  collected  in  lifetime  of  donor,  donee  may  retain  proceeds,  26. 

but  if  not  collected  in  lifetime  of  donor,  or  transferred  for  v'alue,  it  haa 

been  considered  that  death  revokes  check,  26. 
check  to  drawer's  wife  under  peculiar  circumstances  held  valid  as,  26. 
opinion  expressed  that  check  should  be  regarded  as  cash,  26. 
donation  can  not  prevail  against  donor's  creditors,  26. 
nor  can  it  prevail  against  his  estate  unless  delivered,  26. 

DORMANT  PARTNER.     5^^369^;. 

when  notice  of  retirement  necessary,  369(2. 

DRAFTS  OR  WARRANTS.    See  IRREGULAR  AND  AMBIGUOUS  Instru- 
ments. » 

1.  Of  private  corporations,  12\. 

sometimes  corporations  by  one  officer  or  agent  draws  on  itself,  naming 

another  officer  or  agent  as  drawee,  224. 
instrument  in  such  case  may  be  treated  as  note,  or  accepted  bill,  224. 
such  instruments,  often  used  as  vouchers,  and  as  covenant  for  keeping 

accounts,  224. 
not  necessary,  in  such  cases,  to  aver  or  prove  presentment  to  drawee, 

officer,  or  agent,  224. 
instances  of  such  drafts  : 

where  president  and  secretary  of  water  company  drew  on 
treasurer,  224. 
secretary  of  railroad  company  drew  on  treasurer,  424. 
president  of  railroad  drew  on  treasurer,  424. 
agent  drew  upon  treasurer,  424. 
conflicting  cases,  425. 
English  case,  426. 

2.  Of  tnunicipal  corporations. 

sometimes  drawn  by  one  officer,  or  set  of  officers,  on  another,  as  by 

selectmen  or  super\nsors  on  officer,  427. 
generally  used  as  vouchers,  427. 
and  not  deemed  negotiable,  427. 
held  not  negotiable  : 

where  selectmen  drew  order  on  treasurer  payable  to  bearer,  427. 
auditor  drew  on  treasurer,  427. 

county  judges  —  where   mayor   and    recorder  —  where 
supervisors — where  clerk  of  township  board — drew 
on  treasurer,  427. 
mayor  and  recorder  have  no  implied  power  to  execute  negotiable  war- 
rants, 427. 
when  corporate  authorities  empowered  to  draw  warrants  or  orders,  if 

they  be  phrased  in  negotiable  words,  deemed  negotiable,  428. 
instances,  428. 

when  negotiable  indorser  is  bound,  as  on  other  negotiable  paper,  429. 
but  if  mere  voucher,  transferrer  not  deemed  indorser,  429. 
but  transferrer  would  be  liable  to  refund  consideration  of  instrument 
not  valid,  429. 


References  are  to  t-nttm7V  ^^Lf 

paragraphs  mar ked%.  INDEX.  565 

DRAFTS  OR  WARRANTS— <:^«//«7^^^. 

whether  must  be  presented  to  disbursing  officer,  430. 

if  payment  refused,  creditor  may  recover  consideration,  430. 

if  officer  authorized  to  issue,  consideration  presumed,  431. 

otherwise  can  not  be  sued  on,  but  original  consideration  may  be  sued 

for,  431. 
creditor  not  bound  to  take  town  order,  432. 
but  if  he  takes  order,  must  produce  it  to  recover,  432. 
if  once  paid  can  not  be  sued  on  by  bona  fide  holder,  432. 
when  issued  as  vouchers,  do  not  bear  interest  after  demand  and  re- 
fusal, 432, 

but  cofiira,  432. 

if  payable  out  of  particular  fund,  is  charge  against  it  only,  433. 

if  consideration,  or  source  of  reimbursement  indicated,  it  is  different. 

433. 
instances,  433. 

when  negotiable,  transferee  may  sue  in  his  own  name,  434. 
otherwise  can  not,  434. 
in  some  cases  held  that  equities  not  excluded  against  transferee,  435. 

DRAWEE. 

should  be  distinctly  designated  in  bill,  96. 
if  no  drawee  pointed  out,  there  is  no  bill,  96. 

but  holder  of  memorandum  check  may  file  it  as  evidence,  though  no 
drawee  named,  96. 

by  acceptance  party  acknowledges  himself  the  drawee,  though  none 
named,  97. 

suffice  to  address  bill  to  A.,  or,  in  his  absence,  to  B.,  98. 

held  sufficient  to  address  to  A.,  or  B.,  in  the  alternative,  if  both  at 
same  place,  98. 

if  bill  addressed  to  A.,  B.,  and  C,  and  A.  and  B.  only  accept,  they  are 
bound  as  acceptors,  98. 

no  variance  to  allege  such  bill  to  have  been  drawn  on  A.  and  B.,  98. 
if  bill  addressed  to  A.,  it  will  bind  him  only  as  acceptor,  if  he  and  B. 
both  accept,  98. 

if  drawer  and  drawee  same  person,  no  acceptance  necessary,  98. 
how  drawee  addressed,  98. 

DRAWER.    See  ACCEPTANCE ;  Bills  of  Exchange  ;  Protest  ;  Notice 

Signature. 
name  of,  must  be  on  face  of  bill,  92. 
can  be  no  bill  without,  92. 

even  acceptance  on  paper  unsigned  by  drawer  is  mere  inchoate,  92. 
is  generally  a  single  person,  or  corporation,  or  firm,  93. 
but  there  may  be  joint  drawers,  95. 
joint  drawers  may  make  bill  payable  to  their  joint  order,  or  order  of 

either  of  them^  or  to  third  person,  95. 
sometimes  there  is  "  surety  drawer,"  95. 
if  several  draw  on  drawee  without  funds,  all  are  bound  to  acceptor,  and 

neither  can  show  he  was  mere  surety  for  others,  95. 


QOr  T-MTMTV  References  are  to 

OOO  1JNU£-A.  faragraphs  marked \. 

'D'RA.WE.R—conimued. 

if  A.  and  B.  draw  on  C.  without  funds,  and  B.  signs  as  surety,  both  he 

and  A.  are  considered  drawers  as  to  all  parties,  95. 
but  contrary  doctrine  obtains  in  New  York,  95. 
initials  of  name  suffice,  688. 
notice  to,  II.,  970,  970^,  971. 
liability  of,  for  re-exchange,  interest,  and  damages,  898.      II„  1444 

to  1447- 
what  law  applies  to  drawer,  898,  911. 
mere  promise  to  look  to  one  partner,  no  new  security  being  taken,  not 

binding,  II.,  1301. 
discharge  of  acceptor's  obligation.     See  541. 
surety.     See  II.,  1326  to  1331. 
guarantor,  II.,  1789. 

DRUNKENNESS,  species  of  mental  aberration,  214. 
party  in  state  of,  can  not  contract,  214, 
if  he,  in  such  state,  sign  negotiable  instrument,  it  is  void  against  all 

persons  who  had  notice,  214. 
when  it  makes  instrument  void  in  all  hands,  214. 
if  party  gets  drunk  for  purpose  of  entering  into  and  avoiding  agreement, 

it  is  no  defence,  215. 
must  be  specially  pleaded,  215. 
if  party  when  drunk  buys  goods,  and  keeps  them  when  sober,  he  can 

not  then  plead  drunkenness,  215. 

DUE-BILL. 

in  England  simple  I.  O.  U.  not  negotiable,  36. 

conflicting  decisions  in  United  States,  36,  37,  38,  39. 

words  which  amount  to  promise,  and  will  make  due-bill  negotiable,  38. 

effect  of  words  "  on  demand,"  39. 

DURESS.    See  Bona  Fide  Holder. 

renders  contract  made  under  void,  177,  857. 
between  immediate  parties  proof  of,  annuls  instrument,  857. 
whether  instrument  executed  under,  is  void  in  hands  of  holder  without 
notice,  857,  858. 

EFFECTS.     See  EXCUSES  ;  CHECKS, 

when  bill  drawn  without  effect  in  drawee's  hands  is  fraud,  17. 
drawer  of  such  bill  bound  without  notice,  17. 

ELECTION. 

right  of,  in  holder  to  treat  ambiguous  instrument  as  bill  or  note,  1 31. 

of  law  of  place  as  to  interest,  922,  925. 
ENTRIES  in  books,  when  admissible  as  evidence,  II.,  1057. 
EPIDEMIC  as  excuse  respecting  presentment  and  notice,  II.,  1066. 
EQUITABLE  ASSIGNMENT.    See  Assignment.;  Transfer  by  Assign- 
ment ;  Bill  of  Exchange  ;  Order. 

courts  of  equity  recognize  assignments  of  choses  in  action,  15. 

courts  of  law  follow  equity,  1 5. 


References  are  to  INDEX.  887 

paragraphs  marked  \. 

EQUITABLE  ASSIGNMENT^f^;///««^</. 

whether  bill  of  exchange  for  whole  amount  is,  15,  17. 

whether  bill  for  part  of  fund  is,  pro  tanto,  22,  23,  23a. 

order  for  whole  of  fund  is,  21. 

whether  order  for  part  of  fund  is,  pro  tanto,  22,  23,  23^. 

of  bills  and  notes  payable  to  order,  by  delivery,  741  to  747- 

of  securities  is  effected  by  assignment  of  any  claim,  debt,  bill,  or  note 

which  they  apply  to,  748. 
of  negotiable  by  separate  paper,  748a. 

EQUITIES.     Meaning  of,  and  when  they  may  be  pleaded,  724,  725,  725a,  726 

EQUITY. 

will  enjoin  illegal  subscription  by  corporation,  II ,  1522a, 

ERASURES. 

when  innocently  made  may  be  replaced,  II.,  1414,  141 5. 

of  marginal  figures  immaterial,  II.,  1499^. 

burden  of  proof  when  apparent  on  face  of  instrument,  II.,  1417.  1421a. 

ESCROWS. 

negotiable  instruments  delivered  as,  68,  855. 

difference  between  them  and  other  instruments  so  delivered,  68,  855, 
856. 
ESSENTIAL  REQUISITES  OF  BILLS  AND  NOTES.    See  Bills  of  Ex- 
change and  Promissory  Notes  ;  also,  Formal  Elements. 

ESTOPPEL  EN  PAIS.    See  Bona  Fide  Holder  ;  Maker  ;  Acceptor  ;  and 

Certificates  of  Stock. 
as  to  forgery,  II.,  1351  to  1353. 
EVIDENCE.    See  CHECKS;  Broker;  Bona  Fide  Holder;  Protest  as 

Evidence;  Action. 
parol,  inadmissible  to  vary  written  instrument,  80. 
can  not  show  note  paj-^able  on  demand  to  have  been  agreed  to  be  paid 

only  after  decease  of  testator,  80. 
nor  upon  other  conditions,  or  at  other  period,  80. 
can  not  show  that  demand  was  not  to  be  made  at  maturity,  80. 
nor  that  difterent  sum  was  to  be  paid,  81. 
nor  that  certain  account  was  to  be  deducted,  81. 
nor  that  certain  articles  were  to  be  credited,  81. 
nor  that  "lawful  money"  meant  silver,  81. 
nor  that  "dollars"  meant  bank  notes,  81. • 
can  not  engraft  condition  in  instrument,  81. 
can  not  show  it  was  to  be  void  in  certain  event,  81. 
nor  that  it  was  to  be  paid  out  of  particular  fund,  81. 
may  show  want  of  consideration  between  original  parties,  81. 
can  not  vary  engagement  in  any  respect,  8  m. 
contemporaneous  written  agreement  may  be  shown,  8ia. 
parol  evidence  admissible  to  show  parties  are  privy  to  bills  and  notes 

though  they  seem  otherwise,  8i<J. 
if  instrument  obscurely  written,  or  so  mutilated  or  erased  as  to  render  its 
meaning  uncertain,  can  be  produced  to  ascertain  its  terms,  Z\b. 


QQQ  TXTT-nrv  References  are  to 

O  O  O  1  IS  U  t.X.  paragraphs  marked  % 

"^MlViW^CY.— continued. 

as  between  privy  parties  mistakes  can  be  rectified  in  court  of  equity 

%\b. 
if  instrument  given  for  too  large  a  sum  mistake  can  be  siiovvn,  Z\b. 
ambiguities  may  be  explained  by,  87,  88. 
burden  of  proof  as  to  partnership  paper,  369. 
as  to  oral  acceptance,  518. 
See  Partnership,  369. 
when  parol,  or  extraneous,  admissible  to  show  whether  principal  or 

agent  is  bound,  418,  419. 
generally  admissible  to  charge  undisclosed  principal,  740a. 
but  not  to  discharge  agent  contracting  in  his  own  name,  740a. 
not  admissible  to  show  indorsement  without  recourse,  700. 
how  far  admissible  as  to  indorsements,  717  to  723. 
when  admissible  to  show  real  relations  of  parties,  175,  176. 
protest  as  evidence,  II.,  959  to  969. 

at  common  law  interested  party  can  not  testify,  II.,  1216. 
rule  affected  by  statutes  in  many  States,  II.,  12 16. 
in  England,  at  one  time,  no  party  to  instrument  could  testify  against  its 

validity,  II.,  121 7. 
doctrine  overruled,  II.,  1217. 
view  of  U.  S.  Supreme  Court,  II.,  1 217. 

whether  indorser  can  show  bill  or  note  void  for  usury,  II.,  1217. 
identity  of  party  must  be  proved,  II.,  1218. 
sufficient  to  show  same  christian  and  surname,  II.,  1218. 
when  further  identity  must  be  shown,  II.,  1218. 
how  signature  proved,  II.,  12 18. 
expert  testimony  as  to  signature,  II.,  1219. 
admission  dispenses  with  other  proof,  II.,  1220. 

\s  prima  facie  evidence,  but  may  be  explained,  II.,  1220. 
checks  as  evidence.     See  Checks,  and  II.,  1646  to  1650. 
of  forgery.     See  Forgery,  and  II.,  1347  to  1350. 
of  alterations.     See  Alterations,  and  II.,  1417  to  1421a. 
postmark  as  evidence,  II.,  1052. 
as  to  notice,  II.,  1047  to  1058(2. 
protest,  II.,  962  to  969. 
right  to  sue,  II.,  1199  to  1201. 
law  of  forum  applies  to  competency,  but  not  to  effect  of,  887. 

EXCHANGE,  RE-EXCHANGE,  AND  DAMAGES. 
I.  General  ttatiire  of  exchange,  II.,  1438. 

statutory  enactments  on  the  subject,  II.,  1438. 

statutory  damages  not  given  as  penalty,  but  in  lieu  of  re-exchange» 

costs,  etc.,  II.,  1439. 
what  bill  of  "  exchange  "  imports,  II.,  1440. 
what  is  meant  by  "  rate  of  exchange,"  II.,  1440a. 
natural  and  artificial  exchange,  II.,  1441. 
"par  of  exchange,"  II.,  1442. 
Gilbert's  definition  of  "  real  par  of  exchange,"  XL,  1443. 


References  arf  to  .,.^^_^„_.  QQ,.. 

Paragraphs  marked  §.  IJNUt-X.  OOQ 

EXCHANGE,  RE-EXCHANGE,  AND  DAMAGES— ^^«//«z^^^. 

2.  "  Re-exchatige  "defined,  \\.,  1444,  1445. 

drawer  is  liable  therefor  in  case  of  dishonor  of  bill,  H.,  1446. 
drawer  may,  by  apt  words,  limit  amount  of  re-exchange  and  other  ex- 
penses, II.,  1447. 
holder  may  redraw  on  any  indorser  for  re-exchange,  II.,  1448. 

and   an  indorser  who  pays  same  may  redraw  on  any  antecedent  in- 
dorser, II.,  1448. 

drawer  and  indorser  are  not  liable  for  re-exchange  unless  it  is  allowed 

by  law  of  country  where  bill  drawn,  \\.,  1448. 
query,  whether  acceptor  is  liable  for  re-exchange,  II.,  1449. 
better  opinion  is  that  he  is,  II.,  1449,  I450- 
what  laws  determine  liability  of  drawer  and  drawee,  II.,  1451. 
general  rule  in  respect  to  damages,  II.,  1452. 

3.  Promissory  notes,  by  law  merchant,  are  not  -within  rule  entitling  holder 

to  re-exchange  and  damtges,  II.,  1453. 
doctrine  of  English  courts,  II.,  1454. 

measure  of  damages  for  conversion  of  note  is,  prima  facie,  the  amount 

of  note,  II.,  1454. 
drawer  is  liable  for  charges  of  protest,  postage,  and  provisions,  II.,  1457. 
what  is  "provision,''  II.,  1457. 

interest  is  recoverable  against  all  parties  according  to  the  law  of  place 

of  their  several  contracts,  II.,  1458. 
statutory  and  contract  rates  of  interest,  II.,  1458^. 
where  one  rate  fixed  by  law  and  another  by  contract,  II.,  1458a. 

what  rate  should  he  adjudged  against  parties  bound  after  maturity,  II., 
1458a. 

rule  respecting  costs,  II.,  1459. 

whether  damages  inhere  in  contract,  II.,  1460. 

what  law  applies  to  exchange  and  damages,  918  to  921. 

exchange  and  damages  on  coupon  bonds,  II.,  1513. 

EXCUSES  FOR  NON-PRESENTMENT,  PROTEST,  AND  NOTICE. 
I.  Circumstances  of  general  nature,  II.,  1059. 

(i)  declaration  of  war  between  country  of  holder  and  that  of  party  to 
whom  presentment  should  be  made,  II.,  1060. 

cases  arising  during  the  late  conflict  between  the  States,  II.,  1061, 
1062. 

(2)  public  interdiction  of  commerce  and  intercourse,  II.,  1063. 

(3)  occupation  by  public  enemy  and  military  disturbances,  II.,  1064, 

(4)  political  disturbances,  such  as  riots  or  insurrections,  II.,  1065. 

(5)  prevalence  of  malignant  diseases,  such  as  cholera,  small-pox,  yel- 

low fever,  etc.,  II.,  1066. 

(6)  overwhelming  calamity  and  unavoidable  accident,  such  as  freshets, 

storms,  tornadoes  and  earthquakes,  accidents  to  the  mail,  etc., 
II.,  1067,  1068,  1068a. 

if  holder  be  himself  in  default,  he  will  not  be  excused,  II.,  1068a. 
must  be  shown  that  effect  of  either  was  to  prevent  presentment  or  pro- 
test being  made  or  notice  given,  II.,  1069. 

when    impediment  of  whatever  description  is  removed,   the    duty   tc 

make  demand  or  give  notice  revives,  II.,  1070. 
cases  arising  out  of  the  late  war,  II.,  1070,  1071. 


O--^  T-NTTiT?v  References  are  to 

09  J  lJNiJli,A.  J,aragra^hs  marked  \. 

EXCUSES — continue 

2.  Special  circumstances  of  excuse  arising  from  absence  of  right  to  require 

presentment,  protest,  or  notice,  II.,  1072. 
drawing  without  right  or  expectation  that  bill  will  be  honored,  II., 

1073. 
fraud  committed  by  drawer  or  indorser,  II.,  1073. 
as  to  lack  of  funds,  II.,  1074. 
true  criterion  not  whether  drawer  had  funds  in  drawee's  hands,  but 

whether  he  had  right  to  expect  honor  of  bill,  II.,  1074. 
if  drawer  have  funds  in  drawee's  hands,  drawee's  representation  that 

he  can  not  provide  for  it  will  be  no  excuse,  II.,  1075. 
want  of  injury  to  drawer  no  excuse  for  due  demand   and  notice,  II., 

1075. 
nor  is  fact  that  drawee  owes  drawer  larger  amount,  II.,  1075. 
drawer's  right  not  affected  by  attachment  of  funds  after  bill  drawn,  II., 

1075. 
cases  in  which  drawer  has  right  to  draw,  II.,  1076. 
want  of  funds  no  excuse  when  drawer  or  indorser  can  sue  acceptor  or 

other  party  for  amount,  II.,  1077. 
at  what  time  reasonable  expectation  of  bill  being  honored  must  exist, 

II.,  1078. 
Mr.  Chitty's  views,  II.,  1078. 
criterion  where  there  is  a  running  account  between  the  parties,  II., 

1079. 
views  of  Marshall  and  Story,  II.,  1080. 
rule  where  drawer  withdraws  or  intercepts  funds  for  meeting  bill,  or 

otherwise  prevents  due  acceptance,  II.,  108 1. 
acceptance  is,  prima  facie  admission  of  funds  in  hand,  II.,  1082. 
but  does  not  otherwise  affect  general  rule,  II.,  1082. 
indorser  of  a  bill  drawn  without  funds  is  ordinarily  entitled  to  demand 

and  notice,  II.,  1083. 
but  not  if  he  indorses  for  drawer's  accommodation,  and  neither  expects 

bill  to  be  honored,  II.,  1083. 
drawer  and  indorser  generally  entitled  to  require  demand,  protest,  and 

notice,  unless  they  forfeit  it  by  fraud,  or  what  would  amount  to  it, 

II.,  1083. 
holder  has  burden  to  show  drawee  was  without  funds,  II.,  1084. 
showing  no  funds  is  prima  facie  excuse,  II.,  1084. 
defendant  must  then  show  right  to  expect  that  bill  would  be  honored, 

II.,  1084. 

3.  When  party  is  under  obligation  to  provide  for  payment,  II.,  1085. 

if  bill  be  for  drawer's  accommodation,  he  is  charged  without  present- 
ment, protest,  or  notice,  II.,  1085. 

if  bill  payable  at  drawer's  house,  it  is  presumed  for  his  accommodation, 
II.,  1085. 

if  for  indorser's  accommodation,  same  rule  applies  to  him,  II.,  1085. 

qualifications  of  the  rule,  II.,  1085. 

where  party  is  partner  in  the  transaction,  it  is  an  excuse,  II.,  1086. 

but  partner  signing  on  individual  account  not  within  the  rule,  II.,  1086, 

when  firms  with  a  common  partner,  not  within  the  rule,  II.,  1087. 

when  joint  makers  live  too  far  apart,  necessary  delay  in  presenting  for 
payment  does  not  discharge  indorser,  II.,  1089. 


References  are  to  T  tvt  tm  •  v  Or 

pitragraphs  marked  §.  IJNUllA..  0<^\ 

EXCUSES — continued. 

when  drawer  and  drawee  same  person,  no  notice  of  dishonor  neces« 
sary,  II.,  io88a. 

whether  chargeable  without  presentment,  II.,  io88a. 

4.  Excuses  arising  from  special  waiver,  II.,  1090. 

general  principles  as  to  waivers  of  presentment,  protest,  and   notice, 
II.,  1090. 

waiver  need  not  be  direct  and  positive,  II.,  1091. 

may  arise  from  implication  and  usage,  II.,  1091. 

how  waiver  construed,  II.,  109 1. 

waiver  may  be  embodied  in  instrument,  II.,  1092. 

instances,  II.,  1092. 

may  be  over  indorser's  signature,  II.,  1092a. 

whether  it  binds  subsequent  indorsers,  II.,  1092a. 

may  be  on  separate  paper,  II.,  1092^. 

may  be  prior,  contemporaneous,  or  subsequent  to  indorsement,    II., 
1092^5. 

may  be  verbal,  II.,  1093. 

verbal  by  indorser  at  time  of  indorsement  may  be  shown,  II.,  1093. 

when  waiver  applies  to  presentment,  protest,  and  notice,  and  when  only 

to  one  of  these  steps,  II.,  1094. 
effect  of  waiver  of  "  protest"  of  foreign  bills,  II.,  1095. 
effect  of  waiver  of  "  protest  "  of  inland  bills  or  notes,  11.,  1095a. 
construction  of  waivers,  II.,  1096. 
waiver  stating  reasons  not  affected  thereby,  II.,  1097. 
when  waiver  of  demand  written,  verbal  waiver  of  notice  may  be  shown, 

II.,  1098. 

words  "  holden,"   "accountable,"    or  "eventually    accountable,"   XL, 
1099. 

words  constituting  a  guaranty,  deprive  party  of  indorser's  rights,  II., 
1099. 

particular  expressions  amounting  to  waiver,  II.,  1099. 

when  question  is  for  court  to  decide,  II.,  iioo. 

how  laches  or  delay  may  be  waived,  II.,  iioi. 

waiver  of  laches  of  holder  by  delay  must  be  distinctly  proved,  II.,  1 102. 

of  special  waivers  made  after  execution  of  instrument,  II.,  1102. 

waiver  before  maturity  by  act  or  agreement  of  party,  II.,  1102. 

particular  instances,  II.,  1102. 

where  indorser  writes  holder  that  maker  has  failed,  and  craves  indul- 
gence, II.,  1 104. 

other  instances,  II.,  1104. 

where  party  puts  an  obstacle  in  way  of  demand  and  notice,  as  by  stop- 
ping payment,  II.,  1 105. 
where  drawer  of  dishonored  bill  gives  his  own  note,  II.,  1106. 
various  cases  of  similar  waivers,  II.,  1106. 
as  to  waivers  on  day  of  maturity,  II.,  1107. 
and  before  last  day  of  grace,  II.,  1108. 
as  to  whom  and  by  whom  waiver  must  be  made,  II.,  1109. 
must  be  made  by  party  entitled  to  require  diligence,  II.,  iiro. 
to  party  entitled  to  demand  payment,  II.,  mo. 


Qnn  TMT~iTrv  References  are  to 

092  INDEX.  paragraph,  markedl. 

'E.'KCXiSY.S— continued. 

one  copartner  may  waive,  II.,  1109a. 

but  if  firm  discharged,  promise  of  one  partner  after  dissolution  will  not 

bind  it,  II.,  iropa. 
nor  will  promise  of  one  partner  bind  as  to  accommodation  transaction, 

II.,  110912. 
agent  may  waive,  II.,  \\o<^b. 

5.  Special  circumstances  which  show  inability  to  make  protest  and  give 

notice,  II.,  nil. 
(i)  where  there  is  no  person  on  whom  demand  can  be  made,  II.,  1112. 
where  note  is  void  between  maker  and  payee  on  ground  of  illegal 
consideration,  II.,  1113. 
(2)  when  it  is  impracticable  to  find  to  whom  presentment  should  be 

made  and  notice  given,  II.,  11 14, 
what  is  due  diligence  to  find  party  liable  in  this  case,  II.,  11 15. 
inquiry  must  be  made  of  parties  likely  to  be  informed,  II.,  11 15. 
holder  not  bound  to  inquire  farther  than  reasonable  and  prudent  man 

should,  II.,  1 1 15. 
when  inquiry  of  bank  officers  suffices,  II.,  11 15. 
in  seeking  acceptor  or  maker,  inquiry  should  be  made  of  indorser,  etc., 

II.,  1 1 16. 
and  vice  versa,  II.,  1 1 16. 

holder  should   communicate   information   to   notary  acting  for  him, 
II.,  1 1 16. 
presumed  to  know  residence  or  place  of  business  of  immediate 
indorser,  II.,  11 16. 
when  there  is  more  than  one  indorser,  inquiry  should  be  of  all,  II., 

1 1 17. 
exceptions  to  rule,  II.,  11 17. 
if  business  office  of  acceptor  or  maker  be  closed,  protest  may  be  made 

without  further  inquiiy,  II.,  1118. 
conflicting  views  on  this  question,  II.,  11 18,  11 19. 
same  if  bank  or  other  place  of  payment  be  closed,  II.,  11 19. 
inability  to  find  maker  or  acceptor  does  not  excuse  want  of  notice  to 

drawer  or  indorser,  II.,  11 20. 
different  as  to  inability  to  find  drawer  or  indorser,  II.,  1120. 
delays  excused  under  peculiar  circumstances,  XL,  11 20. 
imprisonment  of  party  no  excuse,  II.,  11 20. 
as  to  general  inquiries  to  find  party,  II.,  1 121. 
rule  when  party  is  travelling,   II.,  11 22. 
when  party  has  no  place  of  abode,  II.,  1123. 

(3)  if  bill  or  note  be  transferred  or  indorsed  too  late  to  communicate  with 

prior  parties  by  the  regular  channels,  II.,  1124. 
qualifications  of  the  rule,  II.,  11 24. 

(4)  sickness  or  accident  to  holder,  II.,  1125,  11 26,  11 27. 

illness  must  be  of  a  character  to  prevent  presentment  by  due  diligence, 

II.,  1 127. 
detention  on  voyage,  or  robbery  of  bill,  II.,  1 125. 

6.  Special  circumstances  of  excuse  arising  from  conduct  of  party,  II.,  1128. 
(i)  when  party  has  received  means  to  take  up  bill  or  note,  II.,  11 28. 


References  ar4- to  TMDFV  So? 

EXCUSES—  coHtimted. 

(2)  when  party  has  received  securities  to  provide  for  payment,  II.,  1129. 
effect  of  accepting  assignment  oi  all  maker's  property,  II.,  1 130. 
whether  it  is  waiver  of  right  to  require  protest,  etc.,  II.,  1130,  1131. 
not  deemed  sufficient  excuse,  II.,  1131. 

where  security  is  sufficient  to  indemnify  against  loss,  II.,  11 33. 
not  deemed  sufficient  excuse,  II.,  11 33. 
views  of  Story,  Kent,  and  Parsons,  II.,  1133,  1134,  ii35- 
criticised,  II.,  11 34. 

when  security  is  to  full  amount  of  note,  II.,  1135. 
not  deemed  sufficient  excuse,  II.,  1135. 
discussion  of  the  subject,  II.,  1136,  1137. 
if  indorser  receive  indemnity  at  time  of  indorsement,   that  does  not 

dispense  with  demand,  protest,  or  notice,  II.,  1138. 
rule  when  security  is  given  after  indorsement,  and  before  dishonor, 

II.,  1 1 39. 
there  must  be  obligation  to  take  up  note,  to  operate  as  excuse,  1 139. 
when  given  after  dishonor,  II.,  1140. 

as  to  form  of  assignment  and  character  of  security,  II.,  1141. 
character  of,  has  material  bearing  on  question,  II.,  1142. 
waiver  as  to  one  does  not  apply  to  other  indorsements,  II.,  1143. 
other  cases,  II.,  1143. 

when  maker  or  acceptor  absconds,  presentment  is  excused,  II.,  1144. 
but  notice  to  iijdorser  is  not,  II.,  ii44' 

absconding  of  maker  or  acceptor  to  other  place  in  same  country,  pre- 
sentment excused  if  it  be  unknown  to  holder,  II.,  1144. 
when  drawer  or  indorser  absconds,  notice  should  be  left  at  last  place 

of  abode,  II.,  1144. 
if  abode  unknown,  and  can  not  be  discovered,  notice  dispensed  with, 

II.,  1 144. 
when  maker  or  acceptor  has  removed  domicile  to  another  State   or 

country,  II.,  1145. 
demand  at  his  last  place  of  business  in  such  cases  suffices,  II.,  ii45- 
query,  whether  this  is  necessary,  II.,  ii45- 
when  removal  to  another  locality  in  same  State,  holder  must  make 

demand  at  new  place  of  residence  or  business,  II.,  1146. 
when  drawer  or  indorser  has  left  State,  notice  should  be  left  at  last  place 

of  residence,  II.,  1146. 
7.  Special  waivers  by  promises  to  pay,  a?td  by  part  payments,  after  tnaturity, 

11.,  1 147. 
(i)  Promises    of    drawer     and    indorser    to     pay    after    maturity,    with 

knowledge   of  holder's  default,  dispenses  with  protest  and  notice, 

II.,  II47- 
if  promise  be  made  with  knowledge  of  laches,  it  makes  no  difference 

that  promisor  did  not  know  its  legal  effect,  II.,  1147^!:. 
promise  may  be  made  after  suit  brought,  and  pending  motion  for  new 

trial,  II.,  1 148. 
knowledge-  on  part  of  drawer  and  indorser  of  holder's  default,  is  essen- 
tial, ac'cording  to  American  text  writers,  and  many  decisions,  II.,  1 149. 
query,  whether  proof  of  promise  to  pay  after  maturity  estops  denial 

that  demand  has  been  only  made,  and  notice  given,  II.,  11 50. 


Q-   .  T-Mn-PY  References  are  to 

094  1JNU1!.A.  ^aragra^hs  marked^ 

EXCUSES— coHh'ftu^d. 

decision  in  Virginia,  II.,  11 51. 

(2)  Promise  to  pay  after  maturity  is  regarded  as  prima  facie  evidence  ol 

knowledge  of  laches,  II.,  11 52. 
inference  as  to  knowledge  in  respect  to  presentment  and  notice,  II., 

II53- 
distinction  in  case  of  the  non-acceptance  and  the  non-payment  of  bill 

presented  for  acceptance  before  it  is  due,  II.,  ii54- 
proof  of  knowledge  apart  from  the  presumption  which  arises  from 

promise  to  pay,  II.,  1155. 

(3)  Promise  to  pay  is  presumptive  evidence  that  demand  and  notice  were 

duly  given,  II.,  1 156. 
discrimination    between    promise   to  pay  as  waiver  of  demand   and 

notice,  and  as  waiver  <?/"/r(7i9/"  of  demand  and  notice,  II.,  11 57. 
English  authorities,  II.,  11 58. 
certain  circumstances  which  operate  as  presumptive  proof  of  demand 

and  notice,  II.,  11 59,  1160. 
promise  without  knowledge  of  material  circumstances,  II.,  1161. 

(4)  Burden  of  proof  on  the  plaintiff  to  show  acknowledgment  of  liability 

and  promise  to  pay,  II.,  1162. 
promise  must  be  absolute  to  operate  as  waiver  of  laches,  II.,  1163. 
what  amounts  to  promise,  II.,  1163. 
when  conditional  promise,  coupled  with  other  circumstances,  held  to 

be  presumptive  evidence  of  promise,  II.,  1164. 
what  offer  insufficient,  II.,  1163. 

(5)  Part  payment  after  maturity  stands  on  same  footing  as  promise  to  pay, 

II.,  1 165. 
is  presumptive  evidence  of  fixed  liability,  II-,  1166. 
when  offer  to  pay  part  of  bill  or  note  is  sufficient  to  dispense  with  de- 
mand and  notice,  II.,  1167. 
part  promise  is  only  waiver /ri?  tanto,  II.,  1168. 
(8).  Excuses  for  non-presciit)nent,  etc.,  which  are  not  sufficient : 
general  classification,  II.,  1169. 
(i)  Want  of  prejudice  or  injury  to  drawer,  II.,  1170. 

(2)  Bankruptcy  or  insolvency  of  acceptor  and  maker,  II.,  1171,  1172. 

drawer  or  indorser,  II.,  11 72. 

(3)  Loss  or  mislaying  of  bill  or  note,  II.,  1 173. 

as  to  bill  at  sight,  loss  excuses  reasonable  delay,  II.,  1173. 
if  bill  be  lost  before  acceptance,  demand  should  be  made  and  bill  be 
protested  on  refusal,  II.,  11 74. 

(4)  Appointment  of  drawer  or  indorser  as  executor  or  administrator  of 

maker  or  acceptor,  II.,  )  175. 
if  maker's  estate  be  insolvent,  demand  and  notice  not  excused,  II., 
1175. 

(5)  Transfer  of  bill  or  note  as  collateral  security,  II.,  1176. 
party  not  indorsing  not  entitled  to  notice,  II.,  11 76. 

(6)  Death  of  maker  or  acceptor,  II.,  ii77- 
death  of  drawer  or  indorser,  II.,  ii77- 

query,  whether  death  of  drawee,  before  bill  is  presented  for  acceptance. 
excuses  non-presentment /(?r  «^^^/'/««^^,  H-,  1178,  ii79- 

(7)  Misdating  of  bill  or  note  by  a  foreign  resident,  II.,  1180. 


pa^ri^::;;k/ztk:d%,  tndex.  895 

EXCUSES — continued. 

questionable  if  holder  excused,  though  misled  by  false  date,  II.,  i  i8o. 
what  is  due  diligence  on  part  of  holder,  II.,  1180. 
cases  where  maker  resides  in  one  State,  and  makes  and  dates  note  in 
another,  II.,  11 80. 

EXECUTION. 

whether  negotiable  note  subject  to  for  debt  of  payee,  800a. 

bank  notes  subject  to,  1672,  1673a. 

how  stockholders'  interest  in  corporation  may  be  subjected  to,  II.,  1708a. 

EXECUTORS.    6"^^?  Fiduciaries  ;  Presentment;  Notice. 

EXPENSES.    See  Damages  ;  Exchange  ;  Payment. 

EXPERT. 

testimony  of,  as  to  signature,  II.,  1219. 

EXPRESS  COMPANIES. 

as  collecting  agents,  348. 

EXTINGUISHMENT.    5"^^  Discharges. 
of  acceptor's  obligation,  541  to  549. 

FAC-SIMILE. 

signatures  to  coupon  bonds  may  be  m  fac-sz'mzle,  II.,  1492. 

FACTOR. 

under  del  credere  commission,  liability  of  on  bill  or  note,  314. 

FEDERAL  COURTS. 

follow  decisions  of  State  courts  of  last  resort,  10. 

generally  apply  principles  of  law  merchant,  10,  863,  864. 

sometimes  disregard  State  statutes  in  applying  law  merchant,  449. 

have  jurisdiction  of  suits  between  citizens  of  different  States,  863,  864. 

follow  decisions  of  highest  State  courts  in  cases  arising  under  them, 
II.,  1525- 

but  will  not  follow  all  vacillations  of  decisions,  II.,  1525. 

will  not  respect  State  decisions  violating  general  principles  of  law  mer- 
chant, II.,  1525. 

FEDERAL  GOVERNMENT.     See  GOVERNMENT. 

FEME  COVERT.    See  Married  Woman,  239. 

FICTITIOUS  AND  NON-EXISTING  PARTIES. 

person  fraudulently  using  fictitious  name  guilty  of  forgery,  136. 
use  of  such  names  discountenanced,  136. 

holder  having  knowledge  that  name  of  payee  is  fictitious  can  not  re- 
cover of  acceptor,  although  he  also  knew  it,  136. 
it  is  policy  of  law  to  interdict  fictitious  names,  136. 
when  bona  fide  holder  may  recover  against  acceptor  when  payee  is  fic- 
titious, 136. 

English  doctrine  making  acceptor's  knowledge  of  fiction  criterion  of 

holder's  recovery,  137. 
dissertation  on  and  criticism  of  this  doctrine,  138. 


o     z:  T-vnirv  References  are  to 

OQO  iJNJJ£.A.  paragraphs  fnarked%. 

FICTITIOUS  AND  NON-EXISTING  PARTIES— r^«//;«^^^. 

innocent  holder,  where  there  is  fictitious  payee,  may  treat  paper  as 
payable  to  bearer,  139. 

same  doctrine  applicable  to  notes  as  to  bills,  139. 

payee  deemed  fictitious,  though  there  be  really  such  person,  if  he  was 
not  in  intention  to  be  made  party,  139. 

but  if  such  real  person  was  in  mind  of  drawer,  his  genuine  indorse- 
ment is  essential  to  transfer,  140. 

party  may  adopt  and  use  fictitious  name  as  his  own,  141. 

may  be  sued  in  such  case  and  declared  against  as  having  contracted  by 
such  adopted  name,  141. 

if  party  uses  fictitious  name,  but  does  not  adopt  it,  remedy  is  by  action 
of  tort,  141,  307. 

when  drawer's  name  is  fictitious,  effect  of  acceptance,  540. 

maker  can  not  show  payee  to  be,  93,  227,  242, 

if  partner  draw  bill  in  fictitious  name,  and  indorse  firm's  name,  firm 
bound  on  indorsement,  360. 

when  fictitious  name  is  forgery,  II.,  1345. 

FIDUCIARIES  AS  PARTIES  TO  NEGOTIABLE  INSTRUMENTS. 
I.  Personal  representafives,  261. 

who  is  called  executor  and  who  administrator,  261. 

when  powers  of,  accrue,  and  to  what  time  they  relate,  261. 

can  not  bind  decedent's  estate  by  negotiable  instrument,  262. 

party  signing  himself"  A.  B,,  executor,"  binds  himself  personally,  262. 

decedent's  estate  discharged  by  taking  bill  or  note  of  representative,  263. 

assets  in  hands  of,  good  consideration  for  bill  or  note  made  by,  263, 

when  may  show  want  of  assets,  263. 

total  or  partial  want  of  assets  good  plea  between  original  parties,  263. 

may  restrict  liability  by  making  instrument  payable  out  of  assets,  263. 

have  a  right  to  bills  and  notes  of  deceased,  264. 

duty  to  present,  demand,  and  give  notice  of  dishonor,  when  taking 
bills  and  notes  of  deceased,  264. 

act  in  place  of  deceased,  264. 

if  note  made  to  deceased  by  name,  whose  death  not  known,  it  is  pay- 
able to  his  representative,  264. 

so,  if  death  were  known,  but  name  of  deceased  were  used  in  good 
faith,  264. 

can  not  purchase  note  against  estate  he  represents,  224. 

may  transfer  bills  and  notes  of  deceased  by  indorsement  or  assign- 
ment, 265. 

would  be  liable  on  indorsement,  unless  it  were  restrictive,  265. 

if  transfer  made  for  representative's  private  debt,  it  is  a  fraud,  265. 

either  of  several  may  indorse  bills  and  notes  payable  to  deceased,  266. 

rule  where  note  payable  to  several  representatives,  266. 

name  of  deceased  written  as  indorser  is  nugator}%  unless  there  was  de- 
livery in  his  lifetime,  267. 

if  deceased  delivered  note  without  indorsement,  which  was  necessary 

representative  may  be  compelled  to  indorse,  267. 
but  might  protect  himself  from  personal  liability,  267. 
note  payable  to  A.,  "  as  executor,"  is  assets,  at  least  at  his  election,  268. 


References  are  to  T %•  r>  1?  v  Q < \  *» 

paragraphs  marked,%.  l-NUCA.  09/ 

FIDUCIARIES  AS  V KKY\£.S~coitimued. 

how  such  note  should  be  sued  on,  268. 
effect  of  making  debtor  executor,  269. 

effect  of  representative  giving  note  not  negotiable  for  decedent's  debt, 
270. 

2,  Guardian  can  not  bind  ward's  estate  by  bill  or  note,  271. 

are  personally  bound  to  pay  bills  and  notes,  although  signing  "  as 
guardians,"  271. 

3.  Trustees,  same  rule  applies  to  them  as  to  guardians,  271. 

FIGURES. 

amount  or  sum  payable  usually  specified  in,  86. 
when  they  differ  from  words  in  instrument,  words  prevail,  86. 
if  amount  be  expressed  in  figures  alone  it  suffices,  86. 
marginal  no  part  of  bill  or  note,  86. 

coupon  bond,  II.,  I499<7. 
if  amount  be  only  expressed  in  marginal  figures,  instrument  defective,  86. 

FINDER.    See  Lost  Instruments. 

in  general  acquires  no  rights,  II.,  1468. 
liability  of,  II.,  1468. 

of   bank  note  may  recover  from  depositary  on  proving  genuineness, 
and  value  claimed,  II.,  1674. 

FIXED  INDORSERS.    See  Reissue,  and  II.,  1240,  1241,  1242. 

are  those  whose  liability  has  been  established  by  demand  and  notice, 

II.,  997. 
if  they  reissue  bill  or  note  after  liability  is  so  established,  with  their 

names  upon  it,  they  are  bound  without  demand  or  notice,  II.,  997. 
but  this  may  be  question  of  intention,  II.,  1242. 
are  still  sureties  of  the  debt,  II.,  1305. 

FORBEARANCE. 

to  sue  is  good  consideration,  760,  830. 

FOREIGN  BILLS.     See  Bills. 

FOREIGN  LAWS.    See  CONFLICT  OF  Laws. 
not  judicially  noticed,  891. 
presumptions  as  to,  891. 
enforced  only  by  comity  of  nations,  866. 

FORGERY  OF  NEGOTIABLE  INSTRUMENTS.     See  CHECKS. 
I,  Definition  and  nature  of  fo7-gery,\\.,  1344. 

special  exemplifications  of  what  amounts  to,  II.,  1344. 
habitual  use  of  assumed  name  is  not,  II.,  1345. 
when  use  of  fictitious  name  is,  II.,  1345. 
procuring  signature  of  innocent  party,  II.,  1345. 

making  material  change  in  completed  instrument,  with  intent  to  de- 
fraud, is  forger}',  II.,  1346,  1347. 

the  making  of  bill  or  note  must  be  counterfeit  or  false  to  be  forgery, 

II..  1348. 
intent  to  defraud  is  essential  element  of  forgery,  II.,  1349. 

Vol.  II. — 57 


898  INDEX.  M^'47:,TZtL%. 

% 
FORGERY  OF  NEGOTIABLE  INSTRUMENTS— f^^^/Zw^^^. 

"  uttering  "  of  bill  or  note  is  necessary  to  complete  crime  of  forgery^ 

II.,  1350. 
what  amounts  to  uttering,  II.,  1350. 
not  competent  to  show  similar  forgery  in  evidence,  JL,  1350. 

2.  Liability  of  party  who  adopts  a  forged  signature  as  his  own,  II.,  1351. 

ordinarily  can  not  deny  its  genuineness,  II.,  1351. 

bound  by  admissions,  II.,  1351. 
but  if  he  states  it  to  be  genuine  through  mistake,  and  corrects  error 

before  holder  has  changed  his  relations  to  instrument,  forgery  may 

be  pleaded,  II.,  1352. 
whether  deliberate  adoption  of  forged  signature  binding,  II.,  1352a. 
observations  on  conflicting  views,  II.,  I352<5. 
admission  with  knowledge  is  binding,  II.,  I352«. 

party  by  his  acts  or  course  of  conduct  may  be  bound,  though  signa- 
ture is  forged,  II.,  1353. 
customary  payment  of  similar  paper,  II.,  1353. 

3.  When  one  party  is  estopped  from  denying  genuineness  of  another's  signa- 

ture, II.,  1354. 
(i)  in  respect  to  maker  of  note,  he  may  generally  deny  other  signatures 
to  be  genuine,  II.,  1354. 
when  he  may  not,  II.,  1355. 

(2)  drawer  of  bill  stands  in  same  relation,  ordinarily,  as  maker  of  note, 

II.,  1356. 

(3)  indorser  is  bound  though  prior  names  be  forged,  II.,  1357. 

(4)  transferrer  by  delivery  comes  within  rule  of  implied  warranty  of 

genuineness  of  article  sold,  II.,  1358. 

(5)  when    drawee  or  acceptor   is  bound,  though   drawer's    name  be 

forged,  II.,  1359. 
cases  and  opinions  cited,  II.,  1360. 

distinction  taken  between  bill  received  after  acceptance  and  an  unac- 
cepted bill,  II.,  1361. 

where  drawee  is  estopped  from  denying  genuineness  of  drawer's  name, 
the  loss  is  thrown  on  him,  II.,  1361. 

unless  (i)  holder  has  preceded  him  in  negligence,  and  (2)  he  was  de- 
ceived as  to  genuineness  of  signature,  11.,  1362. 

admission  of  acceptor  extends  only  to  the  signature  of  drawer,  and  not 
to  terms  of  instrument  itself,  II.,  1363. 

4.  Whe7i  one  party  is  estopped  from  denying  another's  signature,  II.,  1354. 

maker  can  generally  deny  payee's  signature,  II.,  1354. 

and  recover  back  money  paid  to  indorsee,  if  forged,  II.,  1355. 

but  if  name  on  note  when  he  delivered  it,  he  can  not  deny  its  genuine- 
ness, II.,  1356. 

drawer  generally  stands  in  same  position  as  maker,  II.,  1356. 

indorser  warrants  genuineness  of  all  prior  signatures,  II.,  1357. 

if  he  pays  under  subsequent  forged  indorsement,  may  generally  recover 
back  the  amount,  II.,  1357,  1358. 

drawee  must  know  drawer's  signature,  II.,  1359. 

generally  held  that  if  he  pays  money  on  forgery  of  drawer's  name,  he 
can  not  recover  it  back,  II.,  1359. 


References  are  to  INDEX.  ^^99 

para^aphs  marked  §. 

FORGERY  OF  NEGOTIABLE  INSTRUMENTS— f^«//«/^^^. 

distinction  between  drawee  recovering  from  party  who  received  bill  be 
fore  acceptance,  and  party  receiving  it  afterward,  11.,  I3&i- 

acceptor's  admission  extends  only  to  signature  of  drawer,  II..  1363. 

and  not  to  terms  of  bill,  II.,  1363- 

if  amount  altered,  acceptor  may  generally  recover  back  from  holder 
II..  1363. 

how  far  negligence  deprives  him  of  this  right,  II.,  1363. 

drawee  who  accepts  or  pays  is  not  thereby  regarded  as  admitting  gen- 
uineness of  signature  of  indorser,  II..  1364. 

extent  to  which  distinction  between  drawer's  and  indorser's  signature 
has  been  carried,  II..  1365. 

circumstances  under  which  acceptor  who  has  paid  bill  under  forged  in- 
dorsement can  not  recover  amount  of  holder.  II..  1336. 

payee  whose  indorsement  is  forged  may  recover  on  instrument,  11., 
1 366. 

thus  if  forged  indorsement  were  on  bill  when  issued  by  drawer,  II.. 
1366. 

for  then  drawee  or  acceptor  could  charge  it  on  account  against  drawer, 
II.,  1367. 

if  acceptor  accept  and  negotiate  bill  with  knowledge  of  forged  indorse- 
ment on  it,  he  is  bound,  II.,  1366. 

5.  Exceptions  to  general  rule  that  drawee  or  acceptor  can  not  recover  back 

money  paid  on  forgery  of  drawer's  7iame,  II.,  1367. 
(i)  when  payment  is  made  to  payee,  II.,  1367. 

(2)  when  holder  peculiarly,  or  parties  mutually  in  fault,  II.,  1367. 

(3)  when  party  has  paid  for  honor  without  negligence,  II.,  1368. 

6.  Recovery  of  7notiey  paid  on  forged  instrument,  II.,  1369. 

generally  money  paid  under  mistake  of  fact  may  be  recovered  back, 

II.,  1369. 
if  valid,  surrendered  for  forged  paper,  it  is  no  payment,  II„  1369. 
and  will  not  discharge  fixed  indorser,  II.,  1369. 
bank  paying  forged  draft  of  depositor  is  still  bound  to  him,  II.,  1370. 
depositor  not  bound  to  examine  pass-book,  II.,  1370. 
party  paying  without  opportunity  of  inspection  may  recover  amount, 

II.,  1370. 
party  collecting  on  forged  indorsement  liable  to  owner,  II.,  1370. 

7.  When  notice  of  forgery  must  be  given  and  demand  of  restitution  made, 

II.,  1371. 
if  holder  surrenders  indorsed  paper  for  forged,  must  discover  it  in  time 

to  notify  indorser,  else  he  is  discharged,  II.,  1371. 
number  of  days  considered  too  long  delays,  II.,  1371. 
doctrine  approved  that  restitution  may  be  demanded  in  reasonable 

time  after  discovering  forger>',  II.,  1372. 
when  forged  paper  need  not  be  returned,  II.,  1372^. 
if  party  has  paid  money  for  or  upon  forged  instrument  when  some 

parties  thereto  are  genuine,  II.,  1372^. 
if  bill  or  note  wrongfully  converted,  owner  may  sue  in  tort,  II.,  1372*5. 
or  may  waive  tort  and   recover  money  as   received  for  his  use,  II., 

1372(5. 
8.  Of  checks.     See  Checks,  and  II.,  1654  to  1657. 


^r\r\  T-vmrv  References  are  to 

900  IIsDtX.  paragrai>hs  marked  \, 

FOREIGN  PROMISSORY  NOTES. 

protest  of,  II.,  928. 
FORMAL  REQUISITES  OF  BILLS  AND  NOTES.     See  Date;  Sign  a- 
TURE ;   Amount  ;  Time   of  Payment  ;  Place  of  Payment 
Drawer  ;    Drawee  ;   Maker  ;   Payee  ;   Negotiability  ;  Ad- 
vice ;  Attestation  ;  Consideration. 

no  particular  words  essential,  73. 

order  under  note,  "please  pay  above  note  and  hold  against  me  in  our 
settlement,"  held  a  good  bill,  73. 

so,  such  an  order  under  an  account,  73. 

so,  an  indorsement  on  a  bond  ordering  contents  to  be  paid  for  value 
received,  73. 

signature  may  be  on  any  part  of  instrument,  74. 

how  signature  may  be  made,  74. 
See  Signature. 

the  name  is  not  necessary  if  it  be  sufficiently  indicated  who  the  party 
is,  75. 

informality  of  expression  or  grammatical  error  immaterial,  76. 

"I  promised  "  construed  as  "  I  promise,"  T^i, 

"pound  "  construed  as  "pounds,"  ^d. 

other  instances,  76. 

instrument  may  be  written  on  parchment,  leather,  or  any  convenient 
substitute  for  paper,  'j'], 

whether  may  be  on  metal,  stone,  or  wood,  'j']. 

may  be  printed  and  similar  to  bank  notes,  78. 

whole  of  bill  or  note  must  be  written  or  printed,  79. 

memorandum  on  any  part  of  instrument  may  qualify  it,  79. 

there  may  be  stipulations  affecting  instrument  on  detached  paper,  79. 

evidence  inadmissible  to  vary,  80. 

instances,  80. 
FRAUD.    See  Bona  Fide  Holder. 

vitiates  consideration,  193. 

fraud  in  inception  of  paper  shifts  burden  of  proof,  769,  810,  819. 

when  consideration  evidence  of,  779. 

notice  of,  impeaches  holder's  title,  789. 

what  notice  suffices — affects  holder  if  he  gets  it  before  payment,  789. 

constructive  notice  sufficient,  789. 

instruments  obtained  by,  177,  847. 

in  drawing  without  funds,  II.,  1074  to  1084. 

what  damages  party  defrauded  into  execution  of  note  may  recover 
776a. 

FRAUDS.    See  Statute  of. 

FUNDS.     Want  of  as  excuse.     See  EXCUSES,  and  II.,  1073. 

GAMING  CONSIDERATION. 

when  note  given  for  is  void  in  all  hands,  195. 
GARNISHMENT. 

when  assignment  takes  priority,  16  to  23a. 

vyhether  payee  of  negotiable  note  subject  to,  800a. 


References  are  to  TTMnTTY  r\r\l 

paragraph!  marked  %.  INDEX.  9O I 

GIFT.    See  Donatio  Mortis  Causa  ;  Consideration. 

of  negotiable  instrument,  not  negotiation  in  usual  course  of  business 

181. 
but  holder  without  notice  could  recover,  l8i. 

GIVING  TIME. 

effect  of  in  discharging  surety,  II.,  1312,  1317. 

GOVERNMENTS  AS  PAKTIES  TO  NEGOTIABLE  INSTRUMENTS.  Set 
Coupon  Bonds. 

when  officer  of  Federal  or  State  government  is  authorized  to  bind  it  by 
negotiable  instrument,  validity  can  not  be  questioned  against  bona 
fide  holder  without  notice,  436. 

government  in  such  case  bound  like  individual,  436. 

at  present  no  Federal  officer  can  bind  government  as  party  to  negoti- 
able paper,  436. 

the  Floyd  acceptances,  437. 

order  by  Government  of  United  States  on  Government  of  France  not 
bill  of  exchange,  438. 

foreign  governments  may  be  parties,  439. 

difference  between  governmental  and  private  agents,  440. 

powers  of  governmental  agents  defined  by  statute,  440. 

coupon  bonds  of  Federal  and  State  governments  negotiable,  441. 

'treasury  notes  of  United  States  negotiable,  though  under  seal,  441. 

after  maturity,  subject  to  equities,  441. 

when  not  negotiable,  441. 

State  pledging  fund  to  pay  interest  on  bonds  can  not  divert  it,  442. 

if  agent  or  officer  authorize  to  sell  bonds  at  par,  sale  below  par  would 
be  void,  442. 

when  public  officer  contracts  in  scope  of  authority,  he  is  presumed  to 
act  officially,  443. 

as  where  bill  payable  to  "  T.  T.  T.,  Treasurer  of  United  States,"  443. 

other  instances,  443. 

who  are  deemed  public  agents,  443^. 

books  are  destitute  of  cases  precisely  in  point,  443a. 

officer  or  agent  can  not  ratify  contract  unless  empowered  to  make  it, 

444. 
governmental  officers  and  agents  not  personally  bound  on  contracts, 

even  though  if  they  were  private  persons  they  would  be  bound,  445. 
reason  and  theory  of  the  distinction,  445. 
if  officer  or  agent  does  not  disclose  official  character,  he  is  bound  by 

contract,  W^a. 

GRACE,  DAYS  OF. 

allowed  by  favor  to  drawee  of  foreign  bill,  to  enable  him  to  provide  for 

payment,  614. 
called  "days  of  grace,"  or  "respite  days,"  because  gratuitous,  614. 
by  custom  universally  recognized  now  as  matter  of  right,  614. 
demand  before  or  after  their  expiration  unavailing,  614. 
interest  chargeable  for  period  of,  614. 
apply  to  all  parties  to  the  paper,  615. 
and  to  inland  bills  and  promissory  notes,  616. 


r\r>o  TMnTTY  References  are  to 

9*-^ 2  1 JN  DiiX.  ^aragraphi  marked  % 

GRACE.  DAYS  OY —continued. 

and  to  all  bills  and  negotiable  notes  except  those  payable  on  demand 
617. 

if  no  time  of  payment  specified,  on  demand  understood,  617. 

bills  and  notes  payable  at  sight,  entitled  to  grace,  617. 

conflicting  views,  617,  618. 

rule  affected  sometimes  by  statute,  618. 

bill  payable  "  one  day  after  sight  "  is  due  four  days  after  sight,  617. 

"  after  sight  "  in  bill  means  after  acceptance  or  refusal,  619. 

"on  demand  at  sight"  equivalent  to  "at  sight,"  621. 

"  at  or  after  sight "  in  note  means  that  it  must  be  again  exhibited  tc 
maker,  619. 

only  negotiable  instruments  entitled  to,  620. 

apply  to  each  instalment  when  paper  payable  in  instalments,  621. 

are  calculated  exclusive  of  day  of  payment,  621. 

generally  confined  to  three  days  in  England  and  United  States,  622. 

courts  judicially  notice,  622. 

usage  in  different  places  may  fix  different  periods  of  grace,  622. 

rules  respecting  usages  of  banks  as  to  number  of  days  allowed  in  par- 
ticular localities,  623. 

may  be  dispensed  with,  633. 

words  "without  grace,"  or  "no  grace,"  or  "fixed,"  dispense  with 
grace,  633. 

"  without  defalcation  "  does  not,  633. 

nor  does  marginal  note  of  day  of  maturity,  633. 

but  if  acceptor  fix  day  of  maturity  without  grace,  it  does,  633. 

allowance  of,  and  number  of  days  fixed  by  law  of  place  of  payment,  634. 

law  merchant,  allowing  three  days,  presumed  to  prevail,  634. 

if  last  day  of  grace  fall  on  Sunday,  paper  becomes  due  the  day  before,  627. 

so  if  last  day  of  grace  be  a  legal  holiday,  627. 

and  if  Sunday  be  last  day  of  grace,  and  Saturday  be  legal  holiday,  paper 
falls  due  on  Friday,  627. 

rule  is  different  as  to  paper  not  negotiable,  627, 

if  Sunday  or  holiday  intervene  in  days  of  grace,  it  does  not  affect  them, 
627. 

latest  business  day  within  or  before  period  of  grace  is  day  of  payment,  627. 

days  of  religious  observance  of  particular  sects,  how  regarded,  628. 

what  days  are  legal  holidays,  629. 

usage  of  banks  as  to  holidays,  629. 

whether  suit  may  be  brought  on  last  day  of  grace,  II.,  1207  to  121 1. 

GREENBACK  CURRENCY. 

whether  instruments  payable  in  are  negotiable,  57. 
held  negotiable  in  Arkansas  and  New  York,  57- 

GROSS  NEGLIGENCE.    See  Bona  Fide  Holder. 

whether,  and  how  far,  affects  holder's  title  of  bills  and  notes,  774,  775, 

776. 
of  coupon  bonds,  II.,  1502. 
of  bank  notes,  II.,  1680. 


References  are  to  T  V n TT  v  r\r\'> 

paragraphs  ma  rked  %  IJNJJtX.  9O3 

GUARANTIES. 

I.  Definition  a7id  nature  of  guaranty,  II.,  1752. 

guaranty  and  warranty  are  synonymous  terms,  II.,  1752. 

guaranty  is  a  peculiar  kind  of  suretyship,  II.,  1753. 

but  differs  from  indorsement  and  from  the  ordinary  contract  of  surety- 
ship, II.,  1753. 

the  difference  defined,  II.,  1753,  1754. 

surety's  obligation  is  primary  and  direct  like  that  of  principal,  II.,  1753. 

guarantor's  is  secondary  and  collateral,  II.,  1753. 

guarantor  contracts  to  pay  if,  by  exercise  of  due  diligence,  the  debt  can 

not  be  made  out  of  the  principal  debtor,  II.,  1753. 
surety  is  an  insurer  of  the  debt,  guarantor  of  the  solvency  of  the  debtor 

n.,  1753. 

guarantor's  liability  is  more  onerous  than  an  indorser's,  II.,  1754. 

he  is  not  absolutely  discharged  by  failure  to  make  presentment  and  give 

notice  within  reasonable  time,  II.,  1754. 
opposite  rules  for  the  interpretation  of  guaranties  laid  down  in  the 

cases,  II.,  1755. 

reasons  why  they  should  receive  a  fair  and  liberal  interpretation,  II., 

1755- 
main  object  should  be  to  ascertain  and  effectuate  the  intentions  of  the 

parties,  II.,  1755. 
if  the  guaranty  propose  a  credit,  that  particular  credit  must  be  granted 

or  the  guarantor  is  not  bound,  II.,  1755. 
held  in  Massachusetts  that  one  authorized  to  draw  drafts  "at  ten  or 

twelve  days,"  had  an  option  to  draw  either  after  date  or  after  sight 

II.,  1756. 

effect  of  writing  one's  name  on  back  of  note  payable  to  a  particular 

payee  before  such  payee's  name,  II.,  1757. 
when  note  is  not  negotiable  such  party  is  to  be  deemed  a  guarantor, 

II.,  1757. 
when  note  is  negotiable  the  opposite  presumption  arises,  II.,  1757. 
guarantor  of  payment  by  payee,  becomes  vested,  on  paying  the  note, 

with  the  same  rights  which  payee  had  against  maker,  and  no  more, 

II.,  1758. 

when  guaranty  of  note  made  after  its  execution,  upon  a  new  and  suffi- 
cient consideration,  is  valid,  II.,  1758. 
2.  As  to  the  consideration  of  guaranties,  XL,  1759. 

valuable  consideration  is  necessary  to  validity  of  guaranty,  II.,  1759. 
three  classes  of  cases  to  be  discriminated,  II.,  1759. 
(i)  when  guaranty  is  contemporaneous  with  principal  contract,  II..  1759. 
in  which  case  it  is  necessary  for  the  consideration  of  the  guaranty 

to  be  distinct  from  that  of  the  bill  or  note,  II.,  1759. 
when  the  guaranty  is  made  prior  to  delivery  of  bill  or  note,  it  will 
be  presumed  to  be  upon  consideration  of  the  credit,  and  will  be 
valid,  II.,  1759. 

(2)  when  the  guaranty  is  made  after  the  contract  is  completed,  and  is 
not  for  benefit  of  guarantor,  II.,  1760. 

in  which  case  there  must  be  some  new  and  sufficient  consideration 
to  support  it,  II.,  1760. 

and  plaintiff  must  prove  such  new  consideration,  II.,  1760. 

rule  does  not  apply  where  there  are  circumstances  to  show  that  the 


nn  A  T  xr  m?  V  References  are  to 

9*^4  INDtX.  ^aragrai>hs  marked  % 

G\5P^^hKYY£JS>— continued. 

guaranty  was  intended  to  relate  back  to  the  delivery  of  the  in- 
strument, II.,  1760. 
(3)  when  the  guaranty  is  made  after  the  contract  is  completed,  and  is 
for  the  benefit  of  the  guarantor,  II.,  1761. 
in  which  case  it  becomes  his  own  debt  which  gi.i,arantor  promises 
to  pay,  II.,  1761. 

3.  As  to  operation  of  statute  of  frauds  (29  Charles  II.),  II.,  1762. 

special  provision  requiring  promises  to  answer  for  another's  debt  to  be 

in  writing  adopted  generally  in  all  the  States,  II.,  1762. 
construction  of,  in  England  and  United  States,  II.,  1762. 
and  herein  (i)  when  the  guaranty  is  a  promise  to  answer  the  debt  ot 
another,  II.,  1763. 
distinction  between  real  and  apparent  promise  to  answer  for  an- 
other's debt,  II.,  1763. 
verbal  guaranty  that  note  passed  by  guarantor  in  part  payment  for 

a  horse  "was  good  and  collectible,"  held  to  be  valid,  II.,  1763. 
where  one  sells  a  note  and  guarantees  its  payment,  the  guaranty 
need  not  be  written,  II.,  1763. 
(2)  as  to  the  terms  of  the  guaranty,  II.,  1764, 

in  England,  the  word  "  agreement  "  construed  to  embrace  both  the 

consideration  and  the  promise,  II.,  1764. 
in  this  country  the  opinion  predominates  that  if  the  promise  be 

written  it  is  sufficient,  II.,  1764. 
where  the  consideration  is  not  required  to  be  expressed,  the  name 

of  the  party  in  blank  is  sufficient  writing  to  satisfy  the  statute, 

II.,  1765. 
where  the  statute  only  requires  the  promise  to  be  in  writing,  it  is 

not  necessary  for  the  consideration  to  appear,  II.,  1765. 
sufficient  in  any  case  that  the  consideration  appears  by  reasonable 

intendment,  II.,  1766. 
rule  formerly  in  New  York,  where  original  contract  and  guaranty 

were  contemporaneous,  II.,  1767. 
now,  by  statute  in  that  State,  the  consideration  must  be  expressed 

in  writing,  II.,  1767. 

words  "  value  received  "  sufficient  expression  of  the  consideration, 
II.,  1767. 

if  guaranty  be  under  seal,  that  imports  consideration,  II.,  1767. 

4.  Guaranty  of  bill  or  note  need  not  be  in  any  particular  form,  II.,  1768. 

though  generally  written,  there  may  be  valid  verbal  guaranties,  II., 

1768. 
when  written,  it  may  be  by  separate  instrument  or  by  writing  on  the 

instrument  guaranteed,  and  may  be  sealed  or  unsealed,  II.,  1768. 
when  on  separate  paper,  it  should  accurately  describe  bill  or  note  to 

which  it  refers,  II.,  1768. 
a  general  guaranty  is  to  whomsoever  may  accept  the  proffer  made,  II., 

1768^'. 
a  special  guaranty  is  one  to  a  particular  person,  IL,  1768^. 
what  is  an  absolute  and  what  a  conditional  guara.niy,  II.,  1769. 

any  extraneous  event  besides  mere  default  of  principal  makes  guaranty 

conditional,  II.,  1769. 
import  of  phrases,  "  I  guarantee  the  collection  of  the  within  note,'' 

'•  I  promise  that  this  note  is  good  and  collectible  after  due  course  ot 

law,"  and  "  I  warrant  this  note  good,"  II.,  1769. 


References  ire  to  „ 

paragraphs  marked  %.  IJNUiLX.  g05 

jUARANTIES — continued. 

guarantee  in  such  cases  must  act  with  due  diligence  in  collecting  note 
II.,  1769. 

what  is  due  dili;jence,  II.,  1769a. 

otherwise,  if  principal  be  insolvent  or  has  removed  from  State  where 
contract  was  made,  II.,  1769^:. 

but  guarantee  must  proceed  against  principal  first  if  he  resided  in  a 
foreign  State  when  the  contract  was  made,  II.,  1769a;. 

5.  A  guaranty  may  be  limited  or  unlimiti'd  in  respect  to  amount  guaranteed, 

II.,  1770. 

it  may  be  limited  to  a  single  transaction,  II.,  1770. 

and  within  a  certain  period  of  time,  II.,  1770. 

and  it  may  be  a  continuing  and  standing  guaranty,  II.,  1770. 

examples  of  each,  II.,  1770,  1771. 

expression  "  from  time  to  time,"  or  "  at  any  time,"  or  for  "  any  debt," 

how  construed,  II.,  1772. 
guaranty  in  such  case  is  not  confined  to  one  instance,  but  applies  to 

debts  successively  renewed,  II.,  1772. 
doctrine  in  the  United  States,  II.,  1773. 

6.  Negotiability  of  guaranties,  II.,  1774. 

(^i)  not  generally  negotiable  when  written  on  separate  paper,  II.,  1774. 

if  addressed  to  a  particular  person,  it  is  a  contract  limited  to  such 
person,  II.,  1774. 

the  party  to  whom  the  guaranty  is  made  may  in  equity  assign  it 
when  he  transfers  the  bill  or  note,  II.,  1774a. 

views  of  Senator  Verplanck  of  New  York  respecting  negotia- 
bility of  guaranties  on  separate  paper  from  instrument  guaran- 
teed, II.,  1775. 

(2)  rule  when  guaranty  is  written  upon  the  paper  at  time  of  its  execu- 
tion, II.,  1776. 

if  such  guaranty  be  not  expressed  in  negotiable  words,  held  in 
some  cases  that  its  being  written  upon  a  negotiable  instrument 
does  not  make  it  negotiable,  II.,  1776. 

in  others,  the  contrary  view  is  maintained,  II.,  1777. 

the  latter  seems  the  better  doctrine,  II.,  1777. 

views  of  Judge  Story  and  Prof.  Parsons  on  this  question,  II.,  1778. 

doctrine  in  New  York  that  guarantor  is  liable  as  a  joint  and  several 
maker  not  sustained,  II.,  1779. 

distinction  in  these  cases  between  secondary  and  absolute  obligation 
by  guarantor,  II.,  1780. 

what  words  of  indorsement  will  make  guarantor  an  original  prom- 
isor, II.,  1780. 

(3)  as  to  effect  of  guaranties  written  on  the  paper  by  the  transferrer  at 
time  of  transfer,  II.,  1781. 

better  opinion  is,  that  such  transferrer  is  liable,  both  as  indorser  and 
guarantor,  II.,  1782. 

but  other  authorities  say  such  guaranty  operates  only  in  favor  of  the 
party  who  first  took  the  instrument  on  faith  of  it,  II.,  1782. 

what  was  held  in  Massachusetts  where  payee  transferred  note  with 
the  words,  "I  guarantee  the  payment  of  this  note  within  six 
months,"  II.,  1783. 

holder  who  transfers  note  and  guarantees  collection,  makes  a  special 
contract,  and  is  not  liable  as  an  indorser,  II.,  1784. 


n  ri  ^  T  XT  n  TT  V  Re/erenc  es  a  re  to 

Q,\5  K^k^'Y\Y.'~>— continued. 

7.  Requisites  to  establish  and  preserve  guarantor's  liability,  II.,  1785, 

and  herein  (i)  as  to  notice  of  acceptances  of  guaranty,  II.,  1785. 
no  notice  of  acceptance  is  required  where  there  is  a  personal  treaty 

between  guarantor  and  guarantee  as  to  specific  existing  demand, 

II.,  1785. 
but  where  a  proposition  for  a  guaranty  is  made,  it  must  be  accepted 

before  it  is  binding,  II.,  1785. 
and  when  addressed  generally  to  any  person,  notice  of  its  acceptance 

should  be  given  by  the  party  acting  upon  it,  11. ,  1785. 
doctrine  of  U.    S.  Supreme  Court  in  reference  to  letter  of  credit 

which  contemplates  future  guaranties,  II.,  1785^. 
notice  of  acceptance  by  particular  person  to  whom  it  is  addressed  is 

necessary,  II.,  1785a, 
decision  of  State  courts,  II.,  17851^. 
knowledge  deemed  from  circumstances  equivalent  to  notice  in  such 

case,  II.,  17851^. 
when  guaranty  has  been  accepted,  it  is  not  necessary  to  give  notice 

of  each  particular  advance  made  in  accordance  with  it,  11. ,  17851^. 

(2)  demand  upon  the  principal  and  notice  of  default  of  guarantor,  II., 

1786. 
when  guaranty  depends  on  happening  of  contingent  event,  notice  of 

its  happening  should  be  given  the  guarantor  within  reasonable 

time,  II.,  1786. 
query,   whether  demand  and   notice  required  in  case   of  absolute 

guaranty  ?  II.,  1786. 
the  correct  doctrine  seems  to  be  that  the  guarantor  is  entitled  to 

have  demand  made  upon  the  maker,  and  notice  of  his  default,  II., 

1787. 
same  strictness  as  to  demand  and  notice  which  obtains  in  case  of 

indorser  is  not  required  to  charge  guarantor,  II.,  1788. 
guarantor  will  only  be  discharged  provided  he  has  suffered  loss,  and 

to  the  extent  of  such  loss,  II.,  1788. 
guarantor  presumed  to  receive  no  injury  from  delay  as  to  demand 

and  notice,  where  principal  is  insolvent  at  maturity  of  debt  and  so 

remains,  II.,  1788. 
injury   is  sufficiently  proved  if  guarantor  was  solvent  when  debt 

matured,  and   became  insolvent   before   demand   and  notice,  II., 

17S8. 
guarantor,  by  writing,  may  waive  notice  of  acceptance,  and  also  de- 
mand and  notice  of  default,  II.,  1788. 
also  he  may  waive  by  a  promise  to  pay  after  maturity,  II.,  1788. 

(3)  as  to  what  will  discharge  guarantor,  II.,  1789. 

he  is  effectually  discharged  by  a  release  of  his  principal,  II.,  1789. 
by  the  guarantees  allowing  extension  of  time  to  the  principal  upon 

consideration,  II.,  1789. 
by  a  renewal  which  suspends  the  original  debt,  II.,  1789. 
by  the  surrender  of  any  security  held  by  the  creditor,  II.,  1789. 
revocation  by  death,  II.,  1789. 

GUARDIANS,    See  Fiduciaries. 

GUARDIANSHIP. 

persons  under  can  not  contract,  259. 


References  are  to  TVmrv  nn*? 

paragraphs  mar ked%.  INDEX.  QO/ 

HALF  NOTES.    See  Bank  Notes,  and  II.,  1695,  1697. 

HANDWRITING. 

proof  of,  when  necessary,  II.,  1219. 

whether,  and  when  comparison  of  sigpnatures  may  be  made,  II..  1219. 

HOLDER.    See  BONA  Fide  Holder. 

HOLIDAYS.     See  GRACE. 

what  days  are  legal  holidays,  629. 
usage  of  banks  as  to  holidays,  629. 

law  making  legal  holidays,  and  thereby  affecting  grace,  does  not  im 
pair  obligation  of  contract,  629. 

HONOR,  ACCEPTANCE  AND  PAYMENT  FOR. 

acceptance  for  honor  or  supra  protest,  II.,  1254,  1258. 
payment  for  honor  qx  supra  protest,  II.,  1254  to  1258. 

HOURS   OF   BUSINESS, 
what  are,  464,  600. 

HUSBAND  AND  WIFE.    See  Married  Woman. 

IDENTITY. 

of  parties  of  same  name,  II.,  1218,  1607,  1612. 
when  party  is  marksman  must  be  shown,  II.,  1218. 

ILLEGALITY  OF  CONSIDERATION.    See  Consideration  ;  Renewal 
Bills  and  Notes. 
how  purged,  207. 

ILLNESS. 

as  excuse  for  want  of  presentment,  protest,  and  notice.     See  Excuses, 

and  478.     II.,  1066,  1125,  1126,  1127. 

when  epidemic  disease  operates  as  excuse,  II.,  1066. 

sudden  illness  and  death  of,  or  accident  to  holder,  as  excuse,  II.,  1125, 
II 26. 

must  prevent  due  diligence,  II.,  1127. 

when  necessary  is  over,  usual  steps  must  be  taken,  II.,  1125. 

IMBECILE.    See  Lunatic,  and  109. 

IMMATERIAL  ALTERATIONS.    See  Alteration,  and  II.,  1398.  1403, 
1411,  1416. 

IMMORAL  CONTRACT.    See  Consideration,  and  195  et  seg. 
void  at  common  law,  195. 
illustrations,  195,  196. 

bill  or  note  based  on,  valid  in  hands  of  bona  fide  holder  without  no- 
tice, 197. 

otherwise  if  statute  declares  contract  void,  197. 

no  nation  will  enforce  contracts  made  in  another  country  based  upon 

immoral  consideration,  866. 
illustration,  866. 


o  T-KT-n.T7-v  References  are  it) 

gOo  IWDli-X.  /laragraphs  marked  % 

IMPLIED. 

authority  of  agent.     See  Agent,  and  278,  289. 

of  copartner  to  bind  firm.     See  Partners,  and  355,  358. 

of  corporation.     See  Corporation,  and  379. 
acceptance.     See  Acceptance,  and  499,  501. 
consent  to  alteration.     See  Alteration,  and  II.,  1401. 
notice.     See  Bona  fide  Holder,  789^,  795a,  795'5- 

IMPRISONMENT.     See  EXCUSES,  and  II.,  1120. 

no  excuse  for  delay  as  to  presentment  and  notice,  II.,  1120. 

INABILITY  TO  FIND  PARTY.    5^,?  Excuses,  and  II.,  11 14,  1 123. 
as  excuse  for  delay  in  presentment  and  notice,  II.,  1 1 14  to  1 123. 

INCAPACITY.    See  Capacity  ;  Infants  ;  Aliens  ;  Lunatics  ;  Married 

Women;  Bankrupts;  Guardians. 
INDEMNITY.     See  Excuses,  and  II.,  11 28,  1480. 

as  excuse  for  non-presentment  and  notice,  II.,  1128  to  1131. 
when  paper  lost,  II.,  1480. 
INDORSEMENT,  and  transfer  by  indorsement.     See   COUPON  BONDS,  II., 

1500. 
I.  Forms  of  transfer,  and  transfer  by  indorsement,  663. 

bill  or  note  payable  to  bearer  or  indorsed  in  blank,  may  be  transferred 

like  currency  by  delivery,  663. 
other  bills  and  notes  by  indorsement  of  transferrer's  name,  and  de- 
livery to  party  named,  663. 
if  not  expressed  to  be  payable  to  order  of  any  person  or  to  bearer, 

they  are  not  negotiable  in  the  United  States  or  England,  unless  by 

statute,  663. 
payee  who  puts  his  name  on  paper  payable  to  bearer  or  indorsed  in 

blank,  is  liable  as  indorser,  663a;. 
when  such  indorsement  is  alleged,  it  must  be  proved,  663a. 
note  payable  to  "  A.  B.  or  bearer  "  is  same  as  if  simply  to  bearer,  663a. 
party  renders  himself  liable  when   he  indorses  a  non-negotiable  note 

payable  to  him  only,  664. 
when    instrument    is   payable    "  to   order,"    payee's    indorsement   is 

necessary  to  transfer  legal  title,  664a, 
of  corporation  with  seal  is  good,  664^. 
delivery  by  indorser  is  necessary  to  complete  contract,  665. 
implies  acceptance  by  indorsee,  665. 

offer  to  indorse  must  be  accepted  in  reasonable  time,  665. 
meaning  of  the  term  "  indorsement,"  666. 
technically,  it  is  applicable  only  to  negotiable  paper,  666. 
literally,  it  means  writing  one's  name  on  the  back  of  instrument,  666. 
technically,  it  means  writing  one's  name  on  instrument  with  intent  to 

incur  liability  in  certain  contingencies,  666. 
term  indorsement  includes  deliver)',  667. 
indorsement  can  not  be  partial  in  respect  to  amount,  668. 
indorsement  is  a  new  contract  embodying  all  tiie  terms  of  the  instru- 

ment  indorsed,  668. 
is  equivalent  to  drawing  new  bill,  669. 


INDOP  ^YMY.'^'Y—co7iti7tued. 

indorser  of  instrument  warrants  (i)  that  it  will  be  accepted  or  paid 
according  to  its  purport,  669^,  671. 

(2)  that  it  is  genuine,  669.'?,  672. 

(3)  that  it  is  valid,  669^,  673,  674. 

(4)  that  the  ostensible  parlies  are  competent,  669a,  675,  676. 

(5)  that  indorser  has  a  lawful  title  to  it,  669^,  677. 

indorsement  "  without   recourse  "    implies  that   indorser  declines    to 

assume  any  responsibility  as  a  party  to  bill  or  note,  670. 
holder  may  recover  against  indorser  "without  recourse,"  (i)  if  any  of 
the  prior  signatures  are  not  genuine  ;  (2)  if  note  is  invalid  between 
original  parties ;  (3)  if  any  prior  party  is  incompetent ;  and  (4)  if  the 
indorser  is  without  a  title,  670. 
indorser  of  bill  contracts  to  pay  at  maturity  if  bill  be  not  accepted 
according  to  purport,  and  he  be  notified  of  its  dishonor, 
671. 
of  accepted  bill,  or  of  a  note,  contracts  to  pay  it  if  not  duly 

paid  by  the  acceptor  or  maker,  671. 
contracts  that  the  bill  or  note  is  neither  forged,  fictitious,  nor 

altered,  672. 
engages  that  the  bill  or  note  is  a  valid  subsisting  obligation 
which  binds  all  prior  parties,  673. 
wherein  considered  and  cases  cited,  674. 
indorser  contracts  that  the  original  parties  were  competent  to  bind 

themselves,  whether  as  drawer,  acceptor,  or  maker,  675. 
query,  whether  this  engagement  extends  to  all  antecedent  parties,  676. 
indorser  contracts  that  he  has  a  lawful  title  to  bill  or  note,  and  a  right 
to  transfer  it,  677. 

indorsement,  as  to  its  obligation,  is  determined  by  the  law  of  the  place 
of  its  execution,  678. 

circumstances  which  invalidate  any  other  contract  apply   to  indorse- 
ment, 678a. 

there  must  be  a  consideration   for  the  indorsement  between  the  im- 
mediate parties,  679. 
2.    Who  may  indorse  or  assign  bills  and  notes,  680. 

any  person  legally  capable  of  contracting,  maybe  the  indorser  or  trans- 
ferrer by  delivery  of  negotiable  paper,  680. 

indorsement  by  assignee  in  bankruptcy,  680. 

personal  representative,  680,  686. 
other  fiduciaries,  680. 

marriage  o{  f etna le  payee,  or  indorsee  of  bill  or  note,  vests  property 
thereof  in  her  husband,  681. 

by  married  woman  of  note  assigned  before  marriage,  681. 

an  infant,  by  his  indorsement,  may  transfer  paper  to  any  subsequent 
holder  against  all  parties  thereto,  except  himself,  6S2. 

if  instrument  be  payable  or  indorsed  to  copartnership,  any  member 
may  transfer  it  and  indorse  it  in  name  of  firm,  683. 

but  if  partnership  is  dissolved  otherwise  than  by  the  death  of  a  partner 
the  survivor  can  not  indorse  in  name  of  firm,  683. 

if  several  persons,  not  partners,  are  payees,  all  must  indorse,  684. 

note  payable  to  executor  may  be  transferred  for  a  debt  of  the  estate, 
685. 


,  _^  T  VTi T7  V  References  are  to 

y  '  ^  ^^^ ^"^*  paragraphs  marked \. 

INDORSEMENT— (T^w//;/?/^^. 

indorsement  by  agent,  301. 

transfer  of  bill  or  note  may  be  made  to  any  one  capable  of  contracting 
with  transferrer,  686, 

it  may  also  be  made  to  an  infant  or  a  married  woman,  686. 

or  to  a  trustee  or  personal  representative,  686. 

by  president  or  cashier,  binds  bank,  685. 

in  which  case,  though  it  is  a  transfer  to  him  personally,  the  trust 
attaches  to  proceeds,  686. 

if  to  A.  for  use  of  B.,  A.  is  indorsee,  685. 

promissory  note  payable  to  "J.  C,  Sh'fif,"  and  indorsed  "J.  C,  Sh'ff," 
does  not  of  itself  impart  notice  to  indorsee  that  the  money  is  pay- 
able to  J.  C.  in  his  official  capacity  as  sheriff,  686. 

if  a  bill  or  note  is  payable  to  a  party  as  cashier,  it  will  be  regarded  as 
payable  to  his  bank,  687. 
3    Forms  and  varieties  of  indorsement . 

transferrer's  name  is  generally  written  on  the  back  of  instrument,  688. 

but  "  indorsement "  is  good  if  name  be  written  on  any  other  portion  ot 
the  paper,  688. 

initials,  or  any  mark  to  indicate  name,  will  suffice,  688«. 

examples  of  what  is  sufficient  indorsement  by  figures  or  other  indicia, 
688«. 

whether  party  who  writes  sale  or  assignment  is  indorser,  or  mere  as- 
signor of  instrument,  688i5. 

peculiar  expressions  used  in  transfers,  688i5. 

amounts  to  ordinary  indorsement  in  an  elaborate  form,  688(5. 

American  decisions  in  similar  cases,  688^. 

indorser  may  authorize  another  to  write  his  name,  689. 

as  a  general  rule,  indorsement  must  be  on  the  paper,  or  attached  to  it, 
689^. 

promise  to  indorse  for  valuable  consideration  will  support  an  action  for 
its  breach,  689a. 

transfer  of  a  note  with  a  guaranty  is  good,  though  the  guaranty  be  void 
under  statute  of  frauds,  689^:. 

not  necessary  for  indorsement  to  be  on  the  original  paper,  690. 

may  be  on  sHp  of  paper  attached  thereto,  690. 

called  allonge,  690. 

various  liabilities  evidenced  by  terms  of  indorsement,  691. 
(i)  indorsement  in  full,  691,  692. 
(2)  indorsement  in  blank,  691,  693. 

no  difference  between  note  indorsed  in  blank  and  one  payable  to 
bearer,  693. 

indorsement  of  blank  paper  is  a  "letter  of  credit  for  an  indefinite  sum," 
.-      694. 

when  there  are  several  indorsers  in  blank,  holder  may  strike  out  any 
he  pleases,  694^. 

but  if  there  be  a  special  indorsement  to  a  particular  person,  holder  can 
not  strike  it  out  and  insert  his  own  name,  694a. 

subsequent  indorsers  are  not  discharged  when  holder  fills  up  a  prioi 
blank  indorsement,  payable  to  himself,  694^. 

blank  indorsement  does  not  per  se  transfer  a  title,  695. 


References  are  to  t xT t-> -c v 

paragraphs  marked  %.  INUbX.  Oil 

INDORSEME  ^T—cojitittned. 

bill  or  note  once  indorsed  in  blank,  and  afterward  in  full,  is  still  pay- 
able to  bearer  against  all  parties,  save  special  indorser,  696. 

title  of  latter  must  be  made  through  his  indorsee,  696. 

holder  can  not  fill  up  blank  so  as  to  make  note  payable  partly  to  one 
and  partly  to  another  person,  696<z. 
4.    What  are  absolute  and  ivhat  conditional  indorsements,  697. 

what  are  restrictive  indorsements,  698. 

indorsee  of  restrictive  indorsee,  698(3:. 

can  not  sue  the  drawer  or  acceptor  upon  it,  698(1. 

mere  mention  of  consideration  in  the  indorsement  would  not  render  it 
restrictive,  6()%d. 

illustrations  of  restrictive  indorsements,  6g2,c. 

indorsement  "  for  collection,"  698^^. 

when  inserted  in  indorsement  and  instrument  put  in  bank  for  collec- 
tion, 698(/. 
makes  indorsement  restrictive,  6g2>d. 

indorsement  "  for  niy  use,"  or,  "  for  collection,"  may  be  recalled  at 
pleasure,  699. 

indorsement  "without  recourse,"  or  "at  the  indorsee's  own  risk," 
makes  indorser  a  mere  assignor  of  the  title  to  the  instrument,  700.  ' 

security  continues  negotiable  notwithstanding  such  indorsement,  700. 

cases  cited,  701. 

some  peculiar  cases,  jooa. 

without  recourse  must  be  clearly  indicated,  700a. 

samples  of  different  modes  or  forms  of  indorsement,  702. 

successive  indorsers  are  liable  to  each  other  in  the  order  they  indors' 
703. 

contribution  between  successive  indorsers  does  not  arise,  except  b> 
special  agreement,  703. 

indorser  may  be  first  in  point  of  contract,  though  second  in  point  ot 
time,  704. 

it  may  be  shown  by  parol  proof  who  are  actually  prior  indorsers,  704. 

joint  payees  who  indorse  are  not  regarded  as  "  successive  indorsers."  704. 

examples  oi  irregular  intervening  indorsements,  705,  706. 

party  who  indorses  after  payee  a  note  payable  to  his  (payee's)  order, 
can  not  show  by  parol  that  he  did  not  intend  to  be  bound  as  in- 
dorser, 707. 

intention  to  become  liable  as  surety  or  guarantor  must  be  cleariy  indi- 
cated, 707. 

party  placing  his  name  on  a  note  payable  to  bearer,  in  fact  or  effect,  is 
an  indorser  only,  707a. 

query,  whether  party  who  writes  his  name- before  that  of  payee  on  note 
is  an  indorser,  709. 

when  the  intention  in  such  case  may  be  shown  by  parol  evidence,  710. 

when  not,  712. 

grounds  for  admission  of  parol  evidence,  711. 

whether  party  signing  on  back  before  payee  is  presumably  joint  maker 
7iZa. 

view  that  third  party  is  presumed  to  be  surety  or  guarantor  in  the  form 
of  joint  maker,  7i3<5. 


g  1 2  INDEX.  .  ^'f'^'^f''  '"■''''. . 

y  paragraphs  tnarked  % 

mDORSEME^T—conh'nued. 

view  that  such  third  party  is  prhna  facie  only  secondarily  liable  as 
guarantor,  713^. 

view  that  such  third  party  is  second  indorser,  Ti^td. 

reasons  for  regarding  such  person,  as  a  general  rule,  to  be  a  first  in- 
dorser, 713^. 

rule  in  New  York,  7 1 3^. 

comments  and  conclusions,  714. 

English  cases  cited,  714a. 

opinion  diverse  as  to  what  parol  evidence  determines  liability  of  person 
who  signs  before  payee,  715. 

if  party  describes  himself  as  surety,  guarantor,  or  indorser,  he  thereby 
gives  notice  of  his  character,  of  which  other  parties  should  take  cog- 
nizance, 716. 

what  is  a  material  alteration  by  maker,  716. 

query,  how  far  parol  evidence  is  applicable  to  ascertained  indorsements, 
717- 

Mr.  Byles'  views  as  to  indorsements  in  blank,  717. 

controverted  by  text,  718. 

general  rule  stated,  to  wit :  that  in  an  action  by  indorsee  against  his  in- 
dorser, no  evidence  is  admissible  save  such  as  would  be  in  suit  against 
drawer  by  one  in  privity  with  him,  718. 

instances  of  exclusion  of  parol  evidence  between  indorser  and  indorsee, 
719. 

whether  contemporaneous  waiver  of  demand  and  notice  may  be  shown 
by  parol  evidence,  7i9fl. 

what  parol  evidence  permissible  between  indorser  and  indorsee,  720. 

limitations  to  rule  as  to  evidence  in  an  action  by  indorsee  against  his 
indorser,  etc.,  are : 

(i)  it  may  be  shown  that  indorsement  was  without  consideration, 
7200;. 

(2)  that  it  was  upon  trust  for  a  special  purpose,  721. 

(3)  that  fraudulent  representations  were  made  to  indorser  at  time 

of  indorsement,  722. 
cases  illustrating  these  views,  723. 

distinction  taken  between  indorsement  for  value  and  for  accommoda- 
tion, 723. 

after  maturity  negotiable  paper  circulates,  but  transferee  only  acquires 

the  right  and  title  of  transferrer,  724a. 
negotiable  paper  may  be  transferred  by  indorsement,  or  by  delivery, 

either  before  or  after  maturity,  724. 

dishonor  for  non-payment  or  non-acceptance  does  not  destroy  its  nego- 
tiability, 724. 
indorsee  of  overdue  paper  takes  it  subject  to  existing  equities,  725. 
what  equities  are  pleadable,  7250. 
must  be  those  inherent  in  paper  itself,  725^. 
exception  in  case  o{  accommodation  paper,  726. 
indorsee  of  overdue  paper  may  recover  if  his  indorser  could,  726^. 
as  to  equities  of  third  parties,  ^iSa. 

rule  as  to  equities  applies  to  party  who  indorses  "  without  recourse,*' 
#  and  reacquires  bill  or  note  after  maturity,  727. 

equity  will  not  compel  surrender  of  past  due  note,  727. 


References  are  to  TMnW  r\t  n 

paragraphs  marked  §.  1  IN  U  i.  A .  V  *  O 

INDORSEMENT-  cojithiucd. 

undated  indorsement  is  presunned  to  have  been  made  at  time  of  execu- 
tion, or  before  maturity  and  dishonor,  728. 

indorsement  will  be  presumed  to  have  been  made  at  place  where  in- 
strument is  dated,  728. 

bill  or  note  is  merged  in  a  judgment,  and  can  not  be  thereafter  indorsed 

or  assigned,  728. 
may  be  transferred  pending  suit,  728. 

INDORSER.    See  Indorsement. 

when  agent  is  deemed,  301,  416,  417. 

bound  as,  314. 
of  forged  paper,  II.,  1355. 
may  require  receipt  on  payment,  II.,  1229. 
notice  to,  II.,  970,  1038. 

how  bound  on  bill  or  note  reissued  by  him,  II.,  997,  1241. 
whom  he  may  sue,  II.,  1204. 
when  may  be  sued,  II.,  121 2. 

liability  of,  for  re-exchange,  interest,  and  damages,  918.  II.,  1448  to  1452. 
what  law  applies  to  indorser,  898  to  902. 

INFANTS. 

persons  under  21  years  of  age  are,  223. 
how  contracts  of,  have  been  classified,  223. 
distinction  as  to  void  and  voidable  contracts  obsolete,  223. 
may  bind  themselves  for  necessaries,  224. 
whether  they  may  execute  notes  for  necessaries,  224. 
can  not  bind  themselves  absolutely  as  drawers,  acceptors,  makers,  or 
indorsers  of  negotiable  instruments,  225. 

doctrine  generally  accepted  that  they  can  not  be  parties  to  negotiable 

instruments,  225. 
views  of  that  text — that  instrument  executed  by  infants  not  necessarily 

void  because  negotiable  in  form,  226. 
and  that  if  for  necessaries,  such  instruments  are  valid  to  extent  of  their 

value,  226. 
Scotch  law  on  the  subject,  226. 

payee  indorsing  paper  executed  by,  warrants  validity,  226. 
if  payee  be  infant,  maker,  drawer,  or  acceptor  is  bound  to  his  indorsee, 

227. 

whether  payment  may  be  made  to  infant  payee,  227. 
infant  not  bound  by  his  own  indorsement,  228. 

indorser  may  rescind  contract,  229. 
views  of  Story,  228. 
remarks  thereon,  228. 

infant's  indorsement  voidable,  not  void,  229. 
if  he  disaffirms  contract  after  age,  must  return  consideration,  229. 
ratification  by  adult  validates  instniment  in  all  respects,  230. 
instrument  may  be  sued  on  in  such  case  without  alleging  ratification.. 

230. 
ratification  may  be  after  action  brought,  230. 
it  inures  to  benefit  of  every  subsequent  holder,  230. 

Vol.  II.— 58 


_T.  T-\TT»r<v  References  are  ta 

9  H  INDEX.  paragraph,  marked  % 

I  "^Y  KWY't>— continued. 

verbal  ratification  sufficient  unless  written  required  by  statute,  231. 

what  words  amount  to  ratification,  231,  232. 

promise  of  adult  must  be  made  to  party  or  his  agent,  233. 

if  promise  conditional,  condition  must  be  fulfilled,  233. 

part  payment  does  not  amount  to  ratification  by  adult,  234. 

what  does  not  amount  to  ratification,  234. 

effect  of  adult  keeping  property  purchased  when  infant,  234. 

or  retaining  consideration  for  contract,  234. 

whether  ignorance  of  law  exonerates  adult,  235. 

statutory  enactments  respecting  ratification  by  adults,  236. 

comparison  between  ratification  by  adult,  and  by  principal  of  agent's 

act,  236. 
adult  retiring  from  firm  of  which  he  was  a  member  when  infant  must 

give  notice,  237. 
but  if  he  continues  in  firm  it  is  no  ratification  of  its  prior  contracts  as 

to  himself,  237. 
whether  infant  making  joint  note  with  adult,  should  be  sued  jointly, 

238. 

INFORMALITY. 

mere  informalities  of  expression  do  not  afifect  negotiable  instruments,  76. 

INITIALS. 

of  maker  suffice  for  signature,  74. 

so  of  drawer,  indorser,  or  acceptor,  688. 

must  be  shown  to  whom  they  apply,  II.,  12 18. 

INJUNCTION. 

lies  to  restrain  illegal  subscriptions  by  corporations,  II.,  1522^. 

INJURY. 

lack  of,  no  excuse  for  want  of  presentment,  protest,  and  notice  of  bills 
and  notes,  II.,  11 70,  1175.     See  Checks. 

INLAND  BILLS.     See  BILLS  OF  EXCHANGE,  and  6  to  14. 
as  to  protest  of,  see  Protest,  II.,  926. 

INSANITY  AND  INSANE  PERSON.    See  Lunatic. 

INSOLVENCY.     See  EXCUSES. 

no  excuse  for  non-presentment  and  notice,  II.,  117 1,  1172. 

INSTALMENTS. 

note  payable  in,  with  condition  that  if  default  made  in  payment  of  first, 

the  whole  shall  be  due,  is  negotiable,  48. 
grace  allowable  on  each  instalment  of  bills  and  notes  payable  in,  621. 
action  lies  on,  as  they  fall  due,  II.,  1213. 
when  note  payable  in,  is  overdue,  787. 

if  instalment  of  principal  of  overdue  note  subject  to  equities,  787. 
otherwise  as  to  instalment  of  interest,  787. 

INTERDICTION  of  commerce  and  intercourse  as  excuse  for  non-presentment, 
protest,  and  notice.     See  EXCUSES,  and  II.,  1063. 


References  are  to  T  x-  r»  17  V  r\\  t. 

paragraphs  marked  §.  1 AU  t,  A .  y  I  ^ 

INTEREST.     See  EXCHANGE  ;  CONFLICT  OF  Laws  ;  USURY, 
when  recoverable  on  bank  notes,  II.,  1687. 
alteration  in  amount  of,  II.,  1384. 

recoverable  against  all  parties  to  bills  and  notes,  II.,  1458. 
need  not  be  specially  claimed,  II.,  1458. 
what  law  applies  to,  918. 
when  contract  rate  prevails,  II.,  1458a. 
on  coupon  bonds,  II.,  1513,  1515. 
recoverable  on  coupons,  II.,  15 13. 

prior  demand  of  payment  not  necessary  to  recovery  of,  II.,  ISH- 
but  readiness  to  pay  at  time  and  place  abates  interest,  II.,  1515- 

INTERPRETATION  OF  CONTRACTS.    See  Conflict  of  Laws. 
by  what  laws  governed,  871. 

INTOXICATION.     See  DRUNKENNESS,  214,  215. 

I.  O.  U. 

whether  negotiable,  36. 

IRREGULAR  AND  AMBIGUOUS  INSTRUMENTS,  128. 
ambiguities  may  in  general  be  explained,  87,  88. 
drawer  and  payee  may  be  same  person,  128. 
drawer  may  draw  bill  on  himself  payable  to  his  own  order,  128. 
or  to  order  of  third  person,  128. 

when  drawer  and  drawee  are  same,  paper  may  be  treated  as  a  note,  128, 
or  as  an  accepted  bill,  128. 
drawer  in  such  case  bound  without  notice,  128. 
identity  of  drawer  and  drawee  must  be  proved,  128. 
usual  to  regard  such  papers  as  bills,  and  to  declare  accordingly,  128. 
where  partnership  has  two  places  of  business,  and  draws  on  itself  from 

one  place  to  another,  it  is  same  as  note,  129. 
same  rule  applicable  to  corporations,  129. 
note  by  maker  to  himself  a  nullity,  130. 

but  if  he  indorse  it,  it  becomes  payable  to  bearer,  or  to  order,  130. 
if  paper  so  ambiguous  that  it  is  doubtful  whether  it  be  bill  or  note,  it 

may  be  treated  as  either,  131. 
instances,  131,  132, 

effect  of  substituting  '*  at"  for  "to  "  in  address  of  bill,  133. 
notes  sometimes  certified  as  checks,  134. 
bank  becomes  debtor  when  it  certifies  notes,  134. 
when  bank  may  retract  certificate,  135. 

JOINT  DRAWEES. 

if  not  partners  all  must  accept,  488. 
otherwise  bill  should  be  protested,  488. 
but  party  accepting  will  be  bound,  488. 

JOINT  AND  SEVERAL  NOTES  AND  BILLS.    See  Joint  Parties. 

note  by  two  or  more  makers  may  be  joint,  or  Joint  and  several,  94.    II., 

1294. 
if  note  running,  "  I  promise,"  signed  by  several,  it  is  joint  and  several, 
94. 


References  are  to 
Q  I O  ^-^  1Jl.\.  paragraphs  fnarked  %. 

JOINT  AND  SEVERAL  NOTES  AND  'QUJLS— continued. 
so  note  running,  "  we  or  either  of  us  promise,"  94. 
note  signed  "  A.  B.,  principal,  C.  D.,  surety,"  and  running.  "  we  prom« 

ise  " — is  joint,  94. 
if  such  note  run,  "  I  promise,"  it  would  be  joint  and  several,  94. 
a  joint  and  several  note  is  joint  note  of  all,  and  several  notes  of  each,  94. 
as  joint  note  it  may  be  valid,  and  as  several  invalid,  94. 
how  note  of  firm  should  be  signed,  95. 
delay  in  presenting  to  joint  maker  when  excused,  II.,  1089. 

JOINT  OWNERS. 

no  implied  authority  in  one  to  bind  others,  358. 

JOINT  PARTIES.    See  COVENANT  not  to  Sue;  Principal  and  Surety 
how  discharged,  II.,  1294. 
discharge  of  one  discharges  all,  II.,  1294. 
but  not  if  holder's  rights  are  expressly  reserved,  II.,  1295. 
rule  as  to  partners,  II.,  1295. 
must  unite  in  action  if  living,  II.,  1183^;. 
on  death  of  one  remedy  survives  to  those  living,  II.,  1183a, 
judgment  against  one  is  bar  to  suit  against  all  others,  II.,  1296. 
but  not  if  liability  is  several  also,  II.,  1296. 
whether  giving  time  to  one  discharges  others,  II.,  1297. 
effect  of  death  of  one,  II.,  1298. 
when  note  of  one  discharges  all,  II.,  1299. 
whether  joint  party  may  be  shown  by  parol  to  be  surety,  II.,  1336. 

JUDGMENT. 

power  to  confess  in  bill  or  note,  whether  it  impairs  negotiability,  61. 
how  rendered  on  instruments  payable  in  currency  and  in  coin,  II., 

1247.    , 
when  good  offset.  II.,  I425>  1426. 
effect  of,  as  merger,  II.,  1283,  1285. 

JUDICIAL  NOTICE. 

taken  of  almanac,  70. 

not  taken  of  laws  of  foreign  countries,  865,  891. 

JUDICIAL  SALE. 

purchaser  of  note  at,  may  recover  full  amount  of  accommodation  m- 

dorser,  767<i:. 
but  is  not  purchaser  in  usual  course  of  business,  780,  781. 

JURISDICTION.     See  FEDERAL  COURTS. 

^^^^'    when  questions  of  diligence  are  for  it  to  determine,  whether  question 
of  reasonable  time  of  presentment  and  ac-eptance  for  court  or  jury. 
466. 
what  are  business  hours  is  question  for,  601. 

LACHES. 

LAW  MERCHANT. 

LEGAL  TENDER.     See  TENDER. 


References  are  to  TTCFIFV  Ql7 

paraeraplis  marked  %.  1ISU£.A.  yi/ 

LETTERS  OF  CREDIT,    5^^  Guaranties. 

definition  of,  II.,  1790. 

are  general  or  special,  II.,  1790. 

nature  of  engagement  by,  II..  1790- 

views  of  Bell,  Hallam,  and  Marius,  II.,  1791.  1792.  I793- 

how  far  similar  to  bills,  II.,  1794,  1795. 

special  letter  only  available  to  person  addressed,  II.,  I797- 

when  amounts  to  acceptance  or  promise  to  accept,  II.,  I797- 

general  letter  available  to  any  person  who  accepts  its  proposition,  II., 
1797.  1798. 

this  rule  applies  even  when  letter  addressed  to  particular  person  pro- 
posing to  be  his  surety  to  third  person  making  advance  or  giving 
credit,  II.,  1797. 

provided  that  credit  is  given  or  advance  made  on  faith  of  it,  II.,  1797. 

whether  or  not,  and  how  far  negotiable,  II,,  1798. 

when  amount  to  acceptance,  II.,  1799- 

LEX  DOMICILII,  863  to  866. 

LEX  FORI,  882  to  892. 

LEX  LOCI  CONTRACTUS.     See  Conflict  of  Laws,  and  867  to  875. 

LEX  LOCI  REI  SIT^,  893  to  894a. 

LEX  LOCI  SOLUTIONIS,  879  to  881. 

LIEN.     See  MECHANICS'  LlEN,  and  II.,  1281. 

See  Bankers'  Lien,  and  334^,  337.     II.,  1708^:,  1708^?', 

meaning  of,  II.,  1279. 

how  waived,  II.,  1279. 

vendor's  lien  as  to  personal  property  waived  by  taking  bill  or  note,  II., 
1279a. 

or  selling  goods  on  credit,  II.,  1279a. 

but  note  on  demand  would  not  defeat,  II.,  1279a. 

if  goods  remain  in  vendor's  hands  until  bill  or  note  given  for  them  ma- 
tures, vendor's  lien  revives,  II.,  1280. 

unless  bill  or  note  has  been  negotiated,  which  would  alter  rule,  II., 
1280. 

taking  bill  or  note  does  not  waive  vendor's  lien  on  real  estate,  II., 
1281. 

rule  where  third  person  is  security  on  bill  or  note,  II.,  1281. 

whether  taking  bond  waives  vendor's  lien  on  real  estate,  II.,  1281a. 

lien  of  vendor  passes  with  note  to  transferee,  II.,  I28i<^. 

unless  vendor  guarantees  note,  or  indorses  without  recourse,  II.,  I28i3. 

rule  as  to  mechanics'  lien,  II.,  1282. 

taking  bond  does  not  waive  lien,  II.,  1282. 

LIMITATION  OF  SUIT.     See  ACTIOX,  and  II.,  1214,  1215. 
how  far  applicable  to  bank  notes,  II.,  1683. 

LIMITED  GUARANTY.     See  GUARANTIES. 

LIS  PENDENS. 

does  not  affect  negotiable  paper,  800a. 


Ql8  INDEX.  ^  ^'-^'"''^.""'''l^i 

7  i  ^v.  paragraphs  mar ktd%, 

LOSS  OF  BILL  OR  NOTE.    See  Excuses. 

as  excuse  for  non-presentment  and  notice,  II.,  1173. 
LOST  AND  DESTROYED  BILLS  AND    NOTES. 

I.  Rights  and  duties  of  loser,  finder,  and  holder,  II.,  1461. 

duty  of  holder  to  give  immediate  notice  of  loss  to  all  parties  to  note  or 

bill,  II.,  1461. 
loser  should  notify  the  public  of  his  loss,  II.,  1462. 
but  notice  unavailing  unless  it  reaches  holder,  II.,  1462. 
advertisement  not  necessary  to  holder's  recovery,  II.,  1463. 
loss  of  instrument  is  no  excuse  for  failure  in  demand,  protest,  and  no- 
tice, II.,  1464. 
demand  should  be  made  on  copy,  II.,  1464. 
drawer  or  acceptor  can  require  production  of  bill  or  proof  of  loss,  with 

indemnity,  II.,  1465. 
in  France  if  original  be  lost,  drawer  and  indorsers  are  compellable  to 

give  a  new  bill,  II.,  1466. 
general  rule  in  England  in  such  case  different,  II.,  1466. 
rule  when  one  part  of  a  foreign  bill  drawn  in  sets  is  lost  by  drawee,  II., 

1467. 
owner  of  lost  bill  or  note  may  maintain  suit  against  the  finder,  II., 

1468. 
bailee  who  tortiously  converts  note  or  bill  is  liable  in  trover,  or  for 

money  had  and  received,  II.,  1468a. 
seinble  in  case  of  maker  or  drawee  who  wrongfully  seizes  and  retains 

bill  or  note,  II.,  1468a. 
rule  where  a  third  party  acquires  lost  note  from  robber  or  finder,  II., 

1469. 

general  doctrines  of  evidence  respecting   lost  and  destroyed   instru- 
ments, II.,  1470,  147 1. 

affidavit  of  loss  or  destruction  necessar}',  II.,  1472. 

question  of  loss  or  destruction  is  generally  one  for  the  courts  and  not 
for  the  jury,  II.,  1472. 

when  notarial  copy  admissible,  II.,  1472. 

if  bill  or  note  is  lost  after  suit  is  brought,  plaintiff  may  recover,  as  in 
other  cases  of  lost  instruments,  II.,  1473. 

rule  as  to  indemnity  in  such  case,  II.,  1473. 

when  debtor  voluntarily  remits  note  to  creditor,  and  it  is  lost,  the  loss 
falls  on  him,  II.,  1474. 

otherwise  if  remitted  at  the  creditor's  request,  II.,  1474. 
2.  Stdt  against  parties  to,  II.,  1475. 

owner  of  lost  instrument,  on  fixing  liability  of  parties  by  demand  and 
notice,  may  enforce  payment  by  suit,  II.,  1475. 

query,  what  is  the  proper  mode  of  procedure  in  such  cases.?  II.,  1475. 

doctrine  approved  that  equity  is  the  proper  forum,  II.,  1475. 

in  England  remedy  on  lost  negotiable  instrument  confined  to  equity, 
IL,  1475. 

distinction  in  England  between  instrument  lost  before  and  after  ma- 
turity, II,,  1477. 

in  United  States  decisions  vary,  IL,  1478.  "' 

rule  as  to  bank  notes  cut  in  halves,  IL,  1479. 

must  be  tender  of  indemnity  before  payment  may  be  required,  II. ,  1480. 


References  are  to  txtvttv  r-v  t  i» 

paragraphs  marked  %.  INDEX.  9I9 

LOST  AND  DESTROYED  BILLS  AND  ^^O'YYS— continued. 

but  this  rule  does  not  apply  where  paper  is  not  negotiable,  II.,  1481. 
where,  though  negotiable,  it  is  payable  to  order  and  unindorsed,  ot 

specially  indorsed,  II.,  1481. 
where  it  has  been  destroyed,  II.,  1481,  1482. 
where  it  has  been  traced  to  defendant's  custody,  II.,  1483. 
where  defendant  is  protected  by  statute  of  limitations,  II.,  1485. 
same  exceptions  applicable  to  rule  requiring  suit  to  be  in  equity,  IL, 

1482,  1485. 

LUNATICS  AS  PARTIES,  209. 

every  person  presumed  sane,  209. 

insanity  or  imbecility  in  England  must  be  specially  pleaded,  209. 

early  authorities  held  that  party  could  not  stultify  himself  by  showing 

lunacy  or  imbecility,  209. 
doctrine  that  defence  must  show  that  defect  of  mind  was  known  to 

other  contracting  party,  210. 
doctrine  criticised  and  repelled,  and  right  to  show  lunacy  or  imbecility 

upheld,  210. 
Lord  Tenterden's  views,  210. 
weakness  of  mind,  immaturity  of  reason,  or  inexperience  generally,  no 

defence,  211. 
what  sufficient  weakness  of  mind  to  operate  as  defence,  211. 
imbecile  as  to  necessaries  stands  on  same  footing  as  infant,  212. 
contracts  for  necessaries  made  in  good  faith  are  binding,  212. 
cases  of  necessaries,  212. 
inquisitions  of  lunacy  as  evidence,  213. 
rule  in  England  and  in  United  States,  213. 
ratification  by  lunatic  after  restoration  to  reason,  213. 

MAKER.     See  Agents  ;    Corporations  ;    Irregular   Instruments  ; 

Joint  and  Several  Notes  ;  Signature. 
must  be  indicated  with  certainty,  91. 
if  promise  in  alternative,  as,  for  instance,  if  note  be  signed  I,  "  A.  B.,  or 

else  C.  D."  the  note  is  not  negotiable,  91. 
initials  suffice  as  signature,  74,  688. 
mark  likewise,  74. 

agrees  to  pay  amount  to  payee  or  his  indorsee,  93. 
estopped  from  showing  that  payee  had  no  capacity  to  indorse,  93,  227, 

242. 

therefore  can  not  show  payee  was  infant,  married  woman,  bankrupt, 
lunatic,  illegal  corporation,  or  fictitious  person,  93,  227,  242. 

if  payee  became  insane  after  note  made,  his  indorsement  would  be 
nullity,  93. 

what  law  applies  to,  895. 

MALA  FIDES.    See  Bona  Fide  Holder,  and  769  to  776^. 

gross  negligence  may  be  evidence  of,  but  is  not  same  in  effect,  774, 
776. 

MALIGNANT  DISEASE  as  excuse  for  non-presentment,  protest,  and  notice. 
See  Excuses,  and  II.,  1066. 


Q20  INDEX.  References  are  to 

^  '  paragraphs  marked  §. 

MARK. 

any  mark  used  as  signature  suffices,  74. 
need  not  be  accompanied  with  certificate  of  witness,  74. 
does  not  prove  itself  like  signature,  but  is  adminicle  of  proof,  74. 
any  peculiarity  may  be  shown  as  evidence  of  genuineness,  74. 
unless  there  be  attesting  witness,  must  be  proved  Sy  other  testimo- 
ny, 74- 

MARRIED  WOMAN. 

1.  General p7-inciples. 

wife's  personality  by  common  law  merged  in  husband's,  239. 

can  not  bind  herself  as  party  to  negotiable  instrument,  240. 

when  promise  by  widow  to  pay  note  made  during  her  marriage  is  bind- 
ing, 240. 

can  not  contract  with  husband,  241, 

husband's  note  to  wife  void,  241. 

can  not  sue  on  husband's  note  in  his  lifetime,  or  his  executor  after 
death,  241. 

husband  making  note  to  wife  is  bound  to  her  indorsee,  241. 

he  is  likewise  bound  by  his  indorsement  of  wife's  made  note  to  him- 
self, 241. 

when  husband's  note  to  wifS  for  money  advanced  out  of  her  separate 

estate  constitutes  declaration  of  trust,  241. 
note  to  single  woman  becomes  husband's  by  marriage,  242. 
can  not  transfer  bill  or  note,  242. 
drawer,  acceptor,  and  maker  can  not  show  that  payee  was  married 

woman  when  instrument  was  executed,  242. 

indorsee  may  recover  against  them,  242. 

indorser  subsequent  to  married  woman  warrants  her  capacity,  and  is 
estopped,  242. 

rule  that  married  woman  can  not  contract  applies,  although  she  lives 

separate  from  husband,  243. 
or  has  eloped  from  him,  243. 
or  has  separate  maintenance,  243. 
or  has  been  divorced  from  bed  and  board,  243. 
rule  in  Massachusetts,  243. 
divorce  from  bond  of  matrimony  restores  capacity  of,  243. 

2.  Exceptional  cases  in  which  contracts  of,  are  binding. 

(i)  when  husband  is  alien  enemy  or  civilly  dead,  245. 

so  if  husband  is  alien  who  has  never  been  in  country  where  she  is 

resident,  245. 
but  not  if  he  has  lived  in  that  country,  245. 
rule  in  Massachusetts,  246. 

when  husband  has  been  banished  or  transported  or  imprisoned  for 
crime,  246. 

or  has  abjured  civil  life,  246. 

or  has  been  abroad  and  unheard  of  seven  years,  when  his  death  is 
presumed,  246. 

(2)  when  she  has  separate  estate,  it  is  liable  in  England  for  debts  con- 
tracted on  faith  of  it,  247. 
English  cases,  247. 


References  are  to  yMnirv  n  '>  T 

paragraphs  marked  §.  1 JN  U H-  A.  y  -i  1 

MARRIED  WOMAN— rwz//««^^. 

authorities  conflicting  in  United  States,  248. 

in  New  York  held  essential  either  (i)  that  intention  to  charge  sep* 

arate  estate  be  declared  in  contract,  248. 
or  (2)  that  consideration  be  for  direct  benefit  of  separate  estate,  248. 
but  in  latter  case,  not  necessary  that  bill,  note,  or  other  contract 

specify  particular  property,  248. 
in   United  States,  general  rule  is  that  separate  estate  is  liable  in 

equity,  on  all  debts  expressly  or  impliedly  charged  thereon,  248. 
in  New  York  rule  at  law  same  as  in  equity,  248. 
how  intent  to  charge  separate  estate  inferred,  248. 
construction  of  note  to  husband,  249. 
rule  in  Massachusetts  under  statute,  249. 
when  separate  estate  charged,  all  held  at  time  of  judgment  liable, 

249. 
promise  by  widow  to  pay  debt  contracted  in  marriage  void,  249. 
but  otherwise  if  she  had  separate  estate,  249. 

(3)  when  wife  is  sole  trader,  she  is  liable  by  custom  of  London,  but  hus 

band  must  be  joined  in  suit,  250. 
statutes  in  United  States,  250. 
without  husband's  consent  can  not  generally  bind  herself  in  trade, 

250. 

(4)  if  husband  fail  to  supply  her  with  necessaries  she  may  bind  him,  251. 

(5)  husband  using  wife's  name,  bound  by  it,  252. 
thus,  if  he  sign  note  in  wife's  name,  252. 

so  if  she  signs  her  name  with  his  assent,  252. 

so  if  he  authorizes,  or  ratifies  contract  in  her  name,  252. 

so  if  husband  conducts  business  in  her  name,  252. 

(6)  may  bind  husband  as  his  agent,  253. 

must  use  husband's  name  as  his  agent  unless  authorized  to  use  her 
own,  253. 

authority  to  bind  husband  must  be  clearly  proved,  253. 
if  agent,  can  not  delegate  authority,  253. 

husband  may  make  same  defences,  when  she  has  used  his  name  by 
authority,  as  if  he  used  it  himself,  253. 
3.  Marriage  entitles  hicsband  to  bills  a7td  notes  of  wife  possessed  before,  254. 
husband  may  indorse  note  made  to  her  when  single,  254. 
or  may  sue  on  it  in  his  own  name,  254. 
or  allow  wife  to  indorse  in  her  name,  254. 

in  last  case  it  may  be  sued  on  as  indorsed  by  wife  with  his  consent,  or 
as  indorsed  by  him,  254. 

if  husband  loaning  money,  takes  note  to  self  and  wife,  it  purports  gift 
to  her  if  she  survives,  255. 

if  note  made  after  marriage  to  husband  and  wife  as  joint  payees,  legal 
interest  on  it  goes  to  survivor,  255. 

husband  must  reduce  wife's  choses  in  action  to  possession,  256. 
if  he  dies  without  doing  so,  right  survives  to  her,  256, 
if  wife  die,  her  representative  may  sue  on  her  choses  in  action,  but  pro- 
ceeds go  to  husband,  256. 
husband  entitled  to  be  her  personal  representative,  256. 


T  -NT  T^  tr  V  References  are  to 

922  1-1>  Uii-'^-  paragraphs  marked  §. 

MARRIED  WOMAN—  continued. 

if  husband  after  her  death  gets  possession  of  her  choses  in  action,  they 
belong  to  him,  256. 

if  husband  dies  without  qualifying  as  representative  of  deceased  wife, 
right  to  administer  passes  to  his  next  of  kin,  256. 

what  amounts  to  reduction  into  possession  by  husband  of  wife's  choses 
in  action,  257. 

husband  liable  for  contracts  made  by  wife  when  single,  258. 

husband  and  wife  must  be  sued  jointly  on  such  contracts,  258. 

if  husband  dies,  wife  only  bound  by  her  contracts  made  when  single, 
258. 

if  wife  dies,  her  representative  only  liable,  258. 

creditors  of  wife  may  follow  her  unreduced  choses  in  action  in  hus- 
band's hands,  258. 

MECHANICS'   LIENS. 

not  generally  waived  by  taking  bill  or  note  for  debt,  II.,  1282. 

nor  by  taking  bond,  II.,  1282. 

such  securities  are  cumulative,  II.,  1282. 
MEMORANDUM    CHECKS.     See  CHECKS. 
MEMORANDUM   ON   NEGOTIABLE   INSTRUMENTS,  149- 

it  does  not  affect  certainty  of  the  paper,  does  not  prevent  negotiability, 
49. 

purport  of  paper  must  be  collected  from  all  eight  corners,  149. 

instances  of  memoranda  aflfecting  operation  of  instrument,  149,  150. 
IL,  1383. 

conflicting  decisions,  152. 

memorandum  merely  earmarking  instrument  does  not  affect  it,  153. 

when,  by  whom,  and  under  what  circumstances  memorandum  written 
may  be  shown,  154. 

will  be  presumed  to  have  been  contemporaneous  with  execution  of  in- 
strument, 154. 

if  contemporaneous  is  constituent  part  of  it,  154. 

if  subsequent  and  with  consent  of  all  parties  will  bind  them,  154. 

if  made  by  stranger,  and  without  parties'  consent,  is  spoliation,  1 54. 

if  made  by  subsequent  party,  without  others'  consent,  is  spoliation  as 
to  his  predecessors,  154. 

when  part  of  instrument  can  not  be  varied  by  parol  evidence,  154. 

when  questions  concerning,  are  for  jury  to  decide,  154. 

if  evidently  intended  not  to  affect  instrument,  it  will  not  do  so,  155. 

instances,  155. 

as  to  place  of  payment,  II.,  1383. 

when  material,  and  effect  of  obliterating,  II„  1383,  1384,  1385. 

MERGER.     See  DISCHARGES. 

at  common    law  appointment  of   debtor  as  executor  merges   debt, 

II.,  1285. 
this  principle  does  not  obtain  in  United  States,  II.,  1285. 
bill  or  note  merged  in  bond  or  covenant  because  of  higher  nature, 

II.,  1293. 
but  no  merger  if  face  of  bond  or  covenant  shows  it  is  mere  additional 

security,  IL,  1293. 


Re/crencis  are  to  INDEX.  Q 2  3 

parag'raphs  marked  §.  J     yJ 

MESSENGER.    See  Notice. 

employment  of,  to  give  notice,  II.,  1004.  1033,  1034. 

MISDATE. 

of  bill  or  note  as  excuse  for  failure  in  respect  to  presentment  ana 
notice,  II.,  11 80. 

MISDATING  BILL  OR  NOTE.    See  Excuses. 

as  excuse  for  non-presentment  and  notice,  II.,  1180. 

MISDESCRIPTION.     See  Notice,  II.,  974,  981. 

of  bill  or  note  in  notice  will  not  vitiate  unless  it  misleads,  II.,  974, 

979^2. 
of  payee's  name  may  be  explained,  100. 

MISLAYING  BILL  OR  NOTE.    See  Excuses. 

as  excuse  for  non-presentment  and  notice,  II.,  1173,  1 174. 

MISNOMER. 

immaterial,  399. 

MISSTATEMENT. 

whether  notice  vitiated  by,  II.,  984. 

MISTAKE.    See  FORGERY ;  ALTERATION  ;  Bona  Fide  Holder  ;  Checks. 
in  amount  between  privy  parties  may  be  shown,  813. 
of  fact,  money  paid  under  may  be  recovered  back,  732,  733.    II.,  1226, 

1243,  1269,   1655,  1661. 
but  not  if  paid  under  mistake  of  law,  II.,  1226. 
if  note  be  surrendered  by  mistake,  only  part  being  paid,  balance  may 

be  recovered,  II.,  1243. 
negligence  in  paying  under  mistake  of  fact  does  not  divest  right  ot 

recovery,  II.,  1362,  1369,  1655. 
holder  of  instruments  executed  under,  850,  853. 

MONEY.    See  Payment  ;  Promissory  Notes  ;  Conflict  of  Laws. 
negotiable  paper  must  be  payable  in,  56,  59. 
whether  negotiable  if  payable  "  in  Canada  money,"  58. 
legal  tender  decisions,  II.,  1246  to  1249. 
agent  to  collect  can  take  nothing  else,  335.    II.,  1245. 

MONTH. 

by  common  law,  lunar  month  is  applied  in  construing  ordinary  con- 
tracts and  statutes,  624. 

by  law  merchant,  calendar  month  applied  to  negotiable  instruments  in 
England  and  the  United  States,  624. 

how  months  computed  in  respect  to  negotiable  instruments,  625. 

how  impossible  date — for  instance,  31st  September — corrected,  625. 

MORTGAGE. 

whether  mortgage  to  secure  bill  or  note  passes  with  it  clear  of  equities. 

834,  835. 
party  who  can  enforce  note  may  enforce  mortgage,  834a. 
deed  of  trust  on  same  footing,  684. 
prior  liens  on  land  protected,  834-^. 


_^.  TxT-mjV  References  are  to 

9^4  liN-Ui-A.  paragraphs  mar ked%. 

MOR  TG  AGE— ,c<?«//;n^^^. 

assignee  of,  chargeable  with  constructive  notice,  634^. 

mortgage  and  note  dehvered  by  third  party  in  violation  of  condition, 

void,  855. 
peculiar  case  in  Wisconsin,  855. 
whether  governed  by  law  of  place  where  property  located,  or  that  ot 

place  where  money  is  to  be  paid,  889. 

MUNICIPAL  BONDS. 

1.  Nature  and  powers  of  municipal  corporations,  II.,  1519. 

definition  of  municipal  corporations,  II.,  1519. 

private  corporations,  II.,  15 19. 
differences  between  the  two  kinds  of  corporations,  II.,  1519^;. 
powers  of  municipal  corporations  are  only  such  as  are  expressly  con- 
ferred or  are  incidental  to  their  existence,  II.,  1519a. 
municipal  corporation  has  no  incidental  power  to  borrow  money,  or 
issue  securities  for  debt,  II.,  1520. 
can  not  without  legislative  authority  issue  bonds 

for  extraneous  objects,  II.,  1520. 
may  have  a  power  conferred  to  do  either  thing 

iox  2i  public  purpose,  II.,  1520. 
or  to  give  to  2^  public  purpose,  II.,  1521. 
what  are  "  public  purposes,"  II.,  1522. 
injunction  lies  to  restrain  for  private  purposes,  II.,  1522a. 
whether  railroad  is,  II.,  1521. 

constitutional  restrictions  on  States  do  not  apply  to  municipal  divisions, 

II.,  1524. 
on  municipal  divisions  do  not  apply  to  States, 

II.,  1524. 
townships  included  in  county,  II.,  1524. 
only  apply  prospectively,  and  do  not  annul 
existing  acts,  II.,  1524. 

construction  of  statutes  applicable  to,  II.,  1524,  1525. 
rules  of  the  Federal  courts,  II.,  1525,  1526. 

2.  Express  a7id  implied  powers  of  municipal  corporations,  II.,  1527. 

classification  of  corporate  powers,  II.,  1527. 

when  municipal  corporations  may  contract  debts,  borrow  money,  or 

issue  negotiable  securities,  II.,  1527a. 
municipal,  never  like  private  corporation,  II.,  1527a,  1528. 
difference  between  contracting  debt,  and  borrowing  money.  II.,  1530. 
when  power  to  borrow  is  clear,  negotiable  security  may  be  given  to  pay, 

II.,  1531- 
various  decisions  on  these  questions,  II.,  1530,  1532. 
municipal  bonds  may  be  sold  by  holder  for  any  sum,  II.,  1533. 
but  not  by  municipality  issuing  them,  II.,  1533. 

authority  to  issue  bonds  for  stock  does  not  authorize  sale  of  them,  II., 
1533- 
for  loans,   does   not  imply   authority   to   sell 
below  par,  II.,  1533. 
sale  below  par,  when  usurious,  II.,  1533. 

holder  of  bonds,  knowing  them  illegally  issued,  not  entitled  to  recover 
II.,  1533- 


References  are  to  TTMnTT  v  c\'^t; 

paragraphs  marked  %  IWJJtX.  925 

MUNICIPAL  Y>O^V)'^— continued. 

usury  impeaches  bonds  in  all  hands,  II.,  1533. 

but  seller  bound  for  the  consideration  paid,  II.,  1533. 

case  of  usury  where  bonds  sold  for  larger  sum  in  depreciated  currency 

II-.  1534- 
how   question    of  municipal  subscription  submitted  to  popular  vote. 

II..  1535. 
construction  of  conditions  that  voters  must  assent,  II.,  1535^. 
various  cases,  II.,  1535^. 
how  election  impeached,  II.,  1536. 

3.  Powers  of  mjinicipal  officer  or  agent  to  bind  t he  corporation,  II.,  1 537. 

views  of  the  United  States  Supreme  Court,  II.,  1537. 

qualifications  of  its  doctrines,  II.,  1538  to  1544. 

decisions  illustrating  its  views,  II.,  1 539. 

township  has  no  inherent  authority  to  contract  a  debt,  II.,  1544a. 

not  included  in  "  corporate  bodies,"  II.,  1544a. 

4.  How  invalidity  of  bonds  cured  by  acquiescence  or  ratification,  II.,  1 545. 

general  principles  which  have  been  adopted : 

(i)  by  failure  of  members  of  corporation  to  enjoin  issue,  II.,  1545. 

(2)  by  their  submitting  to  taxation  to  pay  them,  II.,  1545. 

(3)  by  voting  for,  or  submitting  to  payment  of  principal  or  interest, 

II.,  1^545- 

(4)  by  receiving  or  keeping  proceeds,  II.,  1545. 

decisions  illustrating  these  views,  II.,  1546,  1547,  1548, 
remarks  upon  them,  and  qualifications,  II.,  1549. 

(5)  to  be  capable  of  ratification,  bonds  must  be  constitutional,  and 

not  illegal,  II.,  1547. 

5.  General  principles  of  municipal  liability,  II.,  1550. 

series  of  propositions  on  the  subject,  II.,  1550. 
series  of  decisions  illustrating  them,  II.,  1551,  1552,  1553. 
where  statute   points  out   particular  course,  it  must  be  pursued,  II.. 
I555«. 

6.  Legislative  control  over  77iunicipal  obligations,  II.,  1556. 

may  legislature  compel  municipal  corporation  to  discharge  indebted- 
ness which  it  did  not  contract?  II.,  1556. 

can  legislature  authorize  municipal  officers  to  contract  debt  without 
popular  vote  in  its  favor?  II.,  1557,  1558,  1559. 

may  legislature  validate  municipal  securities  invalid  when  issued?  II., 
1560,  1 561,  1562,  1563. 

may  legislature  authorize  municipal  officers  to  ratify  invalid  securities 
without  popular  vote  ?  1 1„  1 564. 

may  legislature  abolish  right  of  municipality  to  plead  defence  of  illegal- 
ity ?  II.,  1565. 

MUNICIPAL  CORPORATIONS  AS  PARTIES  TO  BILLS  AND  NOTES. 

See    Corporations  ;    Coupon    Bonds  ;    Municipal   Bonds  ; 

Drafts  or  Warrants. 
have  no  implied  power  to  execute  negotiable  instruments,  420. 
but  may  receive  express  or  implied  power,  420. 
ordinary  warrants,  orders,  etc.,  not  negotiable,  420. 


Q26  INDEX.  .  References  are  to 

V  paragraphs  marked  % 

MUNICIPAL  CORPORATIONS  AS  V >CSCY\Y.?>~contmued. 
what  officers  or  agents  may  act  for  them,  421. 
as  to  mayors  of  cities,  422,  427. 

supervisors  have  no  implied  power  to  bind  municipality  by  negotiable 

paper,  422. 
nor  have  trustees  of  towns,  villages,  and  townships,  422. 
nor  selectmen,  422. 
nor  auditors,  422. 
nor  police  juries  of  parishes,  422. 
nor  clerks  of  county  courts,  422. 
nor  clerks  of  boards  of  supervisors,  422. 
nor  county  judges,  422. 
nor  recorders,  422. 

difference  between  municipal  and  private  corporations  as  to  liabilities 
for  official  acts,  423. 

NATIONAL  BANK. 

as  purchaser  of  note,  769,  note. 

NECESSARIES.     See  INFANTS,  225,  226. 

when  and  how  infant  bound  for,  225,  226. 

NEED. 

provision  in  case  of,  iir. 

NEGLIGENCE.     See  MISTAKE;  BONA  Fide  HOLDER;  AGENT;  ALTERA- 
TION ;  Checks. 
liability  for,  of  agent  for  collection,  327,  329. 

party  carelessly  framing  instrument  so  as  to  admit  of 
alteration,  II.,  1405,  1409,  1659. 
in  mistaken  payment  does  not  bar  recovery,  II.,  1362,  1369,  1655. 
carrier  can  not  stipulate  for  exemption  from  liability  for. 
effect  of  gross  negligence,  774,  775,  'j'jd.     II.,  1503,  1680. 
line  of  demarcation  between  negligence  and  notice,  779. 

NEGOTIABILITY. 

meaning  of  term,  i,\a. 

words  of,  104. 

by  what  law  ascertained,  903. 

NEGOTIABLE  INSTRUMENTS.  See  Bills  of  Exchange  ,  Promissory 
Notes  ;  Bonds  ;  Coupon  Bonds  ;  Checks  ;  Certificates  of 
Deposit  ;  Bank  Notes  ;  Certificates  of  Stock  ;  Municipal 
Corporations  ;  Drafts  ;  Warrants  ;  Bills  of  Credit  ;  Cir- 
cular Notes  ;  Bills  of  Lading  ;  Guaranties  ;  Letters  of 
Credit. 

when  instrument  is  called  negotiable,  i. 

meaning  of  term,  \a. 

peculiar  characteristics  of,  i. 

at  common  law,  choses  in  action  not  transferable,  I. 

bills  of  exchange,  first  relaxation  of  rule,  i,  2. 

bills  first  negotiable  instruments,  2. 


Re/erencet  an  to  INDEX.  QS  7 

paragraphs  marked  \.  '      ' 

NEGOTIABLE  INSTRUMENTS— <r^«//««^dr. 

origin  and  history  of  bills  and  notes,  3  to  5. 

English  statute  of  Anne,  5. 

what  terms  necessary  to,  104. 

bill  need  not  be  negotiable  to  be  entitled  to  grace,  104, 

no  precise  words  necessary  to,  104. 

when  payability  at  bank  is  the  criterion  of  negotiability,  90. 

note  may  be  negof table  at  bank,  but  noi  payable  there,  107. 

making  note  in  terms  "negotiable  "  at  bank,  cuts  out  offsets,  106. 

NON-ACCEPTANCE,  NOTICE,  PROTEST, 
proceedings  upon,  449,  450.     11.,  926. 

NON-EXISTING  BILL.    See  Promises  to  Accept,  550,  565. 

NOTARY.    See  BANKS ;  Presentment  for  Payment  ;  Protest  :  Notice. 

liability  of  bank  or  other  agent  employing  him  for  his  default,  341  to  343. 

whether  holder  can  sue  him  for  default  when  he  was  employed  by  col- 
lecting bank,  344  to  349. 

whether  demand  must  be  made  by,  as  ground  of  protest,  579  to  587. 
II.,  938. 

charges  of,  when  recoverable,  II.,  933. 

must  follow  instructions  given,  II.,  934. 

his  authentication  of  protest,  II.,  945. 

duty  of,  as  to  protest,  II.,  939,  959. 

not  incumbent  on,  to  give  notice,  II.,  960. 

evidence  of,  as  to  notice,  II.,  1055  to  1058. 

NOTICE  OF  DISHONOR.    5<?^  Guaranties. 

1.  Nature  and  necesszly  of  notice,  II.,  970. 

duty  of  holder  to  give  immediate  notice  of  dishonor  for  non-acceptance 

or  non-payment  to  drawer  and  indorser,  II.,  970. 
party  primarily  liable  not  entitled  to,  II.,  970. 

rule  as  to  notice  and  protest  applies  only  to  commercial  paper,  II.,  970. 
it  is  part  of  contract  of  drawer  and  indorser  to  have  due  notice,  II.,  970. 
neglect  to  give  notice  discharges  parties  entitled  to  it,  II.,  970. 

debt  for  which  bill  was  drawn  or  bill 
or  note  indorsed,  as  to  drawer  and 
indorser,  II.,  971. 

2.  Power  of  govennnent  to  regulate  notice,  II.,  970^. 

where  no  constitutional  restraint,  government  may  regulate  notice  as  to 
existing  bills  and  notes,  II.,  970^'. 

States  of  U.  S.  can  not  impair  obligation  of  contracts,  II.,  970a. 

therefore  can  not  change  law  applicable  to  notice  of  dishonor  as  to  ex- 
isting bills  and  notes,  II.,  970^. 

3.  For 7nal  and  essential  elements  of  notice,  II.,  972. 

notice  may  be  either  verbal  or  written,  II.,  972. 
verbal  less  strictly  construed  than  written,  II.,  972. 
mere  knowledge  of  dishonor  is  not  notice,  II.,  972. 
no  particular  phrase  or  form  of  notice  is  necessary,  II.,  973. 
object  of.  is  to  inform  party  of  presentment,  dishonor,  and  that  he  is 
held  liable  for  payment,  II.,  973. 


n-yR  TXrm^V  References  a  re  to 

V-"  iiMJr.^V.  paragraphs  marked  % 

NOTICE  OF  V>\^Y{.0^0^—cotitinued. 

notice  must  give  correct  description  of  bill  or  note,  II.,  973,  974. 

if  party  knows  instrument  referred  to,  it  suffices,  II.,  975. 

description  must  be  reasonable,  II.,  975,  976. 

in  ascertaining  sufficiency  of  notice  to  identify  instrunjent,  parties  are 
not  confined  to  its  face,  II.,  975,  976,  977. 

circumstances  of  each  case  looked  to,  II.,  976. 

rule  where  several  notes  of  same  person,  of  same  date,  are  payable  at 
different  times,  II.,  976,  977. 

omission  of  maker's  name  is  fatal,  II.,  978. 

notice  describing  bill  as  "  drawn  by  you,"  suffices,  II.,  978. 

description  of  note  as  bill,  or  drawer  as  acceptor,  or  indorser  as  maker, 
not  defective,  II.,  978. 

if  note  is  payable  to  two  persons  jointly,  notice  may  be  given  either 
jointly  or  severally,  II.,  978. 

need  not  state  who  is  holder  or  at  whose  request  it  is  given,  II.,  979. 

nor  v^here  demand  made,  nor  hour  of  presentment,  II.,  979. 

other  cases,  II.,  979. 

should  indicate  whence  it  comes,  II.,  979. 

when  description  void  for  uncertainty,  II.,  979. 

when  without  date  it  is  defective,  II.,  979. 

but  extraneous  evidence  admissible  to  perfect  it,  II.,  979. 

misdescription  of  date  does  not  vitiate,  unless  it  misleads,  II.,  979(7. 

nor  does  misstatement  of  amount,  nor  names  of  parties,  nor  time  when 
due,  II.,  979^. 

particular  instances,  II.,  980,  981. 

presentment  and  dishonor  must  appear  from  notice  by  "  reasonable  in- 
tendment," II.,  982. 

demand  for  payment  must  be  stated  in  terms,  II.,  982. 

or  legal  excuse  alleged  for  failure  to  make  demand,  II.,  982. 

statement  that  note  is  "unpaid  "  is  not  sufficient,  II.,  983. 

except  when  payable  at  bank,  II.,  983. 

enough  to  say  note  is  "  dishonored,"  which  implies  presentment  and 
demand,  II.,  983. 

and  generally  to  use  any  words  which  indicate  dishonor,  II.,  983. 

query,  whether  indorser  is  discharged  by  misstatement  of  time  of  pre- 
sentment, II.,  984. 

notice  need  not  state  expressly  that  the  party  is  looked  to  for  payment, 
II.,  985. 

when  notice  must  state  that  bill  was  protested,  II.,  986. 

if  bill  were  tioted  for  protest,  no  statement  of  protest  necessary,  II., 
986. 

not  necessary  that  copy  of  protest  of  foreign  bill  shall  accompany  no- 
tice of  dishonor,  II.,  986. 
3.    Who  may  give  notice  of  dishonor,  II.,  987. 

It  is  duty  of  holder  to  give  notice  of  dishonor  to  all  parties  liable  to 
him,  II.,  987. 

but  he  is  entitled  to  benefit  of  notice  given  by  others,  who  would  be 
liable  to  him  if  he  had  given  notice,  II.,  987. 

intermediate  indorser  is  substituted  to  rights  of  holder  on  paying  hiro 
II.,  987. 


References  are  to  INDEX.  9^9 

paragraphs  marked  §. 

NOTICE  OF  TiY^WdyiO^— continued. 
conflicting  decisions,  II.,  987. 
notice  from  a  mere  stranger  is  not  good,  II.,  988. 

must  come  from  party  whose  liability  is  fixed,  or  who  on  paying  is  en- 
tilled  to  reimbursement,  II.,  989. 
query,  whether  acceptor  who  fails  or  refuses  to  pay  can  give  notice, 

II.,  990. 

notice  by  his  agent  is  sante  as  if  given  by  holder  himself,  II.,  991. 

factor  or  attorney  may  give,  II.,  992. 

banker  with  whom  instrument  is  deposited,  or  other  agent  for  collec- 
tion, is  holder  for  purposes  of  notice,  II.,  992. 

notary  not  bound  to  give  notice,  II.,  991. 

if  holder  is  dead,  personal  representative  must  give  notice,  II.,  994- 

sending  note  to  bank  for  collection  implies  authority  to  give  notice, 

II-,  993- 

such  bank  may  use  its  own  or  holder's  name,  II.,  993. 

holder  as  collateral  security  may  give  notice,  II.,  993. 
4.   To  whom  7iotice  should  be  given,  II.,  995. 

all  indorsers,  whether  for  value  or  mere  agents  for  collection,  must  have 
notice  of  dishonor,  II.,  995. 

bank  or  other  agent  indorsing  for  collection,  entitled  to,  II.,  995^. 

drawer  of  bill  entitled  to  notice,  II.,  995. 

acceptor  and  maker  not  entitled  to,  II.,  995. 

not  sufficient  to  inclose  notice  to  subsequent  indorser,  995^. 

nor  is  transferrer  by  delivery  entitled  to,  II.,  995^7. 

accommodation  drawer  or  indorser  entitled  to  notice,  II.,  995^. 

not  so  if  accommodated,  II.,  995'^- 

if  note  payable  on  demand  be  indorsed,  though  overdue,  notice  of  de- 
fault must  be  given  within  reasonable  time,  II.,  996. 

if  indorser  before  maturity  reissues  after  paying  note,  when  liability  of 
all  parties  is  fixed,  no  new  demand  and  notice  are  required,  II., 
996,  997. 

decision  in  California,  II.,  996. 

notice  to  general  agent  of  party  is  same  as  to  principal  in  person,  II., 
998. 

but  not  to  party's  attorney  or  solicitor,  II.,  998. 

agent  signing  his  own  name  entitled  to,  but  otherwise  principal  only, 
II.,  998. 

agent  to  indorse  not  necessarily  agent  to  receive  notice,  II.,  998. 

war  does  not  dissolve  agency,  II.,  998. 

notice  to  copartner  good  even  after  dissolution,  II.,  999. 

semble,  where  one  member  is  distant  from  and  another  at  place  of  pro- 
test, notice  must  be  given  to  the  latter,  II.,  999. 
case  of  separation  by  war,  II.,  999. 

if  drawer  be  partner  of  acceptor,  no  notice  necessary,  II.,  999a. 
if  partner  die,  notice  to  sun'ivor  suffices,  II.,  999«- 
if  joint  indorsers  be  not  partners,  all  must  have  notice,  II.,  999^. 
if  party  dies  before  note  is  due,  notice  must  be  given  to  executor  or 

administrator,  if  ascertainable,  II.,  1000. 
how  notice  should  be  addressed,  if  representative  unknown,  II.,  1000, 

Vol.  II. — 59 


-_  TTM-n-CV  References  are  U 

930  IJNDtX.  paragraphs  marked §. 

NOTICE  OF  DISHONOR— <r^;^//;z?^^^. 

notice  to  one  of  several  executors,  etc.,  suffices,  II.,  1000, 

whenever  notice  duly  received,  it  suffices,  II.,  1000. 

if  there  be  no  personal  representative  of  decedent,  it  is  enough  to 

leave  notice  at  family  residence,  XL,  looi. 
in  case  of  bankrupt,  should  be  given  assignee,  II.,  1002. 
if  no  assignee,  to  party  representing  estate,  II.,  1002. 

5.  Mode  and  formalities  of  notice  whejt  parties  reside  in  same  place,  II., 

1003. 
mode  immaterial  when  notice  duly  received,  II.,  1003. 
if  parties  reside  in  the  same  place,  it  must  be  received,  II.,  1003. 
if  in  different  places,  only  necessary  to  put  it  in  post,  II.,  1003. 
whether  telegraph  may  be  employed  to  send  notice,  IJ.,  1004. 
when  parties  reside  in  same  place,  should  be  sent  to  dwelling  or  place 

of  business,  II.,  1005. 
mail  in  such  case  can  be  only  used  when  the  protest  was  at  a  different 

place,  II.,  1005a. 
various  cases  on  this  subject,  II.,  1005a. 
rule  when  note  payable  at  place  where  party  to  be  notified  resides,  II., 

1006,  1007. 
as  exceptions  to  general  rule,  penny  post  may  be  used  when  parties  re- 
side in  same  place,  II.,  1008. 
deposit  in  penny  post  in  due  time  must  be  shown,  II.,  1009. 
and  must  be  shown  that  the  penny  post  reached  the  vicinity  of  party 

notified,  II.,  1009. 
in  London  and  Edinburgh  the  delivery  by  post  perfected,  II.,  loio. 
post  may  be  used  when  indorser  or  drawer  is  dead,  and   there  is  no 

representative,  II.,  loil. 
rule  where  there  are  distinct  villages  connected  by  mail,  II.,  1012. 
usage  of  bank  may  affect  the  matter,  II.,  1013. 
who  are  to  be  regarded  as  of  the  same  place,  II.,  1014. 
party  residing  out  of  town,  but  receiving  mail  there,  may  be  notified 

by  post,  II.,  1015. 
conflicting  decisions,  ll.,  1015. 
when  it  suffices  to  leave  notice  at  dwelling  or  place  of  business,  II., 

1016. 
whether  sufficient  to  send  notice  to  place  of  business  without  there 

leaving  it,  II.,  1016. 
rule  when  party  has  two  business  places  in  same  town,  II.,  1016. 
if  party  holds  out  that  a  certain  place  is  his  place  of  business,  it  maybe 

so  treated,  II.,  1016, 
with  whom  notice  may  be  left  at  dwelling  or  place  of  business,  II., 

1017. 
what  places  may  be  regarded  as  party's  dwelling  or  place  of  business, 

II.,  1018,  1019. 

6.  Mode  and  formalities  of  notice  when  parties  reside  at  different  places,  II., 

1020. 

it  suffices  in  such  cases  to  send  notice  by  mail,  II.,  1021. 

should  be  properly  addressed  to  party  entitled  to  receive  it,  II.,  1021a. 

should  be  addressed  to  post-office  at  or  nearest  party's  residence,  un- 
less he  receives  his  mail  at  another  office,  and  then  it  should  be 
addressed  thereto,  II.,  1022. 


Re/ere ncet  are  to  TTSinTTY  r\->  \ 

Paragraphtmarked%.  IJNUiSA.  9j  I 

NOTICE  OF  Vil^ViO'^O'R— continued. 

if  party  has  residence  in  one  place  and  place  of  business  at  another 
may  be  sent  to  either,  II.,  1022,  1024. 

place  where  party  actually  resorts  for  his  mail  is  always  appropriate 
address,  II.,  1022. 

residence  need  not  be  domicile,  II.,  1022. 

indorser  may  direct  where  notice  shall  be  addressed,  II.,  1023. 

notice  should  not  be  directed  generally  to  parish  or  county  where 
there  are  several  offices,  II.,  1024. 

rule  where  there  are  two  offices  in  same  town,  II.,  1024, 

whether  delivery  to  bellman  suffices,  II.,  1024. 

what  is  place  of  residence,  II.,  1025. 

notice  should  not  be  sent  away  from  place  of  residence  to  place  of  busi- 
ness, II.,  1025. 

rule  in  respect  to  temporary  residents  or  sojourners,  II.,  1027. 

rule  in  respect  to  members  of  Congress  and  legislative  bodies,  II.,  1027. 

when  a  party  has  several  post-offices,  notice  may  be  sent  to  either.  II., 
1028. 

as  to  notice  addressed  to  party  living  in  a  large  city,  how  name  should 

be  written,  II.,  1029. 
party  holding  out  a  certain  place  of  residence  can  not  deny  it,  II.,  1029a. 
when  party  gives  information  to  holder  of  intended  absence,  notice 

should  be  sent  to  place  mentioned,  II.,  1029a. 
notice  put  in  keyhole  of  residence  sufficient,  II ,  1029a. 
place  of  date  of  instrument  is  prima  facie  evidence  of  residence  of 

drawer  of  bill,  II.,  1030. 
but  not  of  that  of  indorser,  II.,  1030,  1031. 
English  and  American  decisions,  II.,  1030,  1032. 
at  maturity  of  bill,  party  is  presumed  to  reside  at  same  place  where  he 

resided  when  it  was  drawn  or  indorsed,  II.,  1032. 
notice  may  in  all  cases  be  sent  by  a  special  messenger,  II.,  1033,  1034. 
in  which  case  holder  must  prove  safe  arrival  of  letter  in  due  time,  II., 

1033- 
what  in  such  case  is  due  time,  II.,  1033,  1034. 
when  messenger  is  necessary  or  most  convenient,  his  expenses  are 

chargeable  to  party  notified,  II.,  1034. 
when  special  messenger  must  be  employed,  II.,  1034. 
7    Time  within  which  notice  may  and  fnust  de given,  II.,  1035. 
notice  implies  that  dishonor  has  taken  place,  II.,  1035. 
knowledge  by  anticipation  not  equal  to  notice,  II.,  1035. 
as  soon  as  demand  is  made  after  dishonor,  holder  need  not  wait  till 

close  of  business  hours  to  send  notice,  II.,  1036. 
Mr.  Chitty's  views,  II.,  1036. 
holder   is  not  obliged  to  give  notice  on  the  very  day  of  dishonor, 

although  he  may,  II.,  1037. 
when  holder  and  party  reside  in  same  place,  he  has  till  expiration  of 

following  day  to  give  notice,  II.,  1038. 
if  given  at  place  of  business,  must  be  during  business  hours,  II.,  1038. 
if  at  residence,  may  be  at  any  time  before  hours  of  rest,  II.,  103S. 
when  not  in  same  place,  notice  must  be  sent  in  time  to  go  by  first 

mail  al"ter  day  of  dishonor,  provided  mail  does  not  close  before  early 

and  convenient  business  hours,  II.,  1039. 


Vv)- 


^__„  References  are  to 

IJN  U l!y A..  paragraphs  marked  \, 


NOTICE  OF  V)\^\iOViQ^— continued. 

what  is  meant  by  "  next  practicable  mail,"  II.,  1039. 

views  of  Chancellor  Kent,  Parsons,  Story,  and  Chitty,  II.,  1040. 

no  precise  hour  arbitrarily  fixed,  II.,  1041. 

what  are  reasonably  early  and  convenient  hours,  II.,  1041. 

if  drawer  or  indorser  throw  difficulty  in  the  way,  time  is  extended,  11^ 

1042. 
Christmas-day,  Sunday,  fourth  of  July,  and  other  days  on  which  trans^ 
action  of  business  is  forbidden,  are  not  computed  in  giving  notice, 
II.,  1043. 
each  holder  has  a  day  to  give  notice  to  his  predecessor,  II.,  1044. 
safe  rule  for  indorser  to  pursue,  II„  1045. 

over-diligence  in  one  party  does  not  excuse  want  of  diligence  in  an- 
other, II.,  1045. 
if  party  dwell  beyond  the  seas,  it  is  sufficient  to  send  notice  by  first 

regular  ship,  II.,  1046. 
what  ship  should  be  selected,  II.,  1046. 
what  ship  will  not  suffice,  II.,  1046. 
8.  Allegation  a7id proof  of  notice,  II.,  1047. 

what  declaration  on  instrument  must  allege  with  reference  to  facts 

which  dispense  with  presentment  and  notice,  II.,  1047. 
views  of  Byles,  II.,  1047. 

in  the  United  States,  evidence  of  due  diligence  to  obtain  payment  is  ad- 
missible under  the  general  averment  of  due  demand,  protest,  and 
notice,  II.,  1048,  1049. 
views  of  Greenleaf  and  Edwards,  II.,  1048. 
burden  of  proof  as  to  notice  rests  on  plaintiff,  II.,  1050. 
plaintiff  must  prove  due  diligence  in  giving  notice  on  proper  day,  II., 

1050. 
or  that  notice  was  actually  received,  II.,  105 1. 

will  not  do  to  show  that  notice  was  sent  on  one  of  two  days,  II.,  1051. 
contents  of  notice  must  be  shown,  II.,  105 1. 
always  suffices  to  show  due  deposit  in  office  where  mail  may  be  used, 

II.,  1051. 
postmark  \s  prima  facie  evidence  of  notice  being  mailed  on  that  day, 

II.,  1052. 
how  genuineness  of  postmark  shown,  II.,  1052. 
due  course  of  mails  must  be  shown  by  plaintiff,  courts  do  not  notice 

them  judicially,  II.,  1053. 
any  party  bound  prima  facie  when  notice  received  in  such  time  as  it 

would  occupy  for  intermediate  parties  to  transmit  it,  II.,  1053. 
ocular  evidence  of  posting  letter  not  required,  II.,  1054. 
what  is  sufficient  evidence  of  deposit  of  notice  in  office,  II.,  1054. 
protest  of  foreign  bills  is  evidence  of  presentment  and  dishonor,  but  not 

of  notice,  II.,  1055. 
how  rule  is  varied  by  statute  or  local  usage,  II.,  1055. 
decisions  upon  sufficiency  of  testimony,  II.,  1056. 
entries  in  notary's  book  good  secondary  evidence  after  his  death  as  to 

giving  notice,  II.,  lo57- 
even  when  protest  is  not  required  by  law,  II.,  1057. 
in  what  other  cases,  and  what,  secondary  evidence  is  admissible,  lU 
J058. 


References  are  to  INDEX.  933 

paragraphs  marked  %.  '  " 

NOTICE  OF  DISHONOR— (ro«//««^^. 

clue  diligence,  when  facts  ascertained,  is  a  question  for  the  court,  II., 
1058. 

otherwise  for  the  jury,  II.,  1058. 

when  due  diligence  exercised,  no  further  notice  necessar)-,  II.,  1058a. 

what  law  applies  to  notice,  910. 
NOTING.  See  Protest,  and  II.,  939. 
OCCUPATION    OF   COUNTRY   BY    ENEMY. 

as  excuse  for  non-presentment,  protest,  and    notice.     See  EXCUSES 
and  II.,  1064. 

OFFSET.     See  Set-OFF. 

ON  DEMAND. 

meaning  of,  89. 

ONUS  PROBANDI.    5^^  Burden  OF  Proof. 

OPERATION  OF  LAW. 
assignment  by,  748. 
discharge  by.     See  Discharges,  and  II.,  1283,  1286. 

ORAL.    See  Verbal. 

"  OR  ORDER." 

meaning  of  words,  104. 

ORDER. 

when  for  whole  fund  operates  as  assignment,  21. 

when  for  part  of  fund  it  operates  as  equitable  assignment,  22,  23. 

New  York  cases,  23<z.  . 

OVER-CHECKS.     See  CHECKS,  and  II.,  1629. 

OVER-DILIGENCE. 

of  one  party  does  not  supply  negligence  of  another  in  respect  to  notice, 
II.,  I045- 
OVERDUE  BILLS  AND  NOTES.    See  Bona  Fide  Holder;   Checks; 
Coupon  Bonds. 
what  defences  may  be  set  up  when  paper  overdue  at  time  of  transfer, 

724  to  725. 
holder  acquiring  paper  when  overdue,  rights  of,  782  to  787. 
overdue  checks.     See  Checks,  and  II.,  1629. 

OVERWHELMING  CALAMITY    AS   EXCUSE.      See  EXCUSES,  and   II.; 

1067,  1 1 25. 
PAROL  ACCEPTANCE.    5<f^  Acceptance  ;  Statute  of  Fr.\uds. 

PARTICULAR  FUND.     See  ASSIGNMENT. 

instruments  payable  out  of,  not  negotiable,  50. 

but  reference  to  such  fund  as  source  of  reimbursement  does  not  affect 
negotiability,  51. 
PART  PAYMENT.     See  PAYMENT. 

by  drawee  does  not  amount  to  acceptance,  497a. 

is  generally  only  payment /r^?  taiito,  II.,  1289. 


T-NTTM7-\.'  References  are  to 

934    ■  IJNUt-A.  paragraphs  mar kcd% 

PART  Y PCiM.Y.WY—cottiznued. 

generally  agreement  that  it  be  in  full  discharge  is  ineffectual  as  to 

residue,  11.,  1289. 
but  if  accompanied  by  agreement  of  compromise  or  composition  is  ef- 
fectual discharge,  II.,  1289,  1289^. 
is  effectual  discharge  when  so  agreed  if  made  before  maturity,  II.,  1289^. 

by  a  stranger,  II.,  1289a. 
by  bill  or  note,  with  surety, 
II.,  1289^. 
if  advantageous   to   creditor,  II., 
1289a. 
recent  decisions,  II.,  1289(7,  note, 
after  maturity  as  waiver  of  non-presentment  and  notice.     See  Excuses, 

and  II.,  1 165. 
after  maturity  as  evidence  of  fixed  liability,  XL,  1166. 
does  not  discharge  surety  except /r^  tanto,  II.,  1327. 
is  otherwise  if  accompanied  with  stipulation  hurtful  to  surety's  interest, 

II.,  1327. 
is  not  sufficient  consideration  for  agreement  to  extend  time,  II.,  13 17. 
otherwise  if  note  given  for  balance,  II.,  I3i7'^. 

if  made  by  purchaser  when  he  receives  notice  of  defect  in  notice  he  is 
only  protected /r^i  ianto,  789a. 

PARTNERS  AS  PARTIES   TO   NEGOTIABLE   INSTRUMENTS.      See 

Presentment  for  Acceptance  and  for  Payment. 
I.  Nature  and  varieties  of  partnership,  350, 

partnership  bound  when  name  used,  whether  partners  named  in  firm 

and  whether  known  or  not,  350^:,  351. 
nominal  or  ostensible  partner  is  bound  by  firm's  contracts,  as  if  actual, 

352. 
nature  of  general  and  limited,  or  special  partnerships,  352a. 
are  unknown  to  common  law  and  exist  by  statute,  352a. 
retiring  partner  should  give  notice,  353. 
how  notice  of  retirement  given,  353. 
if  there  be  common  partner  in  two  firms,  one  firm  can  not  sue   the 

other  at  law,  354. 
but  may  sue  the  other  in  equity,  354. 
statute  sometimes  changes  rule,  354. 
third  party  holding  paper  .to  which  both  firms  arc  parties,  may  sue  both 

at  law  although  there  be  common  partner,  354. 
when  one  partner  has  good  defence  it  avails  all,  354. 
one  member  of  firm  may  loan  money  to  another,  and  receive  his  note 

on  individual  account,  354. 
note  of  firm  to  member  valid  in  hands  of  indorsee,  354. 
after    dissolution,  ex  -  partner    may  sue  another  on  note  for  balance 

struck,  354. 
2.  Authority  of  copartner  to  bind  firm,  355. 

authority  of  one  partner  to  bind  firm,  springs  from  mutual  agency,  355. 

waive  demand  and  notice, 
person  raising  money  to  enter  firm,  can  not  bind  firm  for  payment,  355. 
authority  of  one  to  bind  all,  applies  only  to  acts  in  scope  of  partnership 

business,  355,  356. 


References  are  to  TMnTrY  n  •?  C 

Paragraphs  marked  %.  1 JN  Uil- A.  y  J  ^ 

PARTNERS  AS  VK^1\YJ=>— continued. 

within  scope  of  business  express  assent  of  all  to  acts  of  one  unnecessa- 
ry, 356. 

the  fact  of  partnership  creates  each  member  an  agent  of  all  within 
scope  of  its  business,  356. 

each  member  of  firm  engaged  in  trade,  may  bind  it  as  party  to  nego- 
tiable instruments,  357. 

joint  owner  of  property  can  not  bind  other  joint  owners  by  negotiable 
instrument,  358. 

nor  can  partner  bind  firm  otherwise  than  in  scope  of  business,  358. 

partner  can  not  bind  firm  by  bill  or  note,  unless  partnership  be  in  trade 
or  concern  to  which  the  issuing  or  transfer  of  such  paper  is  necessary 
or  usual,  357,  358^. 

what  are  trading  and  non-trading  partnerships,  357,  358a. 

of  farming  partnership  has  no  implied  authority  to  bind  it  by  negotia- 
ble instrument,  i^'^a. 

nor  can  one  of  a  firm  engaged  in  mining,  358a. 

gaslight  concern,  358^?. 
law  practice,  358. 

medical  practice,  except  for  necessa- 
ries, 358^. 

nor  can  partner  in  keeping  tavern,  except  strictly  in  the  business,  3583. 

if  firm  is  engaged  in  trading  as  well  as  farming,  one  partner  has  im- 
plied authority  to  bind  it,  358^7. 

rule  when  firm  engaged  in  business  requiring  large  capital  and  credit, 

general  authority  of  one  partner  exists  only  by  implication,  and  may  be 
rebutted,  358^. 

but  if  authority  implied  to  one  partner,  it  can  not  be  denied  against 
party  not  having  notice  that  it  did  not  exist,  368. 

if  firm  hold  proceeds  of  transaction  made  by  partner  in  excess  of  au- 
thority, it  is  bound,  359. 

and  this  rule  applies  whether  paper  be  signed  in  partner's  or  firm's 
name,  359. 

delay  of  firm  to  disaffirm  contract  of  partner,  may  amount  to  ratifica- 
tion, 359. 

if  firm  repudiate  contract  exceeding  authority  as  soon  as  it  is  heard  of, 
it  is  not  binding,  359. 

3.  Formal  signature  of  firm' s  tiame,  360. 
style  of  firm  should  be  used,  360. 
by  "  A.  B."  the  signing  partner  may  be  added,  360. 
should  clearly  appear  that  signature  was  intended  for  firm's,  360. 
in  general,  name  of  one  partner  will  not  bind  firm,  360. 
the  words;  "  I,  A.  B.,  promise,  for  A.  B.  C.  D.&  Co.,"  would  sufficiently 

indicate  firm  as  bound,  361. 
so  "I  promise,"  signed  in  firm's  name,  361. 
if  partner  draws  in  fictitious  name,  and  indorses  firm's  name,  latter  is 

bound  by  indorsement,  361. 
immaterial  variation  from  firm's  name  unimportant,  361. 
partner  executing  joint  and  separate  note  in  firm's  name  would  bind  il 

jointly  only,  361. 


c\'if\  TKSTWV  References  are  to 

Vo^  liNUE-A.  paragraphs  marked %. 

PARTNERS  AS  V ARTIES— contmued. 

bill  drawn  on  firm  may  be  accepted  by  one  partner,  362. 

See  Accepta7ice,  and  362,  488. 
and  his  own  name  in  such  case  shows  he  acted  for  firm,  362,  488. 
conflicting  authorities,  362,  488. 

bill  drawn  on  "  E.  M.  and  others,  trustees,"  and  written  on  "  accepted 
E.  M.,"  binds  all  as  acceptors,  362. 

firm  may  conduct  business  in  one  partner's  name,  363  ;  see  also  304. 
360,  399- 

hw\.  prima  facie  single  name  binds  single  partner  only,  363. 

Story's  views,  363. 

if  paper  signed  by  single  partner's  name  be  used  in  firm's  business,  it 
presumptively  binds  firm,  363. 

if  bank  account  kept  in  single  partner's  name,  his  check  will  bind  firm, 
364- 

if  firm  adopt  single  partner's  name,  bill  or  note  signed  by  him  for  indi- 
vidual purposes  will  bind  him  only,  364. 

otherwise  if  used  for  benefit  of  firm,  364. 
4.  Accommodation,  private,  and  prohibited  transactions,  365. 

no  member  of  firm  can  bmd  it  as  accommodation  drawer,  acceptor, 
maker,  or  indorser,  365. 

holder  knowing  character  of  paper  must  prove  assent  of  all  the  partners, 
365- 

if  paper  shows  its  character  on  its  face,  holder  can  not  recover  without 
proving  assent  of  all,  365. 

if  word  "  surety  "  be  added,  that  gives  notice,  365. 

if  bill  be  carried  to  bank  for  discount  by  drawer  or  maker,  with  partner- 
ship name  on  it  as  indorser,  it  shows  that  it  is  accommodation  in- 
dorsement, 365. 

if  one  partner  gets  firm  paper  discounted,  having  it  put  to  his  credit  is 

not  notice  that  there  is  fraud  on  firm,  365. 
if  partnership  indorsement  is  for  firm's  benefit,  it  is  valid,  365. 
where  A.,  B.  &  C,  partners,  indorsed  for  accommodation,  and  A. 

dying,  E.&C.  renewed  it;  held,  A.'s  estate  discharged  on  old  paper 

for  want  of  notice,  and  not  bound  on  renewal  for  want  of  authority, 

365- 
but  if  A.,  B,  &  C.  were  makers  of  note,  rule  would  be  different,  365. 
no  member  can  bind  firm  for  his  private  debt,  366. 

party  taking  firm's  paper  for  partner's  debt,  must  prove  assent  of  firm, 
366. 

English  authorities,  and  views  of  Parsons  and  Chitty,  366. 

what  proof  necessary  of  firm's  assent,  366. 

may  be  implied  by  circumstances,  367. 

admissions  of  partner  who  used  firm's  name  for  his  own  debt  not  ad- 
missible, 367. 

one  partner  has  no  authority  to  bind  firm  by  blank  acceptance,  there 
being  no  drawer  to  bill,  367. 

partner's  implied  authority  to  bind  firm  may  be  limited  by  agreement, 
368. 

it  is  fraud  to  violate  such  agreement,  368. 

but  it  does  not  affect  bona  fide  holder  without  notice,  368. 


References  are  to  INDEX.  937 

paragraphs  marked  %. 

PARTNERS  AS  Y hKll^'^— continued. 

the  burden  of  proof  in  respect  to  partnership  paper,  369. 
rules  as  to  shifting  of  burden  from  one  side  to  the  other,  369. 
5.   The  effect  of  dissolution  of  firm,  by  retirement  or  agreement,  369a. 
dissolution  may  occur  by  agreement,  3693. 

change  of  membership,  369a. 
retirement  of  partner,  ^Sga, 
operation  of  law,  369a. 
death  or  bankruptcy  of  partner  operates  dissolution,  369a. 
notice  of  dissolution  by  operation  of  law  necessary,  369^. 

unnecessary  when  dormant  partner  retires,  369a. 
otherwise  if  dormant  partner  be  known  as  member,  369^. 
notice  of  dissolution  necessary  when  it  occurs  by  agreement  or  retire- 

ment,  369^.  ,  , 

continuing  members  bound  by  bankrupt  member  if  they  so  hold  out. 

369^. 
method  of  giving  notice  of  dissolution,  369^. 
strangers  entitled  only  to  general  and  constructive  notice,  369^. 
customers  entitled  to  particular  notice,  369^. 
how  effect  of  notice  is  done  away  with,  369^. 

indorsee  with  notice  may  get  good  title  from  indorser  without,  369^. 
dissolution  operates  revocation  of  authority  to  make  new  contracts, 

buf  not  authority   to  arrange,  liquidate,  settle,  and  pay  those  before 

created,  370- 
ex-partner  can  not  give  note  or  accept  bill  in  firm's  name.  370,  37oa. 
nor  indorse  bills  and  notes  given  to  firm  before  dissolution,  370,  370^. 
nor  renew  bills  and  notes  of  firm,  370. 

rule  in  New  York,  370.  ■      y  a 

when  dissolution   not   caused   by   death,  ex-partner   has  no    implied 

authority  to  indorse  bills  or  notes  of  firm,  370^:. 
otherwise  when  dissolution  is  caused  by  death,  370^. 
reason  of  distinction,  370CJ!. 

note  antedated  can  not  bind  firm  after  dissolution,  unless  holder  not 

affected  with  notice,  371.  ,     •  j 

rule  as  to  instruments  signed  in  firm  name  before  dissolution   and 

issued  afterward,  37 1«,  372,  372^. 
various  decisions,  372,  372^;. 
one  ex-partner  may  bind  firm  after  dissolution  as  party  to  bill  or  note, 

if  authorized  verbally  or  in  writing,  373- 
authority  to  give  or  renew  note  in  firm's  name  not  implied  by  authonty 

to  settle  up  or  close  business,  373. 
nor  will  such  authority  be  implied  by  authority  "to  settle  business  of 

firm,  and  sign  its  name  for  any  purpose,    373- 
nor  by  authority  "  to  use  the  name  of  the  firm  in  liquidation  only  of 

past  business,"  373. 
nor  "  to  settle  all  demands  in  favor  of  or  against  firm,    373- 
cases  in  England  and  Pennsylvania,  373- 
how  partnership  debt  taken  out  of  statute  of  limitations,  374. 
doctrine  in  Massachusetts,  374. 


9^)0  TMnVY  References  are  t9 

0<->  liNiJ£.A.  Paragraphs  mar ked% 

PARTNERS  AS  V K^TlY.S—contmued. 

notice  of  dissolution  siiould  be  given,  369^,  375. 
otherwise  nrm  bound  by  use  of  its  name  by  one  partner,  369a,  375. 
6.  Discharge  of  firm' s  debt  by  bill  or  note  of  one  partner,  II.,  1299. 

generally,  bill  or  note  of  one  partner  is  good  discharge  of  consideration 

for  firm's  debt,  II.,  1299. 
but  such  bill  or  note  may  be  taken  as  collateral  merely,  II.,  1300. 
burden  of  proof  is  on  party  alleging  to  show  separate  note  of  partner 

was  taken  in  extinguishment  of  firm's  debt,  II.,  1300. 
effect  of  delivering  up  firm's  note  on  taking  note  of  separate  partner 

II.,  1300, 
renewal  in  firm's  name  after  dissolution,  1300a. 
mere  promise  to  look  to  one  partner  not  binding,  where  no  new  security 

taken,  II.,  1301. 
effect  of  third  parties  entering  into  the  arrangement,  II.,  1301. 
effect  of  partner  changing  his  situation,  II.,  1301. 

PAYEE.     See  AGENTS ;   CORPORATIONS  ;   COUPON  Bonds  ;    Negotiable 
Instruments. 

must  be  indicated,  99. 

sufficient  if  paper  payable  to  A.,  or  order,  or  bearer,  or  holder,  or  to 
order,  99. 

or  to  certain  persons  "  or  assigns,"  99. 

so  if  payable  "  to  administrators  of  A.'s  estate,"  it  suffices,  99. 

so  if  to  "  trustees  of  A.'s  will,"  99. 

or  to  "  heirs  of  A.,"  99. 

or  to  "  A.  or  his  heirs,''  99. 

or  to  "  the  order  of  indorser,"  99. 

whether  "  to  estate  of  A."  suffices,  100. 

of  father  and  son  of  same  name,  father  presumed  to  be  payee,  100. 

but  son  in  possession  could  recover,  100. 

misdescription  or  misspelling  immaterial,  100. 

to  "  secretary  for  time  being  of  certain  society,"  insufficient,  loi. 

but  to  "  the  now  secretary,"  sufficient,  loi. 

so  suffices  if  payable  to  "  treasurer  of  corporation,"  loi. 

or  to  "treasurer,  or  his  successors  in  office,"  loi. 

note  payable  to  people  of  Illinois  means  State  of  Illinois,  loi. 

if  no  one  named  as  payee,  and  no  bJank  left,  it  is  fatal  defect,  102. 

thus,  "  good  for  $100;  value  received,"  is  waste  paper,  102. 

but  "received  of  A.  $100,  which  I  promise  to  pay  on  demand,"  suffi- 
ciently indicates  A.,  102. 

payee's  name  may  be  left  blank,  to  be  filled  up  by  holder,  145. 

as  to  rights  of  holder  to  fill  up  blank,  145,  146. 

not  good  negotiable  note  if  payable  to  A.  or  B.,  103. 
See  Alternative  Payees,  and  103  et  seq. 

if  payable  to  "  bearer  A.,"  same  as  payable  to  A.  simply,  104. 

to  "  order  of  A."  same  as  to  "  A.,  or  order,"  104. 

"A.,  or  bearer,"  same  as  bearer,  104. 

to  "A.  only,"  not  negotiable,  105. 

but  A.  would  be  bound  on  his  indorsement,  105. 


References  are  to  INDEX.  939 

paragraphs  marked  \. 

VAY'EE— continued. 

no  precise  words  necessary  to  negotiability,  io6.  .     ,      , 

maker  can  not  show  payee  to  be  infant,  married  woman,  lunatic,  bank- 
rupt,  or  fictitious,  93,  227,  242. 

PAYMENT.      See  Presentment    for;    Conditional,  and    Absolute 
Payment;  Discharges;   Checks. 

1.  Nature  of  payment,  11.,  1221. 

what  is  meant  by  payment,  II.,  1221. 

it  is  not  a  contract,  II.,  1221. 

difference  between  payment  and  sale,  II.,  1221. 

credit  given  by  drawer,  or  other  party  liable,  to  holder  at  his  request 

is  equivalent  to  payment,  II.,  1221. 
does  not  necessarily  mean  payment  of  money,  II.,  1221. 
party  to  instrument  who  pays  can  not  show  he  paid  as  secret  agent  of 

another,  II.,  1222. 
and  where  stranger  pays  overdue  note  and  says  nothing  as  to  purchase, 

it  is  payment,  II.,  1222. 
payment  by  checks,  II.,  1623. 

2.  Who  may  make,  II.,  1222. 

any  party  to  bill  or  note  may  pay  it,  II.,  1223. 

stranger  can  not  pay  so  as  to  acquire  the  rights  of  a  holder,  II.,  1223. 

but  he  may  always  purchase,  II.,  1223. 

of  what  indorser  should  be  assured  before  he  pays,  II.,  1224. 

of  what  maker  of  note  or  acceptor  of  bill  must  satisfy  himself  when 

it  is  presented  for  payment,  II.,  1225. 
monev  paid  with  knowledge  of  facts,  but  under  mistake  of  law,  can 

not' be  recovered  back,  II.,  1226. 
party  who  pays  should  be  sure  instrument  is  in  possession  of  whomso- 
ever demands  payment,  II.,  1227. 
receipt  ought  always  to  be  taken  on  back  of  bill  or  note,  II.,  1228. 
indorser  who  pays  should  take  receipt  and  require  delivery  of  mstru- 
ment,  II.,  1229. 
■X    To  whom  may  be  made,  II.,  1230. 

payment  should  be  made  to  legal  holder  or  his  authorized  agent  to  re- 

ceive  same,  II.,  1230. 
if  payable  to  bearer  or  indorser  in  blank,  party  in  possession  is  pre- 
sumed to  be  entitled  to  payment,  II.,  1230. 
payment  to  special  indorsee,  II.,  1230^. 
payments  to  assignee  of  bankrupt,  personal  representative,  guardian, 

and  husband  of  female  payee,  II.,  1231. 
others  to  whom  payment  may  be  made,  II.,  1231. 

when/^;;z^  sole  holder  marries,  payment  to  her  does  not  exonerate  ac- 
ceptor though  ignorant  of  marriage,  II.,  1232. 
4.    When  may  be  made,  \\.,\^^^.  r  ,     u    ,  u.  a 

payment  before  maturity  must  be  with  consent  of  both  debtor  and 

creditor,  II.,  1233. 
different  if  paid  holder  at  maturity,  II.,  1 233«.  • 

in  making  payment  after  maturity,  payor  must  be  certain  who  is  then 

holder,  II.,  1233a. 
payment  may  be  demanded  any  time  after  business  hours  on  day  of 

maturity,  II.,  1235. 


r-\jT\-cv  References  are  to 

QAO  INDbX.  paragraphs  mar ked\ 

PAYMENT — continued. 

payor  has  whole  day  to  pay  in,  II.,  1235. 

if  not  paid  in  business  hours,  paper  should  be  dishonored,  II.,  1235. 

if  made  after  action  brought,  holder  may  proceed  for  his  costs,  unless 

included,  II.,  1235. 
rule  when  paper  long  dishonored,  or  torn  and  pasted,  II.;  1235. 
payment  to  wrong  party,  II.,  1235. 

5.  Effect  of,  and  who  may  reissue  bill  or  note,  II.,  1236. 

payment  by  maker  or  acceptor  discharges  drawer  and  indorsers  (who 

are  liable  as  sureties),  and  cancels  instrument,  II.,  1236, 
if  drawer  pay  part,  holder  may  yet  sue  acceptor  for  whole  amount,  II., 

1237. 
in  which  case  he  is  trustee  for  drawer  for  what  he  paid,  II.,  1237. 
on  a  bill  or  note  reissued  by  acceptor  or  maker,  drawer  and  indorser 

are  not  liable  to  even  bona  fide  holder,  II.,  1238. 
when  last  of  several  indorsers  pays  and  reissues,  prior  parties  remain 

liable,  II.,  1238. 
drawer  can  not  reissue  bill  so  as  to  bind  acceptor, 

(i)  where  acceptance  was  for  his  accommodation,  II.,  1239. 

and  (2)  where  name  of  any  indorser  to  whom  he  is  liable  remains 
upon  it,  II.,  1240. 
in  all  other  cases  drawer  or  indorser  may  reissue  bill  or  note,  II.,  1241. 
parties  who  knowingly  negotiate  instruments  after  payment,  thereby 

only  charge  themselves,  II.,  1242. 
meaning  and  effect  of  agreement  to  "  retire  "  a  bill,  II.,  1243. 
if  paper  surrendered  by  mistake,  part  only  being  paid,  balance  may  be 

recovered,  II.,  1243. 
otherwise  not,  II.,  1243. 

6.  Meditim  of  payment  and  legal  tender  cases,  11.,  1244. 

money  paid  must  be  that  current  at  place  of  payment,  II.,  1244. 

terms  construed  as  of  time  and  place  of  contract,  II.,  1244. 

if  coin  alloyed  after  contract,  debtor  must  make  good  full  value,  II., 

1244. 
so  if  name  of  coin  changed  to  apply  to  a  lesser  value,  II.,  1244. 
medium  must  be  that  of  face  of  paper,  II.,  1245. 
agent  can  take  nothing  but  money,  II.,  1245. 
if  paper  payable  "in  currency,"  not  negotiable,  II.,  1245. 
meaning  of  "  in  currency,"  II.,  1245. 
what  is  legal  tender.     See  Tetider,  and  II.,  1246,  1247,  1248,  1249. 

7.  Appropriation  or  application  of  paytnent,  II.,  1250. 

question  as  to  how  credit  should  be  applied  arises  when  debtor  is  in- 
debted to  same  creditor  in  various  items  of  account,  and  pays  a  cer- 
tain sum,  II.,  1250. 
general  principles  as  to  : 

(i)  debtor  may  appropriate  as  he  pleases,  II.,  1250. 
after  once  appropriating,  can  not  change,  II.,  1250. 
if  but  one  debt,  no  question  as  to  apphcation,  II.,  1250. 
after  controversy  arises,  can  be  no  election  as  to,  II.,  1250. 
(2)  if  debtor  makes  no  application,  creditor  may,  II.,  1251. 
silence  of  debtor  leaves  matter  to  creditor,  II.,  1251. 


References  are  to  TTSinPY  rxAt 

paragraphs  marreed%.  liNiJlLA.  94* 

VPC{W£.WY—conttmied. 

can  not  apply  to  debts  not  due,  II.,  1251. 

can  not  apply  so  as  to  peculiarly  injure  debtor,  II.,  1251. 

appropriation  can  not  apply  to  compulsory  payments,  II.,  1251. 

if  once  made  by  creditor,  can  not  be  changed,  II.,  1251. 

if  debtor  deny  one  debt,  creditor  can  not  apply  payment  to  it  in 

exclusion  of  acknowledged  debt,  II.,  1251. 
if  creditor  receive  money,  must  apply  it  as  directed,  II.,  1251. 
(3)  if  neither  party  appropriate,  law  will,  according  -to  equity  and 
probable  intent  of  parties,  II,,  1252. 
various  cases  illustrating  legal  application,  II.,  1252,  1253. 
8.  Pay7ne7it  supra  protest  or  for  honor,  II.,  1254. 

generally  stranger  can  not  pay  debt  and  require  reimbursement,  II., 

1254. 

exception  as  to  bills  and  negotiable  notes,  II.,  1254, 

after  protest  stranger  may  pay  bill  or  note  for  honor  of  drawer,  in- 

dorser,  acceptor,  or  maker,  II.,  1254. 
or  may  pay  for  \xox\ox ge7teraUy,  that  is,  for  honor  of  all,  II.,  1254. 
such  payment  does  not  discharge  paper,  II.,  1254, 
but  transfers  holder's  rights  to  party  paying,  II.,  1254. 
if  for  honor  of  an  indorser,  payor  may  sue  him  and  all  prior  parties,  II., 

1254. 
if  for  honor  generally,  he  may  sue  all  parties,  II.,  1254. 
so  if  for  honor  of  last  indorsee,  II.,  1254. 
how  to  declare  in  such  cases,  II.,  1254. 
party  paying  for  honor  of  drawer  can  not  sue  acceptor  unless  drawer 

could  have  done  so,  II.,  1255. 

acceptor  can  not  pay  for  honor  of  indorser  because  himself  bound  to 
him,  II.,  1256. 

but  acceptor  may  sue  drawer  if  he  pays  for  honor,  provided  his  accept- 
ance were  for  drawer's  accommodation,  II.,  1256. 

party  desiring  to  pay  for  honor  must  be  ready  and  offer  to  do  so  at  time 
and  place  of  payment,  II.,  1257. 

party  should  not  pay  for  honor,  without  ascertaining  genuineness  of 
signatures,  II.,  1257. 

such  party  can  not  recover  back  money  paid  for  honor,  unless  he  dis- 
covers mistake  and  gives  notice  in  time  to  prevent  loss,  II.,  1257. 

when  notice  must  be  given  in  case  of  forgery,  II.,  1257. 

as  to  liability  of  acceptor  for  honor,  II.,  1258. 

the  formal  mode  of  making  payment  supra  protest,  1258. 

PENCIL. 

signature  may  be  made  by,  74. 

PENNY  POST. 

use  of,  for  transmission  of  notice,  II.,  1008,  1009,  loio,  1012,  1013. 

"PER  ADVICE." 

meaning  of  phrase,  109. 

PERSONAL    REPRESENTATIVE.     See  Fiduciaries;    Presentment 
Notice. 


.  _  T"MT»Ti" V  References  are  to 

94-  lINUiiA.  Paragraphs  marked  \ 

PERSONS  UNDER  GUARDIANSHIP, 
can  not  contract,  259. 

PLACE  OF  PAYMENT.  See  Presentment  for  Acceptance,  and  Pre- 
sentment FOR  Payment;  also,  Memoranda  and  Altera- 
tion. 

need  not  be,  but  often  is  specified  in  paper,  90. 

effect  of  making  paper  payable  at  certain  place  "  only  and  not  else- 
where," 90,  459.  563.  635,  643. 

place  of  maker's  residence  understood,  if  none  named  in  note,  90. 

and  of  drawee's  residence,  if  none  named  in  bill,  90. 

circumstances  may  alter  this  rule,  90. 

if  note  payable  on  face  at  bank  in  certain  town,  but  name  of  bank  left 
blank,  payee  may  insert  particular  bank  in  such  town,  90, 

maker  bound  to  holder,  though  payee  exceed  his  authority,  90. 

date  as  evidence  of,  639. 

alteration  of,  II.,  1378,  1383. 

place  of  payment  of  coupon  bonds,  II.,  1497. 
POLITICAL  DISTURBANCE. 

as  excuse  for  non-presentment,  protest,  and  notice.  See  Excuses,  and 
II.,  1065. 

POSSESSION.    See  Presentment  for  Payment  ;  Assignment  ;  Action. 

when  sufficient  evidence  of  ownership,  573. 

of  unindorsed  paper  not  in  hands  of  payee  not  in  usual  course  of  busi- 
ness, ^Z\a,  812. 

whether  possession  of  drawer  or  acceptor  is  in  ordinary  course  of  busi- 
ness, 78 1  a:,  8x2. 

eftect  of,  by  personal  representative,  812. 

POST.     See  NOTICE. 

remittance  by,  287.     II.,  1474- 

presentment  of  check  by,  II.,  1599. 

notice  by,  II.,  1005,  1008,  1013,  1015,  1020. 

POST  DATE.     5^^  Date. 

POSTMARK. 

as  evidence,  II.,  1052. 
POST   NOTES.     See  BANK  NOTES,  and  II.,  1670. 
POUND   STERLING. 

value  of,  II.,  1441. 
POWERS  OF  ATTORNEY.    See  Attorney,  and  274.    II.,  1708^. 
PRECEDENT,  OR  PRE-EXISTING  DEBT.     See  COLLATERAL  SECURITY 
good  consideration  for  bill  or  note,  184. 

bill  or  note  transferred  as  security,  82 5. 
See  Collateral  Security,  and  824  to  831. 
PRESENTMENT   FOR   ACCEPTANCE. 
I.  Nature  and  necessity  for,  449. 

holder  may  present  bill  for  acceptance  as  late  as  day  before  maturity 
449. 


References  are  f»  INDEX.  943 

paragraphs  marked  %. 

PRESENTMENT  FOR  ACCEPTANCE-r^«/'/««^^. 

on  clay  of  maturity  presentment  for  acceptance  is  merged  m  present- 

ment  for  payment,  449. 
if  acceptance  refused,  bill  dishonored,  449- 
and  all  parties  may  be  at  once  sued,  449- 

suit  in  Federal  court  in  such  case,  not  affected  by  State  statute,  449- 
presentment  to  drawee  for.  necessary,   even  though  drawer  has  re- 
quested him  not  to  accept,  450. 
sometimes  relations  of  parties  excuse  failure  of  45o.  ,.  ,  ,„,,^. 

acceptance  must  accord  with  tenor  of  bill,  else  .t  should  be  dishonored. 

450. 
effect  of  acceptance  as  assignment,  451. 
if  holder  bound  to  present  for  acceptance  fails,  he  forfeits  not  only 

remedy  on  bill,  but  also  original  debt.  452. 

2.For}naliiiesof,JitSA'  ,-  .     ^^    ^r-^ 

bills  payable  on  demand  need  not  be  presented  for  acceptance.  454- 

if  payable  at  bank,  rule  not  allowed,  454- 

is  usual  when  bill  payable  at  future  day,  454- 

if  acceptance  refused,  must  be  protest  and  notice.  454- 

rule  as  to  bills  payable  at  or  after  sight,  or  after  other  event.  454- 

unreasonable  delay  discharges  drawer  and  indorsers,  454- 

acceptance  may  be  waived  in  body  of  bill,  454- 

in  such  case  proceedings  merged  in  presentment  for  payment,  454- 

presentment  must  be  made  by  holder  or  authorized  agent.  455- 

party  in  possession  presumably  holder,  455. 

protest  will  inure  to  benefit  of  rightful  holder,  455- 

if  drawee  not  found,  presentment  should  be  to  person  indicated  m  case 

of  need,  455. 
if  there  are  two  drawees  not  partners,  must  be  to  both,  453- 

but  query?  455-  , 

to  one  partner  suffices,  even  if  firm  is  bankrupt,  455- 
if  drawee  not  found,  holder  should  assure  himself  of  agency  of  partj 
actin""  for  him,  456.  , 

difference  between  person  to  whom  presentment  for  acceptance  and 

for  payment  should  be  made,  456. 
may  be  to  clerk  at  drawee's  counting-room,  457- 
if  drawee  dead,  whether  should  be  made  to  his  representative.  458. 
at  what  place  should  be  made,  459. 
Sero-eant  Onslow's  act  in  England,  459. 
stat^utes  as  to  place  of  presentment  in  United  States,  460. 

should  be  at  place  of  drawee's  domicile,  460. 

if  drawee  has  removed,  should  be  at  new  place  of  residence,  if  ascer- 
tainable,  460. 

may  be  at  dwelling  or  place  of  business,  461. 

bill  should  be  actually  exhibited,  462. 

if  drawee  can  see  bill,  and  give  intelligent  response,  it  suffices,  462. 

drawee  may  require  production  of  bill,  463- 

but  may  waive  it,  and  accept,  463- 

if  holder  leave  bill  with  acceptor,  and  by  nec^igence  enable  third  party 
to  get  possession,  can  not  sue  acceptor  in  trover,  4&3- 


944  INDEX.  vs '^^-^^''T/"'"'wR 

-'  "^T  paragraphs  marked  $4 

PRESENTMENT  FOR  ACCEPTANCE- r(9«/z««^^. 
either  of  a  set  of  bills  may  be  presented,  463. 
indorsement  of  one  of  set  carries  all,  463. 
3.   Time  of,  464, 

should  be  during  business  hours,  464«.  ^ 

what  are  business  hours,  464. 

if  bill  payable  at  day  certain,  need  not  be  presented  until  maturity,  to 

charge  drawer  and  indorsers,  465. 
exceptions  to  this  rule  : 

(i)  when  there  is  express  direction  to  payee  or  holder,  465. 

(2)  when  bill  put  in  hands  of  agent  for  negotiation,  465. 

if  bill  not  payable  on  day  certain,  it  must  be  presented  in  reasonable 
time,  465, 

when  question  of  law  and  when  of  fact,  466. 

due  diligence  must  be  exercised,  467. 

distinction  between  bills  payable  at  certain  time  after  date,  and  certain 

time  after  sight,  467. 
circumstances  affecting  question,  468. 

(i)  passing  of  bill  into  circulation,  468. 

(2)  falling  or  rising  of  exchange,  468. 

(3)  facility  of  communication  between  places,  468. 
question  not  affected  by  solvency  of  drawer,  475. 
agent's  duty  in  presenting  for  acceptance,  476. 
must  act  speedily,  without  unreasonable  delay,  476. 
has  not  same  latitude  as  principal,  476,  477. 

effect  of  war,  sickness,  accident,  and  other  reasonable  causes  of  delay, 
478. 

PRESENTMENT  FOR  PAYMENT.     See  Grace;   Checks;   Conflict 
OF  Laws  ;  Guaranties. 
I.  Nature  of,  bywhom  and  to  whom  made,  571. 

nature  of  acceptor's  and  maker's  engagement,  571. 
drawer's  and  indorser's,  571. 

presentment  may  be  made  by  any  bona  fide  holder  or  person  lawfully 
in  possession,  572. 

mere  possession  sufficient  evidence  of  right  to  present,  572,  573. 

except  where  unindorsed  by  payee  or  indorsee,  or  indorsed  specially, 
574- 

when  payment  to  agent  valid,  573. 

may  be  made  by  agent,  572, 

but  mere  possession  of  instrument  not  indorsed  by  payee,  or  special 
indorsee,  is  not  evidence  of  agency,  574. 

Mr.  Chitty's  views,  575. 

what  evidence  of  ownership  suffices  without  indorsement,  573. 

rule  where  indorser  presents  bill  or  note  bearing  subsequent  special  in- 
dorsement, and  no  prior  indorsement  in  blank,  576. 

rule  in  case  of  note  not  originally  negotiable,  577. 

if  holder  die,  representative  must  make,  578. 

if  no  representative  at  time,  must  be  made  in  reasonable  time,  578. 

in  case  of  bankrupt,  assignee  must  make,  578. 


References  are  to  INDEX.  945 

paragraphs  marked  §.  •  T^  ^ 

PRESENTMENT  FOR  V kY^X^'^T— continued. 
\{feme  sole  marry,  husband  must  make,  578. 
if  copartner  die,  survivor  must  make,  578. 
whether  or  not  demand  of  payment  of  foreign  bill  by  notary's  clerk  is 

sufficient  ground  of  protest,  579. 
English  authorities,  and  Mr.  Chitty's  views,  580. 
authorities  in  United  States,  581,  582. 
generally  held  that  demand  in  such  cases  must  be  at  common  law,  by 

notary  in  person,  581. 
distinction,  in  Kentucky,  between  deputy  and  clerk,  583. 
rule  applies  to  protest  of  inland  bills  and  promissory'  notes,  584. 
statutory  authority  or    general  custom  for  clerk  to  present,  may  be 

proved,  586. 
clerk  can  not  make  the  protest,  586. 
custom  as  to  clerk's  authority  must  be  shown  to  relate  to  foreign  bills, 

587. 
must  be  made  to  drawee,  acceptor,  maker,  or  agent,  588. 
personal  demand  not  necessary,  589. 
sufficient  if  at  residence,  place  of  business,  or  to  wife  or  agent  of  payor, 

589. 
may  be  to  clerk  at  counting-room,  588. 
what  sufficient  statement  as  to  presentment,  590. 
distinction  taken  between  presentment  for  acceptance  and  for  payment, 

589. 
whether  holder  must  see  drawee  personally  in  presentmg  for  accept- 
ance, 589. 
opinion  expressed  in  negative,  589. 
■"    to  what  persons,  at  place  of  payment,  it  may  be  made,  588. 
presentment  to  cashier  suffices  if  paper  payable  at  bank,  511. 
general   principles  as  to  time  of,  and  what  constitutes  "  reasonable 

hours,"  590. 
rule  where  acceptor  or  maker  is  dead,  591. 
rule  in  partnership  cases,  592. 
sufficient  if  to  any  partner,  even  after  dissolution,  592. 

if  to  agent  of  one  partner  in  absence  of  other,  592. 
if  to  sur\'ivor,  where  one  partner  dies,  593. 
rule  where  there  are  several  promisors  not  partners,  594. 
semble,  sufficient  if  to  one  on  day  of  maturity,  and  as  speedily  as  prac- 
ticable thereafter  to  others,  594. 
sufficient  if  to  one  oi  several  2&  well  as  joint  promisors,  594. 
if  joint  maker  die,  should  be  to  survivor,  596. 
2.    When  must  be  made,  597. 

need  not  be  made  on  day  of  maturity  to  bind  acceptor  or  maker,  597. 

rule  where  paper  payable  at  particular  place,  597. 

must  be  on  day  of  maturity  to  charge  drawer  or  indorser,  598. 

if  paper  payable  in   instalments,   should  be  as  each  instalment  falls 

due,  599. 
unless  whole  amount  falls  due  on  default  as  to  one  instalment,  599. 
if  no  time  named,  "  on  demand  "  is  understood,  599. 
"  on  demand  at  sight  "  is  same  as  "  at  sight,"  599. 

Vol.  II.— 60 


^  ^      p^  References  are  to 

QAO  liNiJtLA.  paragraphs  marked  %, 

PRESENTMENT  FOR  V KYWS.'^T— continued. 

"on  call,"  or  "  when  called  for,"  is  same  as  "  on  demand,"  599. 

if  paper  payable  at  bank,  should  be  made  during  banking  hours,  600. 

insufficient  after  such  hours  unless  officer  there,  or  some  one  who  gives 

response,  600. 
how  rule  affected  by  usage,  600. 

if  paper  payable  "  at  bank,"  usual  banking  hours  of  the  place  will  con- 
trol, 601. 
what  are  "business  hours"  is  question  for  jury,  601. 
how  far  courts  take  judicial  notice  of  such  hours,  601. 
"business  hours,"  when  paper  not  payable  at  bank,  range  through  the 

day  to  hours  of  rest,  602. 
retirement  to  rest  of  payor  does  not  affect  question,  602. 
if  at  place  of  business  must  be  when  such  places  are  customarily  open, 

603. 
sufficient  at  any  hour  if  response  be  given,  603. 
if  no  time  of  payment   be  specified,  "  reasonable  time  "  is  understood, 

604. 
what  is  "  reasonable  time  "  depends  on  circumstances,  604. 
rule  as  to  bills  payable  on  demand,  605. 
notes  payable  on  demand,  606. 
given  for  a  loan,  607. 
payable  on  demand  with  interest,  608. 
what  delay  discharges  indorser,  609. 
the  true  principles  to  be  deduced,  610. 
rule  when  instrument  is  indorsed  after  maturity,  611. 
how  question  of  reasonable  time  determined,  612. 
3.  Place  of  prese}itme?it  for  payment,  635. 

should  be  made  at  city,  town,  or  other  place  where  maker  or  acceptor 

has  domicile  or  place  of  business,  635. 
if  place  designated  in  bill  or  note,  should  be  there,  635. 
averment  of  presentment  there  suffices,  635. 
if  maker  or  acceptor  has  residence  and  place  of  business  in  same  place, 

may  be  at  either,  635. 
so  may  be  at  either  place,  if  residence  in  one  place  and  business  place 

in  another,  635. 
if  paper  payable  in  particular  town,  presentment  at  all  banks  there  suf- 
fices, 635. 
at  private  dwelling  suffices,  635,  636. 
drawee  must  pay  immediately,  or  bill  be  dishonored,  635. 
business  house  most  suitable  place  for,  636, 
if  business  house  closed,  sufficient  if  at  dwelling,  636. 
so  if  business  place  can  not  be  found,  636. 
if  bill  payable  at  bank,  and  bank  is  holder  at  maturity,  that  amounts  to 

presentment,  636. 
if  business  place  closed,  party  holding  paper  should  go  to  residence,  637. 
so  if  no  place  of  business,  637. 

"  usual  place  of  business  "  is  meant  by  "  place  of  business,"  637. 
place  not  important  if  there  is  actual  presentment  and  response,  638. 
whether'  presentment  on  street  sufficient,  638. 


References  are  to  INDEX.  ^^ ' 

paragraphs  marked  §. 

PRFSENTMENT  FOR  Y hX^Y.-^-^ -continued. 

1  -..  rsi  rl^tp  ^iritna  facie  place  of  payment,  639. 

pane?  not  necessarily  payable  at  place  of  date  640. 

due  diligence  in  seeking  maker  or  acceptor.  640. 

if  paper  payable  in  particular  city,  but  at  no  specified  place.  sufRc.ent 

to  have  it  there  at  maturity.  640. 
whetheTacceptance  to  pay  at  particular  place  is  absolute  or  quahfied. 

641. 

decisions  and  statutes  in  England.  641. 
decisions  and  statutes  in  United  States,  643. 

views  of  U.  S.  Supreme  Court,  643.  ,•    u     „^^ 

when  paper  payaile  a.  particular  place,  drawer  and  mdorser  d,scharged 

hv  failure  to  present  there,  644.  _       ,   u    u-^ 

ave^ent  and  proof  of  demand  when  paper  payable  ••  on  demand    or 
■■  on  demand  after  a  certain  time,    645- 

T,:;X^:':Tlt^l'of  two  places,  presentment  at  either  suffices, 

648. 

so  if  payable  at  either  of  two  banks,  649-  . 

"le  when  drawee  or  acceptor  resides  in  one  place,  and  bill  :s  payable  m 

another.  651.  .  ,, 

place  of  payment  material  part  of  description  of  paper.  6,3. 

4.  Mode  of,  654. 

paper  must  be  actually  exhibited,  654. 

or  at  least  it  must  be  clearly  indicated  to  be  at  hand.  654. 

"refusal  to  pay  be  on  other  grounds,  its  presence  or  absence  imma- 

writttndtmand  delivered  to  servant  at  promisor's  house  insufficient, 

654- 
by  letter  through  post-office  insufficient,  654^. 

must  be  according  to  tenor  of  instrument,  654. 

whether  physical  presentment  implies  demand  of  payment,  655. 

if  paper  in  bank  named  as  place  of  payment,  that  suffices,  656. 

but  mere  physical  presence  in  bank  insufficient,  if  bank  ignorant  of  it. 

656. 
if  naoer  be  property  of  bank  it  suffices,  657. 
com-entiona';  dLaL  by  notice  that  bill  or  note  is  held  tn  bank  for  pay 

ment,  658.  _  ,, 

nile  as  to  maker,  acceptor,  drawer,  and  indorser,  639.  t)t)0. 
Tot  far  cuTtom  ;ontrols  in  the  matter  of  presentment  for  payment,  6  59 
what  law  applies  to,  660,  662, 
PRESIDENT  OF  CORPORATION.    See  Corporations  ;  Checks. 
has  implied  authority  to  take  charge  of  litigation,  393- 

employ  counsel,  393. 
of  bank  has  implied  authority  to  receipt  for  deposits,  393 
whether  bank  president  has  implied  authority  to  draw  on  tunds,  393- 


.Q  T^rnTTY  References  are  to 

94"  IJNUtX.  paragraphs  mar ked% 

PRESIDENT  OF  CORPORATION— f^;z/'z«?^^^. 

general  and  special  power  as  to  negotiable  paper,  394. 
~     may  certify  checks,  XL,  1609. 

has  no  authority  to  release  debts,  395. 

effect  of  signature  as  "A.  B.,  President,"  403,  405,  41Q, 

PRESUMPTION.    See  Bona  Fide  Holder;  Burden  of  Proof;  Evi- 
dence;  Judicial  Notice. 
in  favor  of  holder  of  negotiable  instruments,  810. 
of  payment;  II.,  1205,  1271. 
as  to  foreign  laws,  891. 
as  to  common  law,  891a. 
in  favor  of  protest,  II.,  964. 

PRINCIPAL.    See  Agent. 

PRINCIPAL  AND  SURETY  ;  AND  WHAT  DISCHARGES  SURETY. 

general  remarks  as  to  law  of  principal  and  surety,  II.,  1302. 

1.  Who  are  principals  attd  who  sureties,  II.,  1303. 

acceptor  and  maker  are  principals,  II.,  1303. 

drawer  and  indorsers  are  sureties  for  maker  and  acceptor  to  holder,  II., 

1303- 
but  not  as  between  themselves  cosureties  liable  for  contribution,  II., 

1303- 
if  drawer  and  indorser  for  accommodation  agree  each  to  pay  half,  they 

are  bound  by  the  agreement,  II.,  1303. 
in  New  York  held  that  indorser,  though  he  be  surety,  is  answerable  on 

independent  contract,  II.,  1304. 
though  liability  of  drawer  and  indorser  be  fixed  by  demand  and  notice, 

their  relation  as  sureties  is  not  altered,  II.,  1305. 
final  judgment  against  them  destroys  suretyship,  II.,  1305. 
what  discharges  maker  and  acceptor,  discharges  drawer  and  indorsers, 

IL,  1306. 
whatever  discharges  prior  indorser  discharges  all  subsequent  indorsers, 

II.,  1307. 
when  surety  may  be  bound,  though  principal  not,  II.,  1306. 

2.  Acts  of  creditor  which  discharge  surety,  II.,  1308. 

misrepresentation,  concealment,  duress,  diversion,  and  alteration,  II., 

1309. 
payment  by  maker  or  acceptor,  II.,  1310. 
release  and  satisfaction,  II.,  1310. 

extinguishment  distinguished  from  satisfaction,  II.,  1310. 
covenant  not  to  sue  prior  party  discharges  surety,  II.,  1310. 
so  parting  by  creditor  with  security  for  debt,  II.,  131 1. 
as  to  withdrawal  of  execution,  II.,  1311. 
and  extension  of  time  or  forbearance  to  sue,  II.,  1312. 
effect  ©(taking  renewal  note,  H.,  131 2. 

if  legal  impossibility  of  injury,  principle  does  not  apply,  II.,  1313. 
principal  may  have  defence  not  available  to  surety,  II.,  I3i4- 
elements  which  constitute  indulgence,  II.,  1315- 

(i)  must  be  consideration  for  promise  to  indulge,  II.,  1316. 


References  are  to  INDEX.  949 

paragraphs  marked  %. 

PRINCIPAL  AND  <i\}^'SLT\—co}itinued. 

indulgence  at  -will  of  creditor  does  not  impair  obligation  of  surety, 

II.,  1316. 
what  amounts  to  such  consideration,  II.,  1 316. 
agreement  to  forbear  suit  in  consideration  of  usurious  premium 

discharges  drawer  or  indorser,  II.,  1317- 
but  query.?  II.,  1317- 

where  usurious  premium  goes  as  part  payment,  II.,  1317- 
but  query?  II.,  1317- 
whether  payment  of  interest  in  advance  is  good  consideration, 

II.,  1317. 
whether  agreement  to  pay  same  rate  is,  II.,  I3i7«- 
part  payment  insufficient  consideration,  II.,  I3I7'^- 
but  otherwise  if  note  given  for  balance,  II.,  I3i7'^- 

(2)  promise  must  be  absolute,  II.,  1318. 

(3)  indulgence  must  not  be  indefinite,  II.,  1319. 

and  if  for  no  longer  period  than  required  for  judgment,  and 
given  after  action  brought,  it  is  immaterial,  II.,  1319. 

agreement  to  continue  case  for  valuable  consideration  discharges 
surety,  II.,  1320. 

(4)  surety's  assent  prevents  his  discharge,  II.,  1321. 

thus  where  drawer  said  "you  may  do  as  you  like,"  II.,  1321. 

(5)  surety  not    discharged  when   rights   of  creditor  are    reserved 

against  the  surety,  II.,  1322. 
whether  reservation  can  be  proved  by  parol  when  agreement  is 
in  writing,  II.,  1323. 

(6)  agreement  for  indulgence   must    be   made  with   maker   or  ac- 

ceptor, or  other  principal  party,  II.,  1324. 
1  thus  surety  may  waive  discharge,  II.,  1325. 

3.  Acts  of  creditor  which  do  not  discharge  surety,  II.,  1326. 
mere  delay  or  passivity  of  creditor,  II.,  1326. 
part  payment  made  to  holder  by  maker  or  acceptor,  II.,  1327. 
receipt  of  collateral  security  by  holder,  II.,  1378. 
query,  as  to  taking  collateral  payable  at  future  day,  II.,  1329. 
if  principal  discharged  by  negligence   to  collect,  collateral  surety  is 

also,  II.,  1330- 
if  holder  does  not  use  due  diligence  to  collect  collateral,  delay  may 

discharge  surety,  II.,  1330. 
composition  with  maker  or  acceptor  to  receive  a  certain  per  cent,  of 
debt  for  whole  amount,  and  receipt  of  note  of  third  party  tor  such 
per  cent.,  discharges  surety,  II.,  1331- 
4.  Accottimodation  and  joint  parties  as  sureties,  II.,  1332. 

party  who  adds  word  "  surety  "  to  his  name  is  to  be  treated  as  such, 

II.,  1332. 
semble  as  to  word  "  principal,"  II.,  1332. 
rule  in  respect  to  parties  ostensibly  principals,  but  in  reality  ovXy  for 

accommodation  of  others,  II.,  1332'^- 
in  Eno-land,  if  indorser  of  accepted  bill,  knowing  it  is  for  accommoda- 
tion'^of  drawer,  gives  time  to  him  on  payment  of  part,  acceptor  is 
discharged,  II.,  1333- 
different  where  holder  does  not  know  that  acceptance  was  for  accom- 
modation, II.,  1334- 


n  C  n  T  NT  n  F  Y  References  a  re  to 

VJ'-'  liMJ£-^.  i>aragraplis  marked  %. 

PRINCIPAL  AND  '=>\5KY.TY—co7itmued. 

English  cases  at  law  and  in  equity,  II.,  1334. 

general  rule  in  United  States  that  parties  may  be  treated  according  to 
ostensible  relations,  II.,  1335. 

query,  whether  joint  promisor  can  be  shown  by  parol  evidence  to  be 
only  surety,  and  holder  to  have  known  the  fact,  II.,  1336. 

English  decisions,  II.,  1337. 

in  U.  S.  weight  of  authority  is  in  favor  of  allowing  evidence  that  joint 
party  is  surety,  and  that  holder  knew  it  when  he  took  the  paper,  II., 
1338. 
5.  General  summary  of  sureties'  remedies,  II.,  1339. 

as  to  contribution  between  cosureties,  II.,  1340. 

accommodation  indorser  as  surety,  II.,  1342. 

when  cosurety  may  sue  for  contribution,  II.,  1341. 

surety  who  pays  bill  or  note  may  recover  back  from  principal  with  in- 
terest, II.,  1342. 

whether  payee  who  is  accommodation  indorser  can  recover  whole 
amount  against  maker,  II.,  1342. 

limit  of  recovery  is  amount  necessary  to  indemnify  him,  II.,  1342. 

surety  making  payment  is  entitled  to  benefit  of  all  the  principal's  se- 
curities, II.,  1343. 

PROCURATION. 

authority  under  written  instruments  by,  280. 

signature  "  by  procuration  "  puts  party  dealing  with  instrument  on  in- 
quiry, 280. 

and  such  party  is  chargeable  with  notice  of  extent  of  agent's  au- 
thority, 280. 

PROMISE  TO  ACCEPT  BILL  OF  EXCHANGE.  See  ACCEPTANCE; 
Statute  of  Frauds. 

written  promise  to  accept  existing  bill,  made  to  drawer  and  commu- 
nicated to  third  party,  operates  as  acceptance,  550. 

same  as  to  non-existing  bill,  551. 

effect  of  such  promise  respecting  existing  bill,  not  communicated  to 
third  party  who  takes  bill,  552. 

effect  of  such  promise  as  to  non-existing  bill,  not  communicated,  553, 
554. 

verbal  promise  to  accept  existing  and  non-existijig  bills,  communi- 
cated and  not  communicated,  555,  556,  557,  558. 

verbal  generally  as  efficient  as  written  promise,  559. 

review  of  adjudicated  cases  and  remarks  on  conflict  of  authority,  559. 

difference  between  promise  to  accept  and  actual  acceptance,  560. 

promise  must  be  made  in  reasonable  time  before  bill  drawn,  560. 

must  sufficiently  describe  and  identify  the  bill  or  bills  referred  to,  560. 

what  particularity  of  description  necessary,  560. 

particular  cases,  561. 

semble,  applies  only  to  cases  of  bills  payable  on  demand,  562. 

whether  mere  promise  to  accept  applies  to  bills  not  payable  at  drawee's 
or  payee's  place  of  business,  562. 

when  offer  to  accept  may  be  withdrawn,  562. 

if  acceptance  written  on  bill,  every  holder  may  avail  of  it,  563. 


References  are  to  TX^nrv  r>  r  T 

paragraphs  marked  §.  1  iMJ  t,  A.  y  ^  1 

PROMISE  TO  ACCEPT  BILL  OF  EXCHANGE— ftf«//««^^. 
so  if  acceptance  be  on  separate  paper,  563. 
and  same  rule  applies  to  parol  acceptance,  563. 
damages  recoverable  for  breach  of  promise  to  accept,  564,  565. 
measure   of  damages   for  breach   of  agreement   to   accept   is   incon- 
venience and  loss,  564. 
if  bill  lost  by  agent's  negligence,  damages /r/wa  facie  amount  of  bill, 

564. 
extent  of  damages,  and  who  may  recover  them,  565. 
promise  to  pay  bill  at  maturity  amounts  to  acceptance,  565. 

PROMISE   TO   MARRY. 

is  legal  consideration,  187a. 

delay  in  fulfilling  promise  and  service  rendered  during  engagement 

good  consideration  for  note,  187a. 
in  Scotland  bill  given  a  woman  as  security  for  a  pr6mise  to  marry 

valid,  187a, 

PROMISE  TO  PAY.    5^^  Excuses. 

as  waiver  of  non-presentment  and  notice,  II.,  1147  to  1164. 
as  waiver  oi  proof  oi,  II.,  11 56  to  1164. 

PROMISSORY  NOTES.    See  Negotiable  Instruments. 

1.  Nature  and  history  of,  \a,  3,  28. 

in  vogue  before  bills,  but  not  negotiable  so  early,  2. 

obscure  in  origin,  5. 

history  of,  5. 

whether  negotiable  at  common  law,  5. 

declared  negotiable  by  statute  of  Anne  in  1705,  5. 

definition  and  essential  requisites  of,  28. 

parties  to,  28. 

term  "  credit  drawer,"  28. 

similarity  to  bills,  29. 

2.  Must  be  open,  that  is  unsealed,  to  be  negotiable,  31. 

seal  must  be  recognized  in  body  of  note  to  render  it  sealed  instru- 
ment, 32. 
conflicting  decisions,  32, 
statutes  changing  this  rule,  33. 
scroll  generally  same  as  seal,  34. 

instrument  may  be  sealed  as  to  one  party,  and  unsealed  as  to  other,  34. 
one  action  of  debt  in  such  case  may  be  brought  against  both  parties,  34, 

3.  Promise  to  pay  must  be  certain,  35. 

whether  due-bill  is  negotiable,  36,  37,  38,  39,  40. 

4.  The  fact  of  payment  must  be  certain,  41. 

conditional  terms  which  destroy  negotiability  of,  41,  42,  43,  44. 
effect  of  promise  to  pay  "  as  soon  as  realized,"  45,  45a. 

"  in  course  of  season  now  coming,"  45, 

"  on  return  of  this  certificate,"  45. 

"  on  return  of  my  guaranty,"  45. 

"  as  soon  as  crop  can  be  sold,"  45. 


_-«  T"\rnFV  References  are  to 

VD-^  liMur-A,  paragraphs  mar ked%, 

PROMISSORY  '^OTY.^i— continued. 

in  Massachusetts  essential  to  negotiability  that 
it  be  payable  at  a  definite  time  at  the  elec- 
tion of  holder,  45a. 
this  view  approved  in  Missouri,  45a. 
"  when  A.  shall  come  of  age,"  46. 
"  when  A.  shall  die,"  46. 
"  one  day  after  date,  or  at  my  death,"  46. 
"  when  government  ship  is  paid  off,"  46. 
effect  of  words  to  pay  at  certain  time  after  happening  of  two  events, 
one  of  which  may  not  happen,  46. 
"  certain  sum   as  required  within  thirty  days 
after  demanded,  or  notification  in  news- 
paper," 47. 
"  by  or  on  a  certain  day,"  46. 
"  in  such  manner  and  proportions,  and  at  such 
time  and  place  as  A.  shall  require,"  47. 
if  a  note  be  in  part  for  a  sum  certain,  and  part 

upon  contingency,  not  negotiable,  47. 
if  made   payable  by   instalments  conditional 
that  if  default  in   first  pa}ment  whole  im- 
mediately payable,  48. 
negotiable  within  the  statute  of  Anne,  48. 
"  six  months  after  peace  is  declared  between  the 
United  States  and  the  Confederate  States,"  49. 
if  payable  out  of  particular  fund  not  negotiable,  50. 
certificates  of  receiver  of  court  not  negotiable,  though  framed  in  ne- 
gotiable words,  zpa. 
indication  of  mode  of  reimbursement  does  not  vitiate,  51. 
nor  does  memorandum  of  consideration,  or  security,  51. 
effect  of  words  "  ne  varietur,"  52. 

5.  Amount  to  be  paid  must  be  certain,  53. 

when  amount  is  not  certain,  53. 

if  amount  ascertainable  from  face  of  paper,  it  is  certain.  53. 
words  "  current  exchange,"  whether  they  affect  negotiability,  54. 
when  these  words  may  be  rejected  as  surplusage,  54. 
whether  an  instrument  payable  "  with  exchange  "  on  another  place  can 
be  regarded  a  bill  or  note,  54a. 

6.  Medium  of  payment  must  be  money,  55,  56. 

not  negotiable  if  payable  : 

"  in  cash  or  specific  articles,"  55. 

"  in  merchantable  whisky  at  trade  price,"  55. 

"  in  ginned  cotton  at  eight  cents  per  pound,"  55. 

"  in  work,"  55. 

"  in  good  East  India  bonds,"  55. 

"  in  foreign  bills,"  55. 

"  in  notes  of  the  United  States  bank  or  either  of  the  Virginia 
banks,"  55. 

"  in  current  bank  bills  or  notes,"  55. 

"  in  office  notes  of  a  bank,"  56. 
effect  of  payability  "  in  currency,"  56. 


References  are  to  t  vn  T~  V  n  r  •> 

paragraplis  marked  %.  l^NJU.A.  y^jj 

PROMISSORY  ^OTY.?,— colli imied. 

"good  current  money"  or  "  current  money  "  do  not  affect  negotiability, 

56. 
effect  of  the  words  "  in  currency  "  not  affected  by  legal  tender  act,  57. 
decision  as  to  words  "  in  greenback  currency,"  57. 
words  "  in  Canada  money  "  held  to  destroy  negotiability,  58. 
but  see  contra,  58. 

7.  Contract  ?nust  be  otily  for  payment  of  tnoney,  59. 

if  additional  contract  added,  instrument  not  negotiable,  59. 
it  destroys  negotiability  to  add  promise: 

"  to  deliver  up  horses  and  a  wharf,"  60. 

"  to  take  up  a  note,"  60. 

"  to  pay  all  fines  according  to  rule,"  60. 

"  that  note  shall  be  void  if  dispute  arises,"  60. 

"  that  note  is  only  security  for  certain  balance,"  60. 
effect  of  authority  to  confess  judgment  contained  in  note,  61. 
cases  denying  negotiability  in  such  case,  61. 
cases  upholding  negotiability  in  such  case,  61. 
effect  of  promise  to  pay  collection  fees,  62. 

why  instruments  illustrated  in  preceding  section  should  be  upheld  as 
negotiable,  62a. 

8.  Note  vtitst  be  delivered.     See  Delivery,  and  63. 

protest  of  foreign  notes  as  evidence,  II.,  928. 
note  imports  contemporaneous  debt,  71. 
settlement,  71. 

PROTEST  FOR  BETTER  SECURITY. 

peculiar  kind  of  protest,  when  it  occurs,  530. 

PROTEST  OF  BILLS  AND  NOTES. 

I.  Nature  and  necessity  of  protest,  II.,  926. 

in  England  and  the  United  States,  protest  is  essential  only  in  case  of 

foreign  bills  to  charge  drawer  and  indorser,  II.,  926. 
by  statute,  in  some  States,  inland  bills  and  promissory  notes  may  be 

protested,  II.,  926. 
whether  checks  subjects  of,  II.,  1600. 
protest  is  indispensable  as  evidence  of  dishonor  in  case  of  foreign  bills 

of  exchange,  II.,  926. 
statutes  permitting  protest  of  notes  not  compulsory,  II.,  927. 
bills  must  be  negotiable  by  custom  of  merchants  to  require  protest, 

II.,  927. 
not  so  negotiable  when  payable  "  in  currency"  or  other  legal  money, 

II.,  927. 
notice  not  necessary  to  charge  maker  of  a  foreign  promissory  note, 

II.,  928. 
when  indorsed  it  partakes  of  nature  of  bill  of  exchange,  II.,  928. 
query,  whether  protest  is  evidence  against  indorser  of  foreign  note, 

II.,  928. 
what  is  meaning  of  "  protest,"  II.,  929. 
in  what  cases  necessary,  II.,  930. 
what  is  refusal  to  honor  a  bill,  II.,  931. 


„  T-NTTM?v  Referencei  (ire  to 

9^4  IJNUtA.  paragraphs  mar ked%. 

PROTEST  OF  BILLS  AND  '^OTYJ^— continued. 

absence  from  home  of  drawee  does  not  amount  to  such  refusal,  IL,  931 
no  difference  as  to  protest  whether  bill  is  payable  at  a  certain  time 

after  date  or  sight,  IL,  932. 
bill  protested  for  non-acceptance  need  not  be  presented  for  payment^ 

IL,  932. 
query,  whether  notarial  fees  are  not  chargeable  against  indorser  when 

protest  not  indispensable,  IL,  933. 

2.  By  whom  and  where  protest  mitst  be  made,  1 1.,  934. 

as  general  rule,  protest  must  be  made  by  a  notary  public,  IL,  934. 

notary  must  follow  instructions,  1 1.,  934. 

•when  it  may  be  by  a  private  person,  1 1.,  934«. 

place  of  dishonor  is  place  for  protest,  IL,  935. 

English  statute  and  decisions,  IL,  935. 

law  of  protest  is  law  of  place  of  presentment,  IL,  936. 

3.  Forjnalities  of  protest,  IL,  937. 

presentment  and  demand  must  be  by  notary  in  person,  581,  583. 
IL,  938. 

effect  of  custom  for  clerk  or  deputy  to  act,  581  to  587. 

dishonor  must  be  noted  on  very  day  of  non-acceptance  or  non-pay- 
ment, IL,  939. 

what  is  meant  by  "  noting,"  II. ,  939. 

when  protest  may  be  extended,  IL,  940. 

what  is  meant  by  extending  protest,  II. ,  941. 

as  to  extending  when  there  is  payment  supra  protest,  IL,  941. 

extended  protest  only  available  in  evidence,  IL,  942. 

simple  notice  without  copy  or  memorial  of  instrument  is  sufficient, 
IL,  943- 

copy  of  bill  usually  accompanies.  IL,  943. 

notary's  official  seal  \'=,  prima  facie  proof  of  its  authority,  IL,  945. 

seal  not  needful,  but  protest  without  seal  does  not  prove  itself,  IL,  946. 

impression  on  paper  sufficient  seal,  IL,  947. 

if  State  law  require  seal,  protest  without,  not  evidence  elsewhere, 
IL.  948. 

protest  should  be  signed  by  notary,  949. 

4.  Contents  of  protest ;  what  the  certificate  should  set  forth,  IL,  950. 

should  state  time  of  presentment,  II. ,  951. 

if  hour  of  the  day  not  stated,  proper  hour  will  be  presumed,  IL,  951. 

if  place  of  payment  be  specified,  it   ought  to  be  stated  in  protest- 

II.,  952. 
exhibition  of  bill  or  note  should  be  set  out,  IL,  953. 
whether  mere  "demand"  is  enough,  II. ,  953. 
statement  of  "  presentment "  merely  not  sufficient,  IL,  953. 
refusal  to  accept  or  pay  must  be  stated,  IL,  954. 
must  inform  party  of  dishonor,  IL,  954. 

must  state  name  of  person  on  whom  demand  is  made,  IL,  955. 
need  not  name  officer  of  bank  at  which  paper  was  presented,  IL,  955. 

party  for  whom  protest  is  made,  IL,  956. 
need  not  state  reasons  of  refusal  to  honor,  IL,  957. 
verbal  mistakes  do  not  vitiate  certificate  of  protest,  IL,  958. 


n./erence^areto  INDEX.  955 

PROTEST  OF  BILLS  AND  NOTES— <:<?«//«/^^^. 
5.   The  protest  as  evidence,  IL,  959. 

certificate  is  prima  facie  evidence  of  all  facts  it  contains,  if  they  be  in 

scope  of  notary's  duty,  IL,  959. 
when  not  evidence  in  foreign  Stale,  II.,  959. 
is  evidence  of  presentment,  demand,  and  dishonor,  but  not  evidence  of 

notice,  II. ,  960. 
notice  must  be  proved  by  notary  himself  or  depositions  of  witnesses, 

IL,  961. 
protest  is  evidence  only  of  facts  stated,  IL,  962. 
conflicting-  decisions  on  this  question,  IL,  962. 
whether  statement  that  "due  notice"  was  given  suffices,  IL,  963. 
legal  presumptions  are  in  favor  of  protest,  II. ,  964. 
in  what  cases  such  presumptions  are  applied,  IL,  964,  965. 
protest  is  not  evidence  of  collateral  matters,  1 1.,  966. 
such  facts  as,  for  instance,  that  the  drawee  was  not  in  funds,  or  was 

willing  to  pay  in  bank  bills,  or  that  the  notary  inquired  diligently, 

IL,  966. 
may  be  secondary  evidence  of  notice,  IL,  967. 
as  in  case  of  death  of  parties,  IL,  967. 
protest  admissible  evidence  by  law  merchant  only  in  case  of  foreign 

bills,  1 1.,  968. 
whether  admissible  in  State  where  protest  made,  IL,  968. 
parol  evidence  admissible  to  supply  omissions  of  protest,  XL,  969. 
for  instance,  to  show  that  cashier  to  whom  presentment  was  made  was 

at  the  bank,  IL,  969. 
or  that  the  note  was  in  the  bank,  1 1.,  969. 
or  that  the  note  was  not  paid,  IL,  969. 

or  that  the  party  on  whom  demand  was  made  was  agent,  II. ,  969. 
other  cases,  II. ,  969. 
what  law  applies  to  protest,  908  et  seq.     See  Conflict  of  Laws. 

PROVISION. 

meaning  of  term,  IL,  I457- 

is  allowance  to  agent  in  certain  cases,  IL,  1457. 

PROVISION  IN  CASE  OF  NEED.     See  Au  Besoin. 

PRUDENT  MAN. 

rule  that  circumstances  to  excite  suspicions  of  prudent  man  vitiates  title 
of  purchaser  of  negotiable  instrument  no  longer  obtains,  773,  774, 

775.  n^'- 

PUBLIC  AGENTS.    See  Governments  as  Parties,  436. 

duties  defined  by  statutes  which  are  notice  of  their  authority,  440. 

if  they  sign  with  official  designation,  act  deemed  official,  443. 

who  are  deemed  pubHc  agents,  443^- 

no  official  can  ratify  contract  but  one  who  can  make  it,  444. 

not  bound  by  contract  on  behalf  of  government,  although  they  would 
be  bound  if  acting  for  individual,  445. 

liability  of,  when  they  exceed  authority,  445«- 
PUBLIC  PURPOSE. 

what  is,  1 1.,  1522. 


r  T-N'TM7v  References  are  to 

Q^O  IJNJJtA.  J,aragrapksmarked\. 

PUBLIC  RECORDS. 

not  notice  to  a  purchaser  of  negotiable  instruments,  800. 

RATIFICATION.    See  Agents;   Infants,  and  230-234;  also,  Forgery 
and  II.,  1338  et  seq, 

REASONABLE  TIME, 
what  is,  465. 

whether  question  for  court  or  jury,  466,  478. 
circumstances  affecting  question,  466,  604-607. 
whether  paper  payable  in,  negotiable,  88. 

RECEIPT.     See  Renewal,  and  IL,  1266,  1267. 

on  back  of  bill,  handwriting  must  be  proved,  II.,  1206. 

of  payment  not  necessarily  implies  absolute  payment,  II.,  1266. 

whether  party  paying  may  claim,  XL,  1228. 

indorser  may,  on  payment,  II.,  1229. 

RECEIVERS. 

do  not  acquire  negotiable  instrument  in  usual  course  of  business,  781. 
certificates  issued  by,  not  negotiable,  50^;. 

RE-EXCHANGE.    See  Exchange. 

REISSUE.     See  Payment,  and  II.,  1236  to  1242. 

who  may  reissue  bill  or  note,  II.,  1236,  1242. 

payment  by  maker  or  acceptor  discharges  and  cancels  instrument,  IL, 
1236. 

after  payment  by  maker  or  acceptor,  drawer  or  indorser  would  not  be 
bound  by  reissue,  IL,  1238. 

if  indorser  pay  bill  or  note  he  may  reissue  it  with  or  without  his  indorse- 
ment, II.,  1238. 

but  intermediate  indorser  can  not  reissue  it  as  to  subsequent  indorsers, 
II. ,  1240. 

whether  drawer  may  reissue  bill,  IL,  1238. 

drawer  may  reissue  bill  except  when  acceptance  is  for  his  accommoda- 
tion, IL,  1239,  1 241. 

or  there  is  name  of  indorser  on  it  to  whom  he  is  bound,  II. ,  1240,  1241. 

indorser  who  reissues  bill  or  note  is  bound  by  first  or  second  indorse- 
ment, according  to  alteration,  IL,  1242. 

RELEASE.     See  DISCHARGES. 

technically  instrument  under  seal,  II.,  1290. 

but  bill  or  note  may  be  released  by  agreement  for  valuable  considera- 
tion, IL,  1290. 
discharges  a  joint  party  and  all  subsequent  parties,  IL,  1290. 
of  acceptor  or  maker  discharges  drawer  and  indorsers,  IL,  1310. 
releasor  need  not  be  holder  of  instrument  at  time  of  release,  IL,  1290. 
release  of  drawee  before  he  accepts  is  no  bar  to  suit  on  acceptance,  IL, 

1290. 
agreement  to  operate  as,  must  be  on  consideration,  IL,  1290. 

REMOVAL.     See  EXCUSES. 

as  excuse  for  non-presentment  and  notice,  IL,  1032. 


References  are  tti  T'vn'PV  cwC^ 

paragraphs  marked  \.  IM3bX.  957 

RENEWAL   OF   BILLS   AND   NOTES. 

renewal  bill  or  note  open  to  same  defence  as  original,  177,  179,  205. 

if  original  fraudulent,  renewal  void,  205. 

unless  party  signing  it  know  of  the  fraud,  205. 

renewal  secured  by  mortgage  same  as  original,  205. 

has  benefit  of  any  security  for  original,  748. 

if  renewal  be  forged,  original  not  discharged,  although  surrendered,  205. 

nor  is  indorser  of  original  discharged  if  he  were  notified,  205. 

if  original  based  on  part  illegal  consideration,  renewal  void,  206. 

but  new  note  for  good  part  of  consideration  is  valid,  206. 

if  several  new  notes  given  for  old  one,  some  of  them  may  be  taken  for 

legal  part  of  consideration,  206. 
ex-partner  can  not  bind  firm  by,  to  party  with  notice  of  dissolution, 

370.     II.,  1300a. 
but  renewal  note  by  ex-partner  is  valid  in  hands  of  creditor  without 

notice  of  dissolution,  370.     II.,  1300a. 
effect  of  such  renewal  note,  II.,  1300a. 
decision  in  New  York  and  comments,  370. 

renewal  bill  or  note  suspends  right  of  action  on  original,  II.,  1266. 
various  and  conflicting  views,  II.,  1266, 
effect  of  surrender  of  old  note,  II.,  1266a. 

when  debt  would  be  lost,  renewal  not  deemed  payment,  II.,  1266^. 
effect  of  renewals  of  notes  in  bank,  II.,  I266<:. 
better  opinion  is  that  until  promise  is  redeemed  there  is  no  payment, 

II.,  1266^. 
evidence  admissible  to  show  intention  of  parties,  II.,  1267. 
receipt  "in  full"  or  "in  satisfaction"  open  to  explanation  between 

parties,  II.,  1267. 
and  "absolute  payment"  not  presumed,  II.,  1267. 
giving  indorser  on  new  note  may  raise  presumption  of  payment,  II.,  1267. 
agreement  to  take  note  in  payment  maybe  express  or  implied,  II.,  1268, 

RESIDENCE.    See  Presentment  ;  Notice. 
date  as  evidence  of  residence,  II.,  1030. 

place  of  payment,  639. 
presentment  at  party's  residence,  635,  639. 
who  deemed  residents  of  same  place,  II.,  1014. 

when  and  how  notice  may  be  left  at  party's  residence,  II.,  1016,  loiS, 
1019. 

RESTORATION.    See  Alteration,  II.,  1414,  141 5. 

right  of  as  to  instruments  innocently  altered,  II.,  1414,  1415. 

RESTRICTIVE  INDORSEMENT.    See  Indorsement,  and  697. 

RETIRE. 

effect  of  agreement  to,  II.,  1243. 
REVENUE   LAWS.     See  CONFLICT  OF  Laws. 

how  far  enforced  by  foreign  courts,  913,  914. 

REVOCATION  OF   AUTHORITY.    See  Agent,  and  288a. 

pnncipal  revoking  authority  of  general  agent  should  give  notice,  28Sa 


fy  _,,__-^  References  are  to 

950  IJNUi^A.  paragraphs  marked  §. 

REVOCATION  OF  AUTHORITY— ro;?^/««^^. 

different  rule  applicable  to  special  and  limited  agents,  288a. 

death  of  principal  revokes  all  agencies  not  coupled  withi  an  interest,  288a. 

war  does  not,  222,  288^. 

ROBBERY.    5^^  Excuses,  and  II.,  1 125. 

SALE   OF   NEGOTIABLE   INSTRUMENTS.  AND   AMOUNT   OF   RE 
COVERY.    5^^ Bona  Fide  Holder;  Municipal  Bonds;  Stop- 
page IN  Transitu. 
I.    Validity  of  the  Jtegotiation,  749. 

note  from  A.  to  B.  for  value,  may  be  sold  by  B.  for  any  price  to  C,  and 

sale  is  not  usurious,  750. 
C,  in  such  case,  may  recover  whole  amount  of  maker,  750. 
if  B.  transfer  without  indorsement,  it  is  clearly  a  sale,  750, 
the  rule  where  A.  makes  note  for  B.'s  accommodation  is  different,  750. 
general  principles  as  to  what  notes  may  be  sold,  and  what  sales  are  not 

usurious,  751. 
held  not  to  apply  where  note  is  obtained  by  fraud,  and  delivered  to 

payee  as  a  valid  security,  752. 
holder  who  receives  note,  not  knowing  it  to  be  not  a  valid  subsisting 

security,  may  recover  of  maker,  752. 
rule  as  to  usury  where  note  is  offered  by  maker  for  discount,  and  in- 
dorsed for  his  accommodation,  753. 
senible,  as  to  accepted  bill  offered  for  sale  by  acceptor,  753. 

as  to  bill  or  note  offered  by  payee  for  discount,  who  indorses 
prior  to  others,  753. 
does  not  apply  to  bill  offered  by  drawer  for  discount,  753. 
purchaser  of  bill  or  note  must  assume  title  of  holder  and  liability  ol 

prior  indorsers  to  be  as  indicated  by  paper  itself,  753^- 
delivery  not  necessary  to  contract  of,  753(^. 

maker  bound  by  representations  of  broker  who  is  agent  for  sale,  753^. 
2.  Amount  of  recovery. 

holder  may  recover  full  amount  of  bill  or  note  against  the  drawer  or 
maker,  whether  originally  given  for  value  or  not,  provided  he  paid 
yz^// value,  754. 
where  he  pays  less  than  value,  authorities  differ  as  to  his  recovering 

more  than  the  amount  advanced,  754,  T^'ib. 
English  view  of  subject  as  stated  by  Mr.  Chitty,  755. 
English  cases  as  to  amount  of  recovery,  756. 
distinction  taken  between  out  and  out  sale  of  bill,  and  pledge  of  same 

as  security  for  money  advanced,  756. 
what  seems  to  be  the  true  doctrine  in  the  United  States,  757. 
rule  as  to  amount  of  recovery  on  bill  or  note  obtained  from  drawer  or 

maker  by  fraud,  758,  l^^b. 
discussion  of  conflicting  authorities,  758^;. 
rule  when  there  is  usury  between  indorser  and  indorsee,  759. 
same  in  case  of  a  subsequent  indorsee,  not  a  party  to  the  usury,  760. 
recovery  on  bill  given  in  consideration  of  contract  of  copartnership, 
which  has  been  broken,  is  confined  to  damages  actually  sustained  by 
non-performance  of  contract,  760. 
in  case  ol  novation  of  the  debt,  whole  amount  may  be  recovered,  761. 


p3f;::;-H!',:::ka%.  index.  959 

SALE  OF  NEGOTIABLE  INSTRUMENTS— (r^«//««^^. 

3.    Validity  of  transfer,  and  amount  of  recovery  against  indorser,  762. 

general  remarks  as  to  usury  upon  transfer  of  negotiable  instruments, 

and  amount  of  recovery  against  the  transferrer,  762,  7621a;. 
where  transferrer  does  not  indorse,  or  indorses  "  without  recourse,"  sale 

at  any  price  is  not  objectionable,  762«. 
so  where  holder  receives  instrument  from  agent  of  indorsee,  not  know- 
ing him  to  be  such,  762a. 
yet  transfer  of  bill  or  note  by  delivery  may  be  a  feature  of  a  usurious 

contract,  762^;. 

as  to  effect  per  se  of  indorsement  of  bill  or  note  upon  transfer  for  less 

amount  than  legal  rate  of  discount,  various  views  are  held,  to  wit : 

(i)  view  presented  that  contract  is  usurious  as  between  indorser 

and  indorsee,  and  that  latter  can  not  sue  any  prior  party,  763. 

effect  on  question  of  statute  that  does  not  declare  instrument 

void,  763a. 
decision  of  U.  S.  Supreme  Court,  763^;. 

(2)  view  presented  that  although  contract  is  usurious  as  between 

indorser  and  indorsee,  and  void  as  to  the  former,  the  latter 
may  enforce  a  recovery  against  prior  parties  for  the  full  amount, 
764. 

(3)  view  presented  that  transaction  is  not  usurious,  being  made 

merely  for  the  purpose  of  transfer,  and  the  purchaser  may  re- 
cover against  all  prior  parties  except  his  indorser,  765. 

(4)  view  that  it  is  not  usurious,  because  the  indorsee,  being  a  pur- 

chaser, may  recover  of  indorser  amount  paid  with  legal  inter- 
est, and  of  other  prior  parties  the  whole  amount,  766. 

(5)  view  presented  that  it  is  not  usurious,  because  the  contract  as 
between  indorser  and  indorsee  is  conditional,  767. 

the  last  view  adopted  by  the  text,  768. 

dictinction  between  loans  of  money  and  purchase  of  securities  in  the 

usual  course  of  business,  768, 
rule  respecting  indorsement  for  less  than  legal  rate  of  discount,  applies 

to  case  of  drawer  of  bill,  who  parts  with  it  in  same  manner,  768. 

SATISFACTION.    See  DISCHARGES  ;  Payment. 

SEAL,  31,  34 ;  Protest,  II.,  945, 948  ;  also  Notice  ;  Notary  ;  Commercial 

Paper,  31. 
added  to  commercial  paper  destroys  negotiability,  31. 
whether  such  is  its  effect  in  corporation  drafts,  31. 
note  to  which  seal  is  added  becomes  bond  or  deed,  32. 
this  rule  applicable  to  corporations  as  well  as  individuals,  32. 
bonds  not  negotiable  under  statute  of  Anne,  32. 

attaching  seal  to  signature  does  not  alone  render  instrument  sealed,  32. 
seal  must  be  acknowledged  in  body  of  instrument,  32. 
in  some  States  sealed  instruments  placed  by  statute  on  same  footing  as 

bills  and  notes,  33. 
scroll  affixed  as  seal  is  generally  same  as  seal,  34. 
instrument  may  be  bond  as  to  one  signer  and  note  as  t6  another,  34. 
protest  authenticated  by  notarial  seal.     See  Protest,  and  II.,  945,  948. 
sealed  instruments  may  be  delivered  as  escrow,  68. 
if  custodian  violate  trust,  obligor  not  bound,  68. 


/;  TX'-nw  References  are  to 

900  IJNJJILA.  paragraphs  marked  %. 

SEAL—  contzmied. 

instruments  under  seal  must  be  perfected  before  delivery,  148. 

and  can  not  be  left  blank  as  to  any  material  part,  148. 

this  doctrine  not  applicable  to  coupon  bonds,  148.     II„   1499,   1500, 

1501. 
coupon  bonds  need  not  be  sealed,  II.,  1495,  1495^- 
powers  of  attorney. 

SECURITY.     See  EXCUSES. 

as  excuse  for  non-presentment  and  notice,  II.,  1128  to  1131. 

SEPARATE  ESTATE.    See  Married  Woman. 

SET  OF  BILLS  OF  EXCHANGE. 

foreign  bills  frequently  drawn  in  several  parts,  113. 

all  the  parts  constitute  one  bill,  and  are  called  a  set,  113, 

the  practice  is  followed  to  prevent  loss,  113. 

drawer  usually  incorporates  condition  in  each  part  of  set,  that  it  shall 
only  be  payable  provided  the  others  remain  unpaid,  114. 

for  instance  :  "  Pay  this,  my  first  of  exchange — second  and  third  re- 
maining unpaid,"  114. 

this  condition  operates  as  notice,  1 14. 

condition  should  mention  every  part  of  set,  1 14. 

indorser  bound  to  pass  all  the  parts,  115. 

if  he  pass  two  or  more  parts  to  different  holders,  he  may  be  liable  on 
each,  116. 

either  of  set  may  be  presented  for  acceptance,  116. 

drawee  should  accept  but  one  part,  116. 

if  he  accepts  more  than  one,  he  may  have  to  pay  twice,  116. 

having  accepted  one  part,  should  not  pay  another,  116. 

when  he  pays  accepted  part,  whole  bill  is  extinguished,  1 16. 

party  entitled  to  bill  should  claim  all  parts,  116. 

first  holder  of  one  part  acquires  right  to  whole,  116. 

the  part  protested  must  be  produced  in  suit  against  drawer  or  indorser, 
117. 

all  of  set  need  not  be  produced,  117. 

but  defendant  may  show  prior  claim  on  other  party  than  plaintifif,  117, 

indorsement  of  one  part  carries  whole  bill,  117. 

SET  OF  BILLS  OF  LADING.    5^^  Bills  of  Lading,  and  II.,  1735,  i737- 

SET-OFF. 

1,  Ge7ieral  principles  of  ,  II.,  1423  to  1434. 
definition  of  set-off,  II.,  1422. 
unknown  to  common  law,  II.,  1422. 
first  introduced  in  equity,  II.,  1423. 
exists  generally  by  statute,  II.,  1422. 
generally  confined  to  actions  ex  contractu,  II.,  1423. 
none  but  legal  debt  can  be  set  off  at  law,  II.,  1423. 
equity  will  not  relieve  party  who  has  failed  to  plead  at  law,  II.,  1424. 
must  be  actual  subsisting  debt,  then  mature,  and  not  barred,  II.,  1425. 
must  be  such  claim  as  would  sustain  independent  suit,  II.,  1625. 


paf/^'l^h/nTJkUl.  INDEX.  961 

SET-  0¥Y— continued. 

whether  judgment  may  be,  II.,  1426. 
set-off  as  to  partnership  debts,  II.,  1428. 

joint  and  several  debts,  II.,  1429. 
debts  of  husband  and  wife,  II.,  1430. 
agents  and  trustees,  II.,  1431. 
personal  representatives,  II.,  1433. 
2.  Has  but  limited  application  to  negotiable  instruments,  II.,  1435. 
can  only  be  availed  of  between  parties  privy,  II.,  1435. 
whether  party  taking  bill  or  note  overdue  takes  it  subject  to  set-off  be- 
tween original  parties,  II.,  1435a. 
in  England  he  can  not,  II.,  1436. 
conflicting  authorities  in  United  States,  II.,  1437. 
what  law  applies  to,  II.,  1749. 

SETTLEMENT. 

note  as  evidence  of,  73. 

SICKNESS. 

as  excuse  for  non-presentment,  protest,  and  notice.    See  Excuses,  and 
478.    II.,  1066,  1 125,  1 126,  1127, 

SIGHT. 

meaning  of  at  and  after  sight,  617,  618,  619,  621. 

SIGNATURE. 

to  bill  or  note,  immaterial  on  what  part  of  paper,  74. 

the  words  "  I,  A.  B.,  promise,"  or  "  I,  A.  B.,  request  you  to  pay,"  are 

sufficient,  74, 
may  be  in  pencil  or  in  ink,  74. 
may  be  printed  or  written,  74, 

printed  signature  does  not  prove  itself  like  written,  74. 
by  another  in  party's  presence  and  at  his  request  suffices,  74. 
full  name  may  be  written,  74. 
but  initials  suffice,  74, 

mark  also  suffices,  whether  witnessed  or  not,  74. 
but  mark  must  be  proved,  74. 

name  not  necessary  if  party  be  sufficiently  designated,  75. 
by  agent  with  authority  satisfies  allegation  of  signature  by  principal, 

287. 
how  proved,  II.,  1219,  1220. 

SLAVES. 

notes  for,  173. 

SOLE  TRADER.    See  Married  Woman. 

SPENDTHRIFT. 

under  guardianship  can  not  contract,  259. 
indorsement  is  void,  259. 

SPOLIATION.    See  Alteration. 

Vol.  II.— 61 


9^2  INDEX.  plfrripl"ZtlU% 

STAMPS  ON  NEGOTIABLE  INSTRUMENTS. 

origin  and  use  of  stamp  tax,  Ii8. 

the  United  States  stamp  act,  ii8. 

much  limited  now  in  operation,  1x8,  119.  ^ 

works  on  the  subject,  121. 

construction  of  stamp  act,  122,  123,  124,  125,  126,  127. 

not  intended  to  apply  to  State  courts,  123. 

defence  that  stamped  instrument  was  issued  without  stamp  not  avail- 
able against  bona  fide  holder  for  value  without  notice,  123,  124,  125. 

if  instrument  void  for  want  of  stamp,  original  consideration  may  be  re- 
covered, 123. 

stamp  omitted  must  be  shown  to  have  been  with  intent  to  evade  act, 
124,  125. 

penalty  of  Federal  act  against  fraudulent,  and  not  against  accidenta 
omission,  124. 

whether  omission  prima  facte  evidence  of  fraudulent  intent,  125. 

fraudulent  intent  must  be  proved  affirmatively  and  aliunde,  125. 

whether  Congress  can  prescribe  formalities  of  records,  contracts,  proc- 
ess, and  evidence,  126. 

this  power  denied,  126. 

Federal  stamp  act  did  not  operate  in  Confederate  States,  127. 

how  far  foreign  courts  enforce  stamp  act,  913. 

STATES.    See  Governments  ;  Coupon  Bonds. 
are  foreign  as  to  each  other,  9. 
are  sovereign  under  Federal  Constitution,  863,  864. 

STATE  SECURITIES  RECEIVABLE  FOR  TAXES. 

no  State  can,  under  United  States  Constitution,  pass  law  impairing  ob- 
ligation of  contracts,  446. 

State  held  contracting  party  within  meaning  of  Constitution,  446. 

if  States  make  certain  securities  receivable  for  taxes,  they  can  not  re- 
peal law  so  as  to  affect  existing  rights,  447. 

decisions  of  United  States  Supreme  Court,  447. 

States  may  repeal  statute  funding  bonds  as  against  all  parties  who  have 
not  accepted  its  terms,  448. 

STATUTE  OF  FRAUDS.    See  Guaranties  ;  Promise  to  Accept. 
whether  parol  acceptance  is  affected  by,  566. 

whether  statute  of  frauds  has  application  to  commercial  paper,  567. 
acceptance  not  generally  agreement  to  pay  debt  of  another,  568. 
drawee  accepting  acknowledges  amount  to  be  his  debt,  568. 
if  drawee  is  in  funds,  acceptance  is  undertaking  to  pay  his  own  debt, 
568. 

holder  has  a  right  to  presume  drawee  who  accepts  to  have  been  in 
funds,  568. 

if  holder  knows  when  he  takes  bill  that  verbal  acceptance  was  for  ac- 
commodation, it  seems  that  statute  of  fraud  applies,  569. 

for  then  it  is  known  to  be  debt  of  another,  569. 

if  verbal  acceptance  be  on  independent  consideration,  it  is  binding,  570. 

views  of  U.  S.  Supreme  Court,  570. 

in  relation  to  guaranties,  II.,  1762. 


.  ^'■^"''."/"'"■'/"vfi  INDEX.  9^3 

paragraphs  marked  §.  ^      -" 

STOPPAGE  IN  TRANSITU.    See  Bills  of  Lading,  and  II.,  1730  et  seg. 

vendor  of  negotiable  paper  has  right  of,  67. 

same  rule  applies  as  to  other  personal  property,  67. 

when  consignor  of  goods  has  right  to,  II.,  1730. 

when  right  to  divested  by  transfer  of  bill  of  lading,  II.,  1730. 

sale  of  goods  not  yet  received  without  transfer  of  bill  of  lading  does  not 
divest  right  of,  II.,  1730^. 

is  equitable  remedy  for  protection  of  vendor,  II.,  I730'^- 

yields  to  superior  equity  of  bo?ta  fide  purchaser  of  bill  of  lading,  II., 
1730a. 
STYLE. 

Gregorian  calendar  or  new  style  prevails  in  United  States,  632. 

difference  between  old  and  new  style  of  computing  time,  632. 

SUBSCRIBING  WITNESS.    See  Attestation. 

SUNDAY.    See  Grace  ;  Delivery. 

by  common  law  no  interdiction  of  business  on,  69. 

statutes  changing  common  law,  69. 

bills  and  notes  delivered  on  Sunday,  when  interdicted  by  statute,  69. 

signing  and  dating  on  Sunday  does  not  invalidate,  if  delivery  be  on 
other  day,  69. 

interest  may  begin  to  run  on,  69. 

if  note  void  because  delivered  on,  original  consideration  may  be  recov- 
ered, 69. 

ratification  on  subsequent  day,  69. 

indorsement  on  Sunday  on  same  footing  as  drawing  or  making,  70. 

almanac  is  noticed  judicially,  70. 

indorsee  chargeable  with  notice,  if  paper  dated  on  Sunday,  70. 

otherwise  not,  70. 

how  counted  in  respect  to  grace,  627. 

if  contract  on,  void  where  suit  brought,  presumed  to  be  void  where 
made,  891. 

when  post  date  is  as  of  Sunday,  check  can  not  be  demanded  until 
Monday,  II..  1578. 

SUPRA  PROTEST  OR  FOR  HONOR.    5.?^  ACCEPTANCE ;  Payment. 
payment  supra  protest  or  for  honor,  II.,  1256. 

SURETY.    See  Principal  and  Surety. 

SURETY  DRAWER.     See  Drawer,  and  95. 

SURPLUSAGE,  262. 

SUSPENSION.    See  CONDITIONAL  and  Absolute  Payment. 
of  cause  of  action  by  taking  bill  or  note,  II.,  1272,  1278. 

SUSPICIOUS  CIRCUMSTANCES. 

do  not  vitiate  title  of  bona  fide  holder  of  negotiable  instrument  for  value 
without  notice,  772,  774. 

TAXES.    See  State  Securities. 

securities  when  made  receivable  for,  can  not  be  divested  of  their  tax 
receivability,  447. 


c  T-MTMT-v  References  are  to 

004.  IJNUJiA.  jiaragraphs  marked  % 

TELEGRAPH. 

bill  may  be  accepted  by,  496. 

whether  notice  may  be  given  by,  II.,  1004. 

TENDER. 

no  State  can  make  anything  but  money  legal  tender,  II.,  1246. 
whether  Federal  Government  can   make  anything  but  money  legal 

tender,  II.,  1246,  1247,  1248. 
legal  tender  act,  II.,  1246. 
whether  applicable  to  contracts  made  before  its  passage  and  solvable 

"in  gold  or  silver  coin,"  II.,  1247. 
how  judgment  entered  on  paper  payable  in  coin,  and  on  paper  payable 

in  dollars  simply,  II.,  1247. 
whenever  contract  in  terms  payable  in  coin,  it  is  so  enforced,  XL,  1247. 

TERRITORY  OF  U.  S. 

or  local  division  may  issue  coupon  bonds,  II.,  i486. 

TIME,  COMPUTATION  OF.     See  Month;    Days;    Grace;    Sunday; 
Holidays;  Style. 

TIME  OF  PAYMENT. 

bills  and  notes  usually  payable  at  specified  time  after  date,  or  after 

sight,  or  at  sight,  88. 
on  demand  understood,  if  no  time  specified,  88. 
"  on  call,"  "  when  demanded,"  and  "  when  called  for,"  equivalent  to 

'  on  demand,"  89. 
meaning  of  twelve  months  after  notice,  89. 
meaning  of  on  demand  with  interest  after  four  months,  89. 
the  terms  "in  thirty  days,"  "in  thirty  days  from  date,"  "at  thirty^ 

days,"  and  "  thirty  days  after  date,"  synonymous,  626. 
meaning  of  "  at  sight,"  617,  618. 
meaning  of  "  after  sight,"  619. 

TOWNSHIP. 

has  no  inherent  power  to  contract  debts  and  issue  securities,  II.,  I544«. 
such  power  not  given  under  general  authority  to   corporation,  II., 
1544a. 

TRANSFER.     See  ASSIGNMENT;  INDORSEMENT;    Sale;    Conflict  op 

Laws. 
by  what  law  validity  and  effect  of,  governed,  898,  901. 
hability  of  transferrer  of  bank  notes,  II.,  1675. 
by  what  law  it  is  determined  whether  party  is  assignor  or  indorser 

902. 

TREASURY  NOTES.    See  Governments,  and  441. 
when  negotiable,  441. 
as  tender  in  payment,  II.,  1247  to  1249. 

TROVER.     See  CONVERSION. 

TRUSTEE.    See  Fiduciaries,  271  ;  Checks,  XL,  i6i2«,  161 5. 
personally  bound  by  instrument  issued  in  his  name,  271. 


References  are  to  TNDFY  q6c 

par agraplis  marked %.  liNUliA.  yu^ 

TRUSTEE— r^«//««-?</. 

if  party  be  payee  as  trustee,  the  word  trustee  puts  party  acquiring  in- 
strument on  inquiry,  271,  795a, 

deposit  in  bank  to  credit  of,  charges  bank  with  notice  of  its  fiduciary 
character,  1612^. 

trustees  under  joint  power  must  act  conjointly,  161 5. 

TRUSTEE   PROCESS. 

whether  payee  of  negotiable  note  subject  to,  800a. 

ULTRA   VIRES. 

doctrine  of,  377. 
UNITED  STATES.    See  GOVERNMENTS ;  Federal  Courts  ;  Treasury 

Notes. 
USAGE.     See  CUSTOM. 

when  variant  as  to  grace  from  law  merchant  must  be  proved,  622. 

of  banks  as  to  grace,  rules  as  to,  623. 

USANCE. 

in  Europe  bills  frequently  payable  at  one,  two,  or  more  usances,  88,  631. 

origin  and  meaning  of  term,  631. 

signifies  time  which,  according  to  usage  of  country  between  which  bills 

are  drawn,  is  appointed  for  payment,  88,  631. 
not  established  between  United  States  and  European  nations,  631. 
varies  as  to  length  of  time  in  different  countries,  631. 

USURY.    See  Interest  ;  Sale  ;  Conflict  of  Laws  ;  Municipal  Bonds. 
when  instrument  usurious    in  inception,   sometimes   utterly   void  by 

statute,  197. 
when  considered  usurious  in  inception,  750  to  752. 
effect  of,  between  indorser  and  indorsee,  759,  762,  768. 
if  usurious  in  inception,  indorser  nevertheless  bound,  674. 
so  transferrer  by  delivery,  733. 
if  interest  legal  a-t  place  where  contract  made  or  to  be  performed,  there 

is  no  usury,  although  illegal  at  one  of  the  places,  924. 
unless  the  transaction  were  a  shift  to  cover  usury,  925. 
in  sale  of  municipal  bonds,  IL,  1533. 

VALUE   RECEIVED. 

generally  expressed,  but  not  essential  in  bills  and  notes,  108. 
in  note  import  value  received  by  maker  from  payee,  108. 
in  bill  payable  to  order  of  third  person  are  ambiguous,  108. 
how  construed  in  bill,  108. 
declaration  need  not  aver,  108. 
import  consideration,  161. 

VENDOR. 

right  of  stoppage  in  transitu,  67.    ' 
VERBAL  ACCEPTANCE.    See  ACCEPTANCE ;  Statute  of  Frauds. 

VERBAL   GUARANTY. 

of  solvency  or  payment  when  valid,  739a.     II.,  1763. 

VERBAL  NOTICE.    5^^  Notice. 


r  /-  T-NTTM?v  References  are  to 

900  ^^^ ^^'  paragraphs  marked %. 

VOUCHERS  OF   PAYMENT,  II.,  1227,  1228,  1229. 

WAIVER.    See  Excuses. 

of  appraisement  and  homestead  laws  in  bill  or  note,  61,  62. 
of  presentment,  protest,  and  notice,  II.,  1086  to  1108. 

See  Excuses  for  Non-Presentment,  Protest,  and  Notice,  and  II., 
1086  to  1 108. 

WAR.     See  Aliens   and  Alien  Enemies  ;  Excuses  ;  Confederate 
States. 
prohibits  intercourse,  216  to  222. 
does  not  annul  agency,  222,  288. 
excuses  delay  in  presentment  and  notice,  II.,  1060. 

WAREHOUSE   RECEIPTS. 

at  common  law  unlike  bills  of  lading,  and  not  negotiable,  II.,  17 13. 
sometimes  made  negotiable  by  statute,  II,,  17 14. 

"WITHOUT   RECOURSE." 

meaning  and  effect  of  indorsement  "  without  recourse,"  670,  705,  727. 

WITNESS.    See  Attestation  ;  Alteration. 

alteration  of  witnessed  instruments,  II.,  1392,  1393. 


THE  END. 


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